China, the largest trading partner of the Mercosur bloc, is influencing discussions within the South American alliance as it engages in complex trade negotiations with the European Union (EU).
Uruguay has advocated for a free trade agreement (FTA) with China, either as a bloc or individually.
However, historical opposition from Mercosur partners, such as Paraguay for diplomatic reasons and Brazil and Argentina to protect their markets from Chinese competition, has hindered progress.
In recent months, internal tensions have shifted, leading to a more favorable environment for Mercosur to debate the possibility of exploring a trade agreement with China.
The bloc, which will hold its semi-annual summit soon, can only negotiate trade agreements collectively, not individually.
Despite resistance from other members, Uruguay initiated talks with China for an FTA in July 2022, even considering the possibility of leaving Mercosur if the rest of the bloc did not endorse the agreement.
However, China altered its position in mid-April, indicating a preference to negotiate with all Mercosur countries together, after Brazil’s President expressed interest in pursuing a Mercosur-China agreement following the completion of EU trade negotiations.
Negotiations with the EU have proven challenging, as unresolved technical aspects and new demands have complicated the process.
Amidst internal divisions within the bloc, reaching agreements with both China and the EU in the short term is difficult.
China has been making progress in strengthening its ties with South America, playing a significant role in Argentina’s financial aid and investments in critical sectors.
Brazil remains China’s largest trading partner in Latin America and shares a leading role in geopolitical forums like BRICS.
Even Paraguay, which recognizes Taiwan, has substantial trade with China.
China has become Mercosur’s largest trading partner, with significant exports and imports between the two.
This positions China ahead of the EU in trade volume, solidifying its importance in the region.
The path forward for Mercosur involves navigating the complexities of EU negotiations while considering the potential for a trade agreement with China.
The discussions remain critical and divisive within the bloc, making reaching a consensus challenging in the near term.