World Economy

Mercosur Eyes EU Trade

Mercosur Eyes EU Trade Mercosur Eyes EU Trade

South America’s Mercosur countries are set to meet to initiate talks on a possible free trade deal early next year with the European Union.

The 49th Mercosur Summit is being held at the Conmebol headquarters in Asuncion, Paraguay.

Foreign and economy ministers from the group are hoping that details of the proposed deal can be hammered out in the next few months, Paraguay’s Foreign Minister Eladio Loizaga said on Sunday, news outlets reported.

Rigoberto Gauto, Paraguay deputy foreign minister and who is chairing the discussions before the summit with his peers from Mercosur members, plus economy and trade ministers, and central bankers, said the proposal will be considered but its implementation will be addressed under Uruguay’s chair, that formally takes over, for the next six months, from Paraguay on Monday.

Gauto added that Paraguay proposed that the list of identified barriers should not be permanent or definitive, but rather open and flexible, so that other measures identified by member countries, can be discussed and eventually incorporated.

The Paraguayan official did not reveal more details but said that a new chapter for Mercosur is opening and according to Loizaga, “Paraguay wants to return to the origins of Mercosur, which means a free trade and transit zone, so that members in equal conditions can develop and have access to the regional markets.

”As we can find in our Paraguay (and Uruguay) supermarkets all brands and produce from the region and our partners, we want Paraguay to have the same access and facilities.”

The deputy minister revealed that most barriers are imposed at border crossings and also (Argentine) measures which strongly condition fluvial transport, and are nerve breaking for landlocked Paraguay.

Among those expected at the gathering are Argentina’s President Mauricio Macri; Brazil’s President Dilma Rousseff; Venezuelan President Nicolas Maduro; Uruguyan President Tabare Vazquez; and host nation Paraguay’s President Horacio Cartes.

 Linking Markets

Mercosur countries are working on a common position they can take into talks with the European Union which have dragged on since resuming in 2010 after a six-year halt.

Currently, they are ready to open up 87% of the Mercosur market to EU countries who, having proposed 91.5%, want more.

A trade deal would link two of the world’s biggest markets, the Mercosur region of nearly 300 million inhabitants and the EU of over 500 million. But an agreement has proved elusive since negotiations started in the 1990s.

Mercosur wants a deal with the massive European Union as well as the Pacific Alliance grouping Chile, Colombia, Mexico and Peru.

Mercosur’s full members are Argentina, Brazil, Paraguay, Uruguay and Venezuela. Its associate members include Chile, Peru and Colombia.

 Argentina, the New Workhorse

Mauricio Macri wants to lead Argentina back into the international community after the three Kirchner governments that led to its isolation since 2003. A stronger Mercosur would help: It’s not just about relationships within the alliance, but also about foreign trade with other economic zones. Under Cristina Kirchner, Argentina repeatedly slowed negotiations with the EU.

“All eyes are on Macri,” said Juan Carlos Hidalgo, Latin America expert at the Washington-based Cato Institute. “He’s already shown an enormous willingness to reform.” Macri has been sworn in for a week, and has already lifted currency controls pegging the peso to the US dollar, and released concrete plans to lower export tariffs on agricultural and industrial goods.

Even before he took office on December 12, he traveled to Brasilia to talk with President Dilma Rousseff about improving economic ties. “When Brazil does better, then so does Argentina,” Macri said.

 Wavering Heavyweight

That’s only logical. All protectionist measures aside, Brazil is Argentina’s biggest trade partner. The only problem is that Brazil is not doing particularly well. Statistics show that South America’s largest economy has shrunk by more than 3.5% in 2015. Although Rousseff introduced some economic reforms shortly after her reelection at the end of 2014, these did not go over well with her interventionist Workers’ Party.

Rousseff needs the approval of her party now more than ever.

The “Common Market of the South,” or Mercosur, was founded 24 years ago in Asuncion by Argentina, Brazil, Paraguay, and Uruguay. It was meant to reduce tariffs and subsidies, and do away with–or at least coordinate–trade quotas and other trade barriers.