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”.