Uruguay decides to take its distance with Mercosur by negotiating directly with third countries, escalating the disagreement with Argentina over the strategy of common external tariffs.
On July 7, Uruguay announced it would start negotiating independently with countries outside the Mercosur, despite a resolution from 2000 stating that members need to jointly negotiate tariff agreements.
The Uruguayan minister of foreign affairs justifies the decision by defending “the modernization of the bloc, through a substantive, agile, dynamic, flexible and permanent agenda of external negotiations“. The country wants to reduce the common external tariffs to ease trade with countries outside the bloc. Reductions in tariff need a unanimous agreement from the state members. But Argentina doesn’t approve Uruguay’s claims and wants to keep the trade tariffs higher to protect its economy.
Mercosur, for Southern Common Market in Spanish, is a South American trade agreement established in 1991. It set an internal free-trade market and built a stronger voice for negotiating with external parties. Founding members are Argentina, Brazil, Paraguay, and Uruguay. Venezuela’s membership was suspended in 2017 and several other Latin American countries, including Chile or Colombia, are associated with the Mercosur without being members. Bolivia, an associated member and in the process of joining Mercosur, said it would negotiate independently of Mercosur’s perimeter as well.
Uruguay is a long-time advocate for more flexibility to open its country to international commerce. It had yet received little echo so far. But Brazil has been more incline to open the gates. In March, it proposed to reduce import tariffs, considering them outdated – they didn’t changed since 1995 – and to high according to current standards. It didn’t receive unanimous approval. However, Argentina, which closed beef export for a month to limit inflation of food prices, becomes more isolated.
Uruguay still claims to be part of Mercosur
Uruguay’s economy is relatively more stable than its Argentine neighbour, which faces with a staggering inflation and a debt overload. In the past, Uruguay suffered from its close ties with Argentine and Brazilian economies, which faltered in the early 2000s. During this crisis, Argentine withdrew about a third of Uruguay’s deposits from bank accounts they had opened in what was often referred as the Switzerland of South America. After a bank crisis in 2002, Uruguay recovered with 15 years of uninterrupted growth, a first for the country.
Earlier in March, during the 30th anniversary of Mercosur’s creation, the disagreement between Argentina and Uruguay became more acute. The president of Uruguay, Luis Pacalle Pou, declared that Mercosur shouldn’t be a “ballast” or a “corset” for the country to move ahead. President of Argentina, Alberto Fernández, replied that “if we are a ballast, take another ship“.
In April, Uruguay advanced the possibility – unapproved – to negotiate directly with countries. It didn’t ask for repealing the obligation of a common consensus inside the bloc though. The resolution 32/00, signed in 2000, mentions that member needs to “jointly negotiate agreements of a commercial nature with third countries” and that a member “may not sign preferential agreements that have not been negotiated by Mercosur“. Regarding the resolution, Uruguay considers that the clause 32/00 is “not in force, since it was never internalized“.
Nevertheless, Montevideo, which hosts the headquarters of the trade bloc, claims to remain a full member of Mercosur.
The announcement came the day before a virtual summit between the presidents, marking the end of Argentina’s six-month presidency of Mercosur. The leadership will be transferred to Brazil.
- LVIII Ordinary Meeting of the Common Market Council (CMC) of Mercosur – States Parties and Bolivia, Uruguay Ministry of Foreign Affairs, July 2021, Free access
- Argentina Halts Beef Export for 30 days, Farmers Stop Commerce, Newsendip, May 2021, Free access
- Cryptocurrency Gains Interest In Argentina As Trust in Peso is Low, Newsendip, May 2021, Free access
- Argentina Avoids Default for Now, Newsendip, June 2021, Free access
- Con una frase, Alberto Fernández volvió a poner a Argentina en conflicto abierto con Uruguay y alteró a los demás socios del Mercosur, Infobae, March 2021, Free access
- Decision 32/00 Southern Common Market, Foreign Trade Information System, Free access