Economy

Mercosur's meeting of Presidents shows divergences and fissures in the bloc

Countries disagreed about flexibilities in the bloc and changes in the Common External Tariff, in addition to a discussion between Argentina and Uruguay

Brazil's President Jair Bolsonaro. Photo: REUTERS/Ueslei Marcelino
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  • The Brazilian proposal is for a 20% linear cut in the Common External Tariff, covering all sectors;
  • Brazil wants the freedom to negotiate trade agreements with other countries if other members of the bloc are not interested.

What would be a commemorative meeting of the 30th anniversary of the Treaty of Asunción that created Mercosur, the Southern Common Market trade bloc, on Friday, turned into a virtual meeting that opened up the divergences between countries about flexibilities in the bloc and changes in the Common External Tariff. It ended up in a discussion between Argentina and Uruguay.

In his speech, President Jair Bolsonaro made clear the Brazilian position on the need for change in the Common External Tariff, the tariff applied by countries to the entry of extra-block goods. The proposal was presented by Brazil in 2019 and is still under negotiation, but with increasing resistance from Argentina.

READ ALSO: Brazil posts smallest current account deficit in 13 years, FDI inflows jump

“We defend the modernization of the bloc with the updating of the Common External Tariff, as a central part of the process of recovering our economic dynamism,” said the Brazilian President, adding that the bloc must further accelerate negotiations with other groups of countries to increase its participation in world trade chains. “We want speed and significant results.”

The need for consensus among member countries for all decisions to be taken is one of the obstacles for negotiations in any economic sector to move forward, and the rule has been criticized by Brazil’s President.

“We understand that the consensus rule cannot be transformed into an instrument of veto or a permanent brake. The principle of flexibility is inscribed in the Asunción treaty itself, ”he said.

The Brazilian government wants two essential changes in Mercosur: the cut in the tariff rate and the freedom to negotiate trade agreements with other countries if other members of the bloc are not interested.

READ ALSO: Brazil inflation rises to multi-year high driven by strong rises in transport and housing costs

The Brazilian proposal is for a 20% linear cut in the tariff, covering all sectors – a proposal lower than the one initially made in 2019, in which the idea was to reduce the tariff average from 13.6% to 6.4 %. While Uruguay and Paraguay agree with the proposal, Argentina, always more resistant to tariff cuts, gave a positive initial signal at the beginning of the year.

However, looks like President Alberto Fernández changed his mind.

“Argentina has been very pragmatic. However, we do not believe that a reduction in the linear tariff for all rates is the best instrument. We preferred to continue with the methodology we were working on, ”said Fernández. “The Argentine proposal will preserve the balance between the industrial and agro-industrial sectors.”

READ ALSO: Argentina sees its economy shrink 4.3% in the last quarter of 2020

Annoyed by the Argentine positions, which have been followed in part by Paraguay, the President of Uruguay, Luis Lacalle Pou expressed his dissatisfaction with the bloc and complained about the “weight” that Mercosur has.

“Obviously, Mercosur weighs. Its activity, its production, weighs on the international stage. But it cannot be a burden. It can’t be a heavy load that prevents our countries from moving, ”said Lacalle Pou. “That’s why we talked to all presidents about flexibilization. Flexibility, different speeds, Uruguay needs to move forward.”

The Uruguayan President also said that he will formally propose flexibility because he needs a quick response.

Flexibility, which would give countries the power to negotiate agreements independently, has also been advocated since 2019 by Brazil, but to date, it has not progressed.

Lacalle Pou’s speech particularly offended Fernández, who took the criticism as directed at his country.

“If we become a load, I’m sorry. The truth is that we don’t want to be a burden to anyone. It is easier to get off the boat if that load weighs a lot,”said the Argentine President.

“We ended up with these ideas that help the unit so little at a time that unity matters to us so much. We don’t want to be anyone’s weight. If we are, let them take another boat. We are nobody’s ballast. ”

At the tensest moment of the meeting, Bolsonaro was gone. The President left the virtual meeting shortly after his speech alleged problems with the agenda, which led to an irony of the Argentine chancellor Felipe Solá, who insisted on extending his compliments to him, “even though President Bolsonaro is no longer here.”

Scorned by Brazil’s Economy Minister Paulo Guedes, before taking office, Mercosur was once again part of the government’s attention with the signing of the agreement with the European Union and the fact that the bloc still guarantees a considerable slice of Brazilian trade.

However, Brazil tries to change points from the beginning. If before the country had the support of Mauricio Macri, Fernández has no sympathy for the changes and neither for the Brazilian government. Now, not even for the Uruguayan. With the consensus rule, the Argentine government can stop any changes that it does not like.

Chile and Argentina commit to work to unite South America with Asia via cable of optic fiber

Chilean President Sebastián Piñera reaffirmed the commitment to work together with Argentina in the project that seeks to unite South America with Asia Pacific through a submarine cable of fiber optic, reported La República.

Piñera took the opportunity to “invite the other countries in the region to join this project that will allow Chile to have 5G connectivity technology, to connect with greater speed than today.”

(Translated and co-written by LABS)

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