MERCOSUR: common market in the grip of discord


Nelson Almeida / AFP

South America is ready to enter the "Global Gateway" of the EU only on the terms of mutual respect and equality

At the crossroads of the three borders between Brazil, Argentina and Paraguay, the 62nd MERCOSUR Heads of State Summit was held in Puerto Iguazu, Argentina by Presidents Alberto Fernández of Argentina, Luiz Inácio Lula da Silva of Brazil, Mario Abdo Benítez of Paraguay, accompanied by his country's President-elect Santiago Peña, and Luis Lacalle Pou of Uruguay.

MERCOSUR (Mercado Comun del Sur) is a common market of South American countries in terms of size and economic potential, the second customs union after the EU and the third free trade area after the EU and NAFTA (Canada, USA and Mexico).

Founded in 1991, MERCOSUR brings together Argentina, Brazil, Paraguay and Uruguay. Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname have "associated state" status. The issue of accepting Bolivia, whose president Luis Arce attended the summit, as a full member of the group was postponed this time.

Collectively, the countries of the South American Common Market account for 11.9 million square kilometers or 67% of South America's territory. It is home to 270 million inhabitants or 62% of the population of the Southern Cone. In 2022, MERCOSUR countries accounted for almost 70% of South America's GDP and its trade with the world reached $727 billion with a surplus of $69 billion.

"In a world increasingly driven by geopolitical competition, our regional choice must be cooperation and solidarity," said Brazilian Luiz Lula, who took over the six-month chairmanship of MERCOSUR from Alberto Fernandez, at the opening of the 62nd Summit.

However, from the very first minutes, the meeting highlighted the differences between the Member States. The Southern Hemisphere Common Market continues to face a difficult situation. The declining weight of domestic inter-State trade, ideological tensions between right-wing and left-wing governments, continued pressure from the United States and unresolved issues of cooperation with the European Union create uncertainty about the sustainability of the mechanism.

As it happens, the current composition of MERCOSUR represents equally right-wing (Paraguay and Uruguay) and left-wing (Argentina and Brazil) governments. The former link the development of trade and economic ties with policies that conflict with the much-desired "cooperation and solidarity."

At the same time, asymmetries between large and smaller economies make it difficult to reach consensus. Tensions at the Puerto Iguazu meeting largely arose over the future direction of the trade bloc. "Smaller economies" – Uruguay and Paraguay – are seeking permission to negotiate deals individually without the approval of other members of the community, contrary to existing MERCOSUR rules. At the same time, they are not inclined to change the rules.

Thus, Uruguay attempted to conduct a feasibility study for a bilateral free trade agreement with China and began negotiations with the Asian giant. However, Beijing did not support Uruguay's ambitions, preferring to develop relations with the entire MERCOSUR.

This prompted Brazilian President Luiz Inacio Lula da Silva to promise to reduce "dissent" in the group. He even called for the resumption of talks with Venezuela, expelled for political reasons from the bloc in 2017.

The right-wing immediately put up a fight, making trade and economic cooperation dependent on the political-ideological arrangement of the Maduro regime, which is undesirable to the United States. Abdo Benitez and Lacalle Pou sharply criticized the opposition policies of Nicolás Maduro's government.

"Venezuela's problem should be solved by Venezuelans through dialog among themselves, not by other countries interfering in their internal affairs," Luiz Lula suggested that trade should not be mixed with politics.

However, the MERCOSUR heads of state failed to avoid a clash with politics, and already at a more serious intercontinental and even global level.

The first summit of the European Union (EU) and the Community of Latin American and Caribbean States (CELAC) in eight years will be held in Brussels from July 17 to 18, with MERCOSUR playing the first violin from the Western Hemisphere. The 21-page draft declaration of the upcoming summit has also become known.

The original text of the declaration proposed by the EU included several points of support for Ukraine, citing UN General Assembly resolutions. "The text on Ukraine was very balanced," an unnamed EU diplomat told the pan-European website EURACTIV.

"We condemn in the strongest terms Russia's war of aggression against Ukraine, which clearly violates Ukraine's independence, sovereignty and territorial integrity and threatens the rules-based international order," said the European version of the draft declaration, which states that the post-war world should be built according to Kiev's parameters.

However, Latin American experts did not find this text so "balanced", and in a counter-proposal they "deleted everything that concerns Ukraine". Most Latin American countries have repeatedly stated that they do not want to be dragged into a war, which they still consider primarily a "European problem."

Instead, Latin Americans, in order "to help heal our collective memory and reverse the legacy of underdevelopment," asked Europeans to pay reparations for the damage caused by slavery.

Apparently, in addition to the already proposed scheme called Global Gateway, which claims to be the EU's answer to China's "One Belt, One Road" initiative, Global Gateway involves the export of raw materials and agricultural products from Latin America, and the import of European machinery.

According to European Commission President Ursula von der Leyen, the Global Gateway project will promote "a fair, green and digital transition, will be mutually beneficial and will bring the two regions even closer together."

The reaction of Latin Americans was again a little different from that of Europeans.

"We are not interested in agreements that doom us to the eternal role of exporters of raw materials, ore and oil. We need policies that involve deep regional integration based on skilled labor and production, science, technology and innovation. This requires greater integration, articulation of production processes and the interconnection of energy, roads and communications," said Brazilian President Luiz Lula.

Argentine President Alberto Fernández reiterated this point: "No one can condemn us for being suppliers of raw materials from which others produce industrial products and then sell them to us at exorbitant prices."

The participants in the MERCOSUR summit in Puerto Iguazu agreed that "the additional instrument presented by the European Union is unacceptable. Strategic partners do not negotiate on the basis of mistrust and the threat of sanctions."

Let us recall that the original Mercosur-EU free trade agreement, after 20 years of negotiations, was agreed in June 2019 but never ratified.

It is noteworthy that in January 2023, the CELAC summit was held in Buenos Aires, which was attended by representatives of 33 states of the region. At that time, the United States was accused of seeking to disrupt integration processes in Latin America and subordinate them to its interests.

Today, the same concerns are being expressed about the Old World. Officials in Brussels had hoped to announce significant progress on the MERCOSUR deal at July's CELAC-UE summit in Brussels, and European Commission President Ursula von der Leyen has called for it to be done as soon as possible.

However, MERCOSUR countries are brushing this prospect aside.