Uruguay looks like an island of prosperity in a sea of ​​instability in South America – 03/02/2021 – Latinoamérica21

During the last decade, Brazil has lost its regional importance. This movement has intensified in recent years.

At the same time, several presidents have tried to fill the void left by the Brazilian omission. They all failed.

Would it be different with the Uruguayan Luis Lacalle Pou?

In 2017, Peruvian Pedro Pablo Kuczynski proposed the creation of the Lima Group to deal with the crisis in Venezuela.

In 2018, Colombian Iván Duque decided to leave Unasur (Union of South American Nations) during his first week in government.

In 2019, Chilean Sebastián Piñera brought together six other presidents from the region to create the Forum Prosul with the aim of replacing Unasur.

Brazilians Michel Temer and Jair Bolsonaro were not directly involved in any of these initiatives. In all three cases, the concrete results after a few years were well below the presidential voluntarism.

The Lima Group has become harmless after the Venezuelan adventure of the self-proclaimed Juan Guaidó.

Some more recently elected presidents, like Argentina’s Alberto Fernández and Bolivian Luis Arce, and candidates for the post like Andrés Arauz, who ran in the second round in first place in Ecuador, have called for the restructuring of Unasur.

The Prosul Forum did not obtain results in terms of regional consultation, or even coordination of efforts to deal with the effects of the pandemic on public health; Bolsonaro did not attend any of the three Prosul virtual meetings hosted by Chile in 2020.

Now it’s the turn of Uruguay, led by Lacalle Pou, to take the lead.

Faced with the situation of economic disintegration and political fragmentation which prevails in South America, the President of Uruguay received Alberto Fernández in Colonia del Sacramento last November.

In February, he traveled to Bolsonaro for lunch at the Palácio da Alvorada and invited Paraguayan Mario Abdo on Carnival Tuesday for a conversation in Punta del Este.

There were characteristics common to all the meetings. Informal, without official declarations or joint communications from the chancelleries.

The agendas for the three face-to-face conversations were guided by Uruguay. Along with less important questions of interest to the interlocutors, flexibility of Mercosur has always been the main theme.

Uruguay’s agenda to make Mercosur more flexible is a euphemism for ending the Common External Tariff (CET), which forces all countries in the bloc to cover the same import tax for products outside the bloc.

The CET is the instrument that ensured strong growth in intra-bloc trade between 1991 and 2011, but which lost steam due to the industrial crisis in Brazil and Argentina, political fragmentation and a Chinese presence. increased.

Strong Chinese demand for primary products in the bloc has guaranteed abundant foreign exchange in recent years and numbed the member countries’ industrial export effort.

In Uruguay, the relaxation of Mercosur seems to have internal legitimacy. After all, between 2015 and 2019, this country posted economic growth while Argentina and Brazil stagnated.

Lacalle Pou argues that Mercosul should abandon the TEC and that each partner negotiates individual trade agreements with third countries or blocs.

Among the four founders of Mercosur, Uruguay is the only one to have borders only with the countries of origin of the bloc and its economy was the most integrated with its neighbors before the Treaty of Asunción of 1991.

The country has maintained its tradition of not automatically aligning itself with either of its neighbors. The independence of Uruguay itself can be understood as a function of the distension between Brazil and Argentina. Now he appears to be favoring his departure from the two, which would be an unprecedented move.

Lacalle Pou’s password had already been given in his speech at the virtual Mercosur meeting in July 2020, which handed over the presidency of the Paraguay bloc to Uruguay. He focused his speech on the defense of “deideologized” relations with China and on the importance of agricultural specialization in the economies of the region.

The reaction was weak. Attention has focused on the Mercosur-European Union deal, which negotiations have continued for more than two decades, has made no progress over the past year and has lost ground in presidential concerns.

Uruguayan foreign trade is less and less South American and more and more Chinese.

In 2000, 49% of Uruguayan exports went to neighboring South American countries, after a decade of strong growth in trade within Mercosur.

In 2010, South America’s level of total Uruguayan exports was 39.4%; in 2020, the level was below 25%.

Ten years ago, Brazil bought 24% of Uruguayan exports and China only 5%. Today, China alone buys 28% of what Uruguay sells and Brazil only half (14%). Chinese dynamism has numbed regional integration.

For Brazil, Uruguay also represents less and less commercially. If in 2018 Brazil had a surplus of $ 1.8 billion, in 2020 it was only $ 600 million. Brazilian exports to Uruguay have fallen 40% in two years.

Uruguayan exports to China are concentrated in just two agricultural products, meat and soybeans, unlike industrialized and diversified exports to Brazil and Argentina.

Intra-regional trade is more accessible to small businesses and generates more and better jobs. The specialization propagated by the Uruguayan president implies deindustrialization and fewer jobs linked to foreign trade.

Lacalle Pou is right to promote regional dialogue and to worry about the costs of an ideological policy towards China, Mercosur’s main trading partner. However, it is wrong to understand that Uruguay alone will negotiate more favorably with extra-regional partners.

The trend towards building regional blocs, although unstable in recent years, continues to strengthen. Everywhere, the cost of exiting a regional agreement is much higher than the cost of maintaining it.

The concrete result of the relaxation of Mercosur would be more productive specialization and greater interdependence with China. Even with China, Mercosur could negotiate better together.

Argentina, Brazil, Paraguay and Uruguay together account for 75% of total soybean imports from China, in addition to 37% of meat and 25% of cellulose. All of these products are very intensive on land and water.

China depends on Mercosur to guarantee an increase in its protein consumption, but, due to political incapacity, the bloc has so far not benefited indirectly from this situation.

Political dialogue is particularly important in Mercosur because a large part of its trade is managed. When the Brazilian and Argentinian economy ministers do not speak to each other, trade between the two countries drops considerably.

Part of the decline in intraregional trade is the result of political fragmentation. There are other regional integration instruments that should be modernized, such as the Aladi Reciprocal Credit Agreement (Latin American Integration Association), which is also headquartered in Montevideo.

In the current scenario of economic disintegration and political fragmentation in South America, Uruguay may look like an island of prosperity in a sea of ​​instability. But its medium-term stability will be compromised by the lack of harmony between Argentina and Brazil.

Lacalle Pou might be able to put Alberto Fernández and Jair Bolsonaro for the first time at the same table, but he would hardly have the same success in the face of savings 200 times greater than his own.

Uruguay would have much more to gain from allowing a good dialogue between its two neighbors and from contributing to the construction of a consensual program in South America than by negotiating alone with China, the United States or the European Union. .

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