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LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

A daily publication Of the dialogue

December 22, 2022

Is the Mercosur Trade Bloc Headed for a Breakup?

Uruguayan President Luis Lacalle Pou’s government is seeking to negotiate its own free trade agreements, which could threaten the Mercosur trade bloc. // File Photo: Uruguayan Government.

Q

  • Uruguay’s eagerness to seek trade agreements outside Mercosur led to criticism from the bloc’s other members—Argentina, Brazil and Paraguay—as leaders of the four countries met in early December in Montevideo. Uruguayan President Luis Lacalle Pou said his country must “open up to the world,” while Argentine Foreign Minister Santiago Cafiero referred to Uruguay’s attempts by saying they could “lead to a breakup” of Mercosur. Why does Uruguay want to negotiate trade deals outside of Mercosur, and how would the trade bloc be affected if it does? Which trade partners is Uruguay considering for new deals, and will it achieve such agreements? What political forces are influencing the situation?

A

Thomas Andrew O’Keefe, president of Mercosur Consulting Group Ltd.: “It’s the epitome of chutzpah for Argentina and Brazil to accuse Uruguay of undermining Mercosur’s common external tariff if Montevideo negotiates trade agreements bilaterally with countries outside the trade bloc. For decades, governments in Buenos Aires and Brasília have gutted the common external tariff with exceptions when it suits their interests. Accordingly, Uruguay is within its sovereign rights to negotiate a free trade agreement on its own if its Mercosur partners refuse to also do so. In this particular case, Uruguay is primarily interested in sealing a deal with China, its largest trading partner outside Mercosur. That may explain the surprising opposition to Uruguay’s move emanating from Paraguay, the only South American country that still maintains diplomatic relations with Taipei and not Beijing. Should Uruguay succeed in signing an accord with China…”

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