Uruguay and Argentina lobby for Brazil’s support for their differing Mercosur agendas

RIO DE JANEIRO, BRAZIL – While Uruguay is moving forward on its own in its goal of reaching a Free Trade Agreement (FTA) with China, Mercosur is also on the move. And it does so at its own pace: zigzagging, slow steps, and under the influence of the interests of Argentina and Brazil.

The two main partners of the South American trading bloc, whose governments have opposite orientations, announced on Friday an agreement to reduce the Common External Tariff (TEC) by about 10% for goods imported from third countries.

Read also: Check out our coverage on Mercosur

Without their presidents having yet met face to face, the governments of Argentina and Brazil thus advanced towards what could be a formula of mutual benefit: while the administration of Jair Bolsonaro seeks a more significant economic opening that will allow him to lower prices in the domestic market, the administration led by Alberto Fernandez was willing to concede a reduction of the tariff in exchange for delaying other types of relaxations, such as those promoted by Uruguayan President Luis Lacalle Pou with the endorsement of Brasilia.

Argentina’s rapprochement with Brazil, through the figure of the new Foreign Minister Santiago Cafiero, marks a dispute to the alliance and the harmony between Uruguay and Jair Bolsonaro, mainly through the figure of the Minister of Economy Paulo Guedes.

However, Lacalle Pou’s government is confident of retaining Brazil’s approval to continue on the path of openness.

To begin with, Uruguay understands that the negotiations for the FTA with China “are moving forward on their own”, supported by the explicit interest of Xi Jinping’s government and its weight in the region and the world.

In this sense, both Lacalle Pou and his Foreign Minister Francisco Bustillo defend the decision to start negotiating with third countries without the need to ask for the endorsement of the Mercosur partners, under the understanding that Resolution 32/00 -which some allege as an obstacle- does not prevent progress at different speeds.

What does require the support of the partners in the formal flexibilization of Mercosur? Since he took office, Lacalle Pou has insisted on reformulating and clarifying the regional bloc’s postulates. Although he had the initial support of Brazil to do so, the resistance of Argentina and Paraguay caused the proposal to stagnate and sink.

And just as Argentina intends to approach Brazil to block part of that liberalizing agenda, Lacalle Pou ratified in the last hours that Uruguay’s position is to negotiate the reduction of the TEC tied to Mercosur’s flexibilization.

“What we have said more than once to all presidents and foreign ministers in bilateral or Mercosur meetings is that at the same time as the tariff reduction, the bloc’s flexibilization should be presented. It is clear to us that the two things go hand in hand, both at the same time,” said Lacalle Pou.

Any of the modifications require the consensus of the four countries.

Next Monday, Foreign Minister Bustillo will receive his Brazilian counterpart, Carlos Alberto França, in Montevideo. The Bolsonaro government minister intends to learn first-hand the negotiations with China and Uruguay’s position on the tariff.

Ignacio Bartesaghi, an expert in international relations, told El Observador that a tariff reduction is not a bad thing for Uruguay, but “neither is it a matter of life and death”, as it is for Brazil.

Therefore, Bartesaghi pointed out that “it would be a strategic mistake” not to condition the vote in favor of the reduction to an “explicit” validation of Uruguay’s openness strategy and its negotiation with China.