Trade among Mercosur full members Argentina, Brazil, Paraguay, Uruguay and Venezuela in the process of incorporation is forecasted to reach 41 billion US dollars said Brazil's ambassador to Argentina Enio Cordero. This is a significant leap from the 9 billion of 2002 and 4.5 billion in 1991 when the block was established.
The bulk of Mercosur trade takes place between Argentina and Brazil, the group's economic heavyweights. Brazil is Latam’s largest economy and Argentina the second largest in South America.
Brazilian companies have recently invested more than 10 billion USD in Argentina while Argentine firms have invested around 4 billion in Brazil, according to Cordero.
He added that a significant percentage of cars produced in Argentina, one of the most dynamic industries, are exported to Brazil while many of them are built with auto parts manufactured in Brazil.
Happily, Mercosur has shown a lot of vitality, Cordero said. Mercosur is a customs union that aims to be a free trade area and a common market within four years and equally important the political will to make it “a one way street with no turning back”.
Regarding repeated trade disputes blocking imports between the two countries and in spite of their “strategic alliance”, Cordero said such obstacles are simply a normal aspect of trade negotiations.
Any time you have trade between countries, conflicts will arise, he said. I wouldn't dramatize these conflicts. That's not a problem. It would be a problem if we didn't have the will to resolve conflicts and we have that will.
Cordero said trade between Argentina and Brazil was up 50% in the first half of 2010 from a year ago.
But while the two countries have resolved many disputes in recent years, Mercosur as a whole has found it hard to agree on a common customs code, which is a prerequisite to establishing a genuine free-trade area.
”I don't think it will be possible to conclude an agreement on a customs code at this upcoming summit August 3 in Argentina), he said. It will probably take more time.”
Concluding such a deal is challenging in part because it entails harmonizing each country's import tax rules and ensuring that no country has a competitive trade tax advantage over another.
Despite the challenges, however, Mercosur is slowly becoming more integrated economically and politically said Cordero. He added that Mercosur members are designing common residency and passport policies.
Cordero said that Mercosur governments are encouraging companies to leave aside the US dollar for trade and replace the greenback with local currencies. So far about 400 million USD worth of trade between Argentina and Brazil has been conducted using local currencies.