Tension in Mercosur
On December 6, started the 41st meeting of heads of state and government of Mercosur, the economic association whose members are Brazil, Argentina, Uruguay and Paraguay. The membership of Venezuela was suspended in 2017.
The president of Argentina, Alberto Fernández declared his dissatisfaction of the Uruguayan decision to join the Regional Comprehensive Economic Partnership (RCEP), that was announced on December 1. He reminded Luis Lacalle, president of Uruguay, that the changes of commercial policies of a member of Mercosur must be agreed with the other members. The RCEP agreement includes, since its start in 2020, the ASEAN countries, China, South Korea, Japan, Australia and New Zealand. It aims at creating the largest free trade zone in the world (30% of overall GDP) in the fastest growing area. Uruguay exports to China (21% in 2021) are similar to the joint exports to Brazil (15%) and Argentina (4,4%), while Brazil leads its imports (23%) followed by China (21%) and Argentina (14%). Much more important, 25% of overall exports of Uruguay are beef and 9% soy, whose markets are mainly China and Southeast Asia countries, not Mercosur countries, Argentina and Brazil. Besides this, Australia and New Zealand are direct competitors to Uruguay because they export a lot of beef and their prospects have improved since the starting of RCEP. In addition, the economic growth of the area, coupled with the demographic growth, is fostering beef consumption much more than in other areas. Countries that belong to RCEP may take advantage of this momentum, while those outside RCEP will be stuck. This is why Uruguay decided to join the RCEP.
The consequences for the other members of Mercosur may be negatives; Uruguay may import more goods from RCEP members due to lower commercial tariffs and it can even resell imported products profiting from its membership in Mercosur. Mercosur itself could be damaged and the interregional trade could narrow. More broadly, the decision of Uruguay can negatively affect the Commercial Agreement signed between the EU and Mercosur en 2019 aiming at lowering trade barriers and enhancing the trade of goods and services.