Mercado Comun del Sur (MERCOSUR) member states—Argentina, Brazil, Paraguay and Uruguay—will convene a two-day meeting today in Asuncion, Paraguay. Argentine
Mercado Comun del Sur (MERCOSUR) member states—Argentina, Brazil, Paraguay and Uruguay—will convene a two-day meeting today in Asuncion, Paraguay.
Argentine President Alberto Fernandez has refused demands by Uruguay and Brazil to decrease the bloc’s external common tariff this year in order to protect domestic industries. Accordingly, MERCOSUR’s struggle to open to other markets has caused internal division, stalling the progress of many pending free trade agreements (FTA) with other countries.
Frustrated with the slow pace of progress, Uruguay announced it would commence FTA negotiations with China last week, prohibited by MERCOSUR’s trade rules. Trade negotiations with Singapore, South Korea, Canada and the Gulf Cooperation Council have also slowed as leaders continue to debate trade liberalization policies.
Expect the summit to focus on the state of trade negotiations between Uruguay and China. While Brazil and Paraguay seem more willing to relax MERCOSUR’s rules to allow greater trade, Argentina has since criticized the move. MERCOSUR members will likely agree to lower common external tariffs today to improve economic growth and appease the desire of Brazil and Uruguay to open trade. However, if Argentina continues to oppose attempts by members to increase trade openness, it could lead to a Brexit-like move by Uruguay or Brazil in the long-term, aiming to improve competitiveness and economic growth.