Mercosur at its worst: declining exports, political tensions and few trade agreements – economic, financial and economic news

Or Ral alfonsn or the brazilian Jos sarney They imagined in 1985, when they founded Mercosur in Foz de Iguaz, that after 30 years of life this regional bloc would go through its worst economic moment and be limited to a customs union with meager results in sight: the historic decline in its exports, increasingly weak intra-zone trade, a low level of free trade agreements with other regions and tariff barriers among the highest in Latin America.

There is not much to celebrate in these 30 years of Mercosur and the recent ideological differences between Brazil, Argentina, Paraguay and Uruguay they only worsen the deterioration of this regional bloc which was once the hope for brilliance in the southern cone.

Alberto Fernandez and his Mercosur peers will hold a virtual bloc summit tomorrow with the idea of ​​revitalizing historic agreements and commemorating their founding. But in fact, these celebrations appear to be a kind of cynicism towards the group of countries that make up the bloc and which in 30 years have not managed to make much progress economically or politically.

The latest report from the consultancy firm International Business Development (DNI) led by Marcelo Elizondo argues that Among the twenty regional integration agreements that exist in the world, Mercosur is the one that achieves the least export / GDP ratio: less than 15% against more than 30% in the world average. In addition, the foreign tariff levels of the four countries of the bloc are above the world level of 9.2, which increases the cost of operating in foreign trade.

The closed policies of Mercosur in recent years have generated few economic relations outside of itself. “It has the format of a Customs Union (AU), which is a type of international agreement little used in the world (where more flexible and dynamic agreements have been preferred),” says Elizondo. In the twenty trading blocks that exist in the world, the GDP of Mercosur was equivalent to 2.9% of the world product and the exports of the block were equivalent to only 1.4% of the world total (the share is less than half of the total share of world product.).

Paradoxes of fate: Mercosur, which is one of the seven economies in the world, is the bloc that exports the least in the world, it has not yet achieved a common currency nor has been able to establish strong institutions over the years. time. Parlasur appears as a parliament with little political weight and rather limited to expressions of high ideological profile.

A report circulating in the Chancellor’s offices Felipe Sol and his office, to which he had access The chronicler, reveals that “Current Mercosur levels mark lowest intra-zone trade participation overall”.

At the same time, the document argues that, given the low level of trade, the bloc’s exports compared to the rest of the world have accentuated its tendency towards primarisation, This is the most marked phenomenon of Brazilian exports, according to the same report.

Although the automotive sector is the one that concentrates intra-zone trade, the report in Sol’s hands mentions that other industrial sectors were losing relative participation in the regional market. And bilateral agreements in the automotive sector have tended to strengthen regional integration, limiting trade and its imbalances (mainly in vehicles). “However, the effects on integration and balance are relative. Although this is the most integrated sector of the bloc, it has not been a balanced process, neither between the partners nor between the links themselves.” , indicates the document.

It is clear that Mercosur’s trade in services has been one of the few signs of improving. The bloc recorded strong growth between 2003 and 2010 in this area and over the last 15 years there has been a greater dynamism of imports of services, which has accentuated the structural deficit.

The total trade of Mercosur during the first decade since its inception has been strengthened in intra-area trade. However, The last 20 years have been marked by an expansion of extra-zone trade, mainly due to an increase in commodity exports. And the share of trade within the bloc is “between historic lows and extra-regional exports are 8 times greater than exports within the bloc,” indicates the reserved report.

In terms of negotiations between the bloc in collaboration with third parties, there has been little progress during the 30 years of Mercosur. A historic agreement has been reached with the European Union, but it has not been reached in practice and it is very likely that it will take more than 10 years.

At a time, Currently, there is a strong tension between Argentina’s more conservative stance to narrowly open the bloc to new markets and Brazil or Uruguay’s stance to make it more flexible. as soon as possible towards free trade agreements. In the negotiations opened from the bloc, agreements are expected with India, Canada, Lebanon, Singapore, South Korea and EFTA. The opening of Mercosur to the Pacific Alliance and the incorporation of Bolivia as a full member are also on the table, a debate which is now provoking resistance from Jair Bolsonaro’s Brazil to Alberto Fernndez.

CHALLENGES AND CHANGES

The Chancellor’s Secretary for Economic Relations, Jorge Neme, said that “Mercosur has taken a step forward and needs to discuss what the future agenda will be. Today’s world has other relations, the emergence of China has changed the world board of power and has become an important partner of the region due to its demand for food we must re-discuss of this agenda after the 30-year celebration. “

Former Ambassador to the United States and current President of the Argentine Council for International Relations (CARI); Jos Octavio Bordn, He said that “the historic decision of Argentina and Brazil expressed in the Declaration of Foz de Iguaz in 1985 left behind decades of strategic mistrust between the two countries and was the cornerstone of Mercosur”.

In dialogue with The chronicler Bordn observed that “paradoxically, in a time of increasing globalization, there was a decline and a weakening of multilateralism. Faced with this reality, it is necessary to get Mercosur out of the stagnation and mistrust that it is experiencing. This requires us to renew ourselves to seek an updated convergence of diversity. Deepen our strategic agreements, increase internal trade between our countries and to articulate the productive chains between us and with other regions to participate actively in world trade “.

Miguel Acevedo, President of the Argentine Industrial Union (UIA), has a more optimistic vision of the future of Mercosur: “Mercosur’s 30th anniversary is an opportunity to reaffirm the industry’s attachment to regional productive integration. A path with many urgent and still necessary challenges, essential for the growth and development of the region and of our countries “.

Consulted by The chronicler, Acevedo noted that in an increasingly competitive world in terms of value-added exports, “Mercosur is the platform on which each partner can capitalize on its strengths. And this requires a common strategy, political will and the commitment of all the actors who make it up to achieve it.” The UIA, like its counterparts in Mercosur, believes that it will be able to proactively contribute to fundamental negotiating issues such as the common external tariff, rules of origin, regulatory convergence and trade negotiations with markets. third.

The former ambassador to China, Diego guelar, one of the biggest enthusiasts of the regional bloc for several years, admitted that “Mercosur faces the dilemma between deepening integration or returning to a simple free trade area.” Integration is a common identity mechanism with political, defense and political aspects. activities, in addition to the tariff issue. Dividing and negotiating each on their own – being only a ZLC – weakens us. “

For the current Argentine Ambassador to Uruguay, Alberto Iribarne, “The biggest challenge for Mercosur will be to de-ideologize the proposals. For the vast majority, whether they are more liberal or more progressive, a stronger, more united Mercosur, with more prominence and greater inclusion in the world, suits them. Deepening integration by modernizing the bloc’s agenda presupposes a program of concrete steps. “ For this, Iribarne said The chronicler that “ a global approach to its problems, both within the region and in its external relations, must be proposed, a long-term strategic vision which starts from a clear reading of the regional and global scenario for the years to come and involvement of the economic and social sectors “.

Meanwhile, the Ambassador to Brazil, Daniel Scioli, believes that to strengthen Mercosur from now on, it will be necessary “to increase trade and achieve greater intra-Mercosur productive integration”. To do this, Scioli proposed to resolve the controversies surrounding agriculture and improve connectivity to lower production costs.

It’s all part of a decalogue of good intentions if Mercosur fails to take off en bloc and is limited to being a customs union with little impact on the global economy.