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Montevideo, May 29th 2023 - 21:11 UTC



Mercosur lacks discipline and has become a 'straitjacket' for trade negotiations

Tuesday, December 9th 2014 - 23:03 UTC
Full article 12 comments
“Mercosur is off the track, it won't be easy to put it back; this is partly because the block left aside the original project of a customs union” said Ms Valls “Mercosur is off the track, it won't be easy to put it back; this is partly because the block left aside the original project of a customs union” said Ms Valls
Talvi said that the Brazilian private sector could create the necessary dynamics favorable to a greater global integration of Mercosur Talvi said that the Brazilian private sector could create the necessary dynamics favorable to a greater global integration of Mercosur

Mercosur must discipline and return to its origin as a customs union since it has become a 'straitjacket' for negotiations with other regional blocks, according to Lia Valls, foreign trade coordinator at the Brazilian Economics Institute belonging to the prestigious thinktank Getulio Vargas foundation.

 “Mercosur has become a straitjacket, particularly when it comes to negotiations with other blocks; it must return to the original discipline, be more flexible with a common external tariff” underlined the Brazilian expert, during a trade conference in Paraguay sponsored by the European Union.

Ms Valls said all these issues must be addressed by the country members of Mercosur, for example in the area of tariffs “since it is crucial to lower tariffs to improve the competitiveness of our industries”.

When asked whether the incorporation of Venezuela (Mercosur fifth full member), Ms Valls said that “the block's problems are not from now” and pointed to the Argentine economic crisis of 1999, when the conversion system (one dollar equivalent to one Peso) collapsed.

“Mercosur is not on the right track, it's won't be easy to put it back on rails, and this is partly because the block left aside the original project of a customs union”.

The Brazilian expert said that the Mercosur group was facing a complex situation, 'of great fragility' and 'there is no clear discipline regarding trade, the idea of a customs union is in a difficult situation'.

Another panelist at the EU sponsored conference, Uruguay's Ernesto Talvi, was equally drastic about Mercosur.

“In its current situation Mercosur is of no use to its members because it is isolated from the world. Brazil must lead a radical policy change so that the region hooks on the new integration geography with the 'mega-treaties'”.

Talvi said that eleven countries of the region have bilateral trade agreements with the US: those from the Pacific Alliance, Central America and the Dominican republic. Another seven have agreements with Canada and looking at Central America and the Pacific you can see a region clearly hooked on to the rich and prosperous north.

”But what about Mercosur? (Argentina, Brazil, Paraguay, Uruguay and Venezuela), we are completely isolated of this trade integration network, so relevant when the US is currently discussing mega agreements with the Pacific and Asian countries, and a another mega transatlantic accord with Europe“, pointed out Talvi.

He added that Mercosur, once and for all must join this new global integration geography of mega-treaties and Brazil must assume the leadership.

Talvi says that there are chances of improving the situation and this is clearly evident in the attitude of Brazil's private sector.

”Only a few years ago the powerful Federation of Sao Paulo industries, which also includes Minas Gerais staunchly defended a protectionist status quo, but today they realize they are being left aside, isolated of relevant agreements, on the margins of global production chains and have changed completely their attitude: now they are demanding greater integration and an open markets' policy“, indicated the Uruguayan economist.

Talvi said that the Brazilian private sector could create the necessary dynamics favorable to a greater integration, even when traditionally they have been contrary to such processes.

”But if this happens then small countries like Uruguay and Paraguay that need wide open markets could have better prospects; as small countries we are currently behind this huge wall that has been built by Brazil and Argentina“.

Finally Talvi underlined that in times of trade mega-accords, if Mercosur does not react it will be left aside, isolated with ever more difficult access to markets and ever more distant from these international production and trade networks.

”The Pacific Alliance (Chile, Peru, Colombia and Mexico) is a last generation, I would say state of the art trade agreement and has in a few years managed to create a block in size equivalent to the Brazilian economy but with a great difference: they are open and connected to the rest of the world”.

Top Comments

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  • Chicureo

    Uh, just an ignorant suggestion but perhaps Brazil, Paraguay and Uruguay could do far better negotiating OUTSIDE Mercosur. There are SEVERAL countries that would be very happy to negotiate with Paraguay alone. Chile has granted free Pacific port privileges to them and yet they remain imprisoned with the stupidity of the Venezulean and Buenos Aires idiots.

    Dec 10th, 2014 - 01:31 am 0
  • Conqueror

    The reality is that mercosur is only of 'benefit' to one country, argieland. It enables argieland to feel important as one of the 'leaders'. It's supposed to be a customs union. That's all. But, bit by bit, argieland has pushed it along a path of political power. What is the purpose of the Mercosur Parliament? A customs union doesn't need a parliament. Foreign and trade ministers get together, work out what needs to be done, take proposals back to governments and then sign up to agreements. Why do the four full members need 18 MPs each? Was there an unused building they needed to fill. When has the Parliament told a member that it can't do something? When Paraguay was illegally suspended, where was the Parliament? It was all agreed between three presidents to further argieland's political power. How does argieland make things better? It justs drags everyone backwards for its own benefit. Unfortunately, the EU has made the mistake of entering negotiations with it. That gives it a certain amount of credibility. But much of the EU is just as bad as argieland. The EU likes to claim that it has a customer population of around 500 million. Mercosur says it has 275.5 million. So what? It isn't customers that are needed. It's manufacturers, producers, growers. The Canadians, Chinese, Russians and the US aren't members of either. Most members of the EU, and others, joined it for what they could get out, not what they could put in. That takes care of most of eastern Europe. And argieland is much the same. Because it wants power. A customs union isn't about power, it's about co-operation. And where is mercosur 'progressing'? It now has a two strong allies, argieland and Venezuela, with similar aims and similar incompetence. Time was that argieland and Venezuela were progressive and wealthy. Argieland's economy was mostly run by Brits. Then it got Peron. And, in a similar fashion, Venezuela got Chavez. And they both hit the skids. Mercosur is going with them!

    Dec 10th, 2014 - 11:45 am 0
  • MagnusMaster

    @1 No full member of Mercosur can sign a FTA outside Mercosur, those are the rules which every full member agreed. So Brazil, Paraguay and Uruguay would need to change the rules (but they would need the votes of Argentina and Venezuela) or leave.

    Dec 10th, 2014 - 02:18 pm 0
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