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Mercosur has only benefited Brazil in the last ten years with a surplus of 36.8bn

Tuesday, August 7th 2012 - 20:14 UTC
Full article 5 comments
It is time for the other three members to change of strategy, says Orlando Ferreres It is time for the other three members to change of strategy, says Orlando Ferreres

Brazil is the only country that in the last ten years has benefited from Mercosur with an intra-zone trade surplus of 36.8 billion dollars while the other three full members, Argentina, Uruguay and Paraguay have accumulated huge deficits in the same period, according to Argentine economist Orlando Ferreres a regular columnist from La Nacion with graduate studies in Harvard.

“The Brazilian are far better organized that the other members and have obtained very good results from Mercosur both in surplus terms as in attracting direct investments that preferred the huge market, the continuous reliable economic policy, greater orthodoxy and long term coherence with no defaults or sovereign debt ‘shavings’ compared to the other three members, particularly Argentina”, pointed out Ferreres.

In the last ten years (Mercosur was started in 1991), while Brazil has enjoyed a huge surplus, Argentina’s deficit intra-zone reached 13.6 billon dollars while Uruguay’s 11.8bn and Paraguay’s 12.6 billion dollars, plus the fact the three ‘partners’ have become increasingly Brazil dependent.

Ferreres also points out that not only have they suffered these great deficits in intra-region trade but the outer zone trade in the same period has expanded even more. Why then the insistence in remaining in these conditions in Mercosur?

But numbers are not only an overwhelming reason: the smaller members have to support a very high common external tariffs with special protection cases that can reach 35% thus punishing consumers, which for example does not happen with Chile, that never joined Mercosur.

Another issue to take into account is that Brazil is dearer than Argentina and surely more than Uruguay and Paraguay. A dollar not so many years ago in Brazil traded at 3.90 Reais, now it is down to 2.03 and six months ago it was 1.53 Reais. This means Brazil manages these huge surpluses in the region even with an overvalued currency.

Mercosur will never work according to its original intentions, the same way ALALC (Latin American Free Trade Association) in the sixties and ALADI in the eighties never culminated because none of the member states is prepared to yield domestic market but in a minimum percentage.

Venezuela’s incorporation is more political than economic and will further complicate instead of simplifying the evolution of Mercosur anticipated Ferreres.

The main fact is that there are no human resources from Mercosur thinking for Mercosur but rather staff from the International trade and Foreign affairs ministries from the four countries, with preponderance from Brazil, determined to defend their home interests.

“Brazil has the initiative in all negotiations and it is only logic that they have obtained the most attractive results”.

What can be done? It is obvious that the small countries and Argentina must change of strategy before it is too late and all the most attractive industrial investments and future economic activities end up in Brazil.

Ferreres believes it is more efficient and effective to follow the path of Chile which has trade agreements with as many countries as possible and has achieved far better results than Uruguay, Paraguay or Argentina with Mercosur.

“What is certain is “that we can’t continue in the path of the last ten years” concludes the Argentine economist.

Top Comments

Disclaimer & comment rules
  • toxictaxitrader

    will anyone listen? or will populism rule

    Aug 08th, 2012 - 07:08 am 0
  • ChrisR

    Will Pepe Mujica take heed from this Argentinean? Perhaps.

    It would be better, instead of getting closer to Brasil, if Urguay got closer to the USA and the UK, but Pepe's old leftie background prevents him from even understanding British politcal structure.

    Like many LatAm people he thinks the Queen is his 'equivalent'.

    He should be so lucky!

    Aug 08th, 2012 - 07:58 pm 0
  • BAMF Paraguay

    Mercosur has been of great benefit to Paraguay even though officially it doesn't show. Remember most of Paraguay's economy is unofficial, or the black market, and so the massive amounts of products that are imported into Paraguay and then exported to Brazil are not counted. Also Paraguay and benefited greatly from the cheaper agricultural machines from Brazil, allowing Paraguay's agriculture to boom.

    Aug 08th, 2012 - 10:02 pm 0
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