The 60th Mercosur summit that will begin this Wednesday, July 20, in the city of Luque, 15 kilometers from Asunción, the capital of Paraguay, will address a series of economic issues, among which stand out the analysis of Brazil’s tariff policy, which in May provided for a unilateral rebate for certain extra-zone products, the progress in talks on a “last generation” trade agreement with Singapore and the follow-up of the treaty signed in 2019 with the European Union.
The meeting will take place at the Conmebol (South American Football Confederation) Convention Center and has the confirmed presence of three of the four presidents of the countries that make up the bloc: Argentina’s Alberto Fernández, Paraguay’s Mario Abdo Benítez, and Uruguay’s Luis Lacalle Pou.
BOLSONARO’S PRESENCE ON HOLD
Although the Brazilian president, Jair Bolsonaro, had announced last week his decision not to attend the meeting, he later left open the possibility of a change of position, so his presence is not ruled out due to his good relationship with “Marito”, as he called the Paraguayan president in statements to the press made last Sunday.
However, Brazil will be represented by its Ministers of Economy, Paulo Guedes, and of Foreign Affairs, Carlos Alberto França, who will defend before their counterparts from Argentina, Paraguay, and Uruguay one of the most controversial aspects within the bloc, such as the tariff reduction set unilaterally as a way to combat inflation amid the economic effects of Russia’s invasion of Ukraine.
In May, the Brazilian government “temporarily and exceptionally” reduced import tariffs on 6,195 items, including beans, meat, pasta, cookies, rice, and construction materials.
The Argentine Foreign Ministry said that Bolsonaro’s measure “does not include the automotive sector or products considered sensitive,” which was duly agreed upon between the two countries.
The tariff reduction is in addition to another already applied, also temporarily, in November 2021, and both are part of the Brazilian government’s objective of “lowering the prices of basic products”, taking into account that year-on-year inflation in the neighboring country reached 11.89% in June.
Likewise, Paraguayan Foreign Minister Julio Arriola, in statements to the Asuncion daily ABC, said that “logistical, technical and documentation details” are being “finalized because of the imminence of the meeting.
Arriola said that progress would be analyzed in the agreement that the bloc signed with the European Union and that negotiations are about to conclude for a “state-of-the-art free trade agreement” between Mercosur and Singapore, which will allow “expanding the trade horizon with Southeast Asia”.
He also pointed out that in the bloc, “we are focused on reaching an agreement between the four states to benefit the competitiveness of our economy for access to inputs and better conditions for our productive sectors,” he added.
On the other hand, Arriola pointed out that “we must move forward jointly towards the prioritization of the agenda of external negotiations, as provided for in the founding texts of Mercosur”.
In this way, Arriola alluded to the intention expressed by Uruguay to initiate negotiations with China to reach a bilateral trade agreement outside the decisions of the bloc as a whole.
In the same sense, Fernández had expressed himself in the virtual summit of July last year when he pointed out that “nobody is saved alone” and called for respecting the joint decisions of the bloc.
“We believe that the way forward is to comply with the Treaty of Asuncion, negotiate together with third countries or blocs and respect the figure of consensus”, said Fernandez on that occasion, adding that “it is through more regional integration and not less regional integration, that we will be in better conditions to produce, trade, negotiate, and compete”.
Last Monday, during the ceremony commemorating the 192nd anniversary of the swearing-in of the Constitution, Lacalle Pou announced that the trade agreement “will be with China” and that “later it will be with other countries”.
The rest of the countries of the bloc warned that Lacalle Pou’s strategy does not respect the regulations that gave origin to Mercosur, referring to Decision 32 of July 29, 2000, taken by the Council of the Common Market, which reaffirmed “the commitment of the States Parties of Mercosur to jointly negotiate agreements of a commercial nature with third countries or groupings of countries outside the zone in which tariff preferences are granted”.
“The constitution of a common market implies, among other aspects, the need to have a common external trade policy” it was established in that norm, which also determined that “as from June 30, 2001, the States Parties will not be able to sign new preferential agreements or agree on new trade preferences in existing agreements within the framework of Aladi that Mercosur has not negotiated”.
In its defense, Uruguay claims that not all bloc members endorsed this decision.
In the last hours, although he maintained his position to continue negotiating with China, Lacalle Pou opened the possibility of moving forward “jointly”, that is, to add the other three countries of the bloc to the negotiations and transform the bilateral trade agreement into one between the whole Mercosur and the Asian country.
The intention to carry out bilateral agreements on an autonomous basis had been raised by Lacalle before his inauguration as president in March 2020 and was supported in several Mercosur meetings.
In one of them, in July 2021, Lacalle Pou defined the impossibility of individual agreements as a “burden” of Mercosur regulations that acts as a “corset” and blocks Uruguayan attempts to “move forward”.
With information from Télam