The presidents of Mercosur member countries are meeting this Thursday at the bloc's summit in the Brazilian region of Bento Gonçalves; a meeting that will have little to resolve due to the changes in government and policies in Argentina and Uruguay, which will surely dictate to what extent they can advance on issues such as updating the common external tariff and new trade agreements.
The meeting will include, in addition to President Jair Bolsonaro, Paraguayan President Mario Abdo, Uruguayan Vice President Lucía Topolansky and outgoing Argentine President Mauricio Macri. Despite having less than a week to hand over office, Macri did not invite his successor, opposition leader Alberto Fernández, who is expected to lead talks in the future, to attend the summit.
The countries are meeting amid an unexpected announcement by the United States of tariff increases on steel and aluminum imports from Brazil and Argentina, the bloc's largest economies. The summit would be an opportunity for the two countries to discuss the issue, but it is unlikely to happen because Macri is on his way out and Fernandez will not attend, according to one source.
Fernández will also be in the hands, or not, of negotiations to revise Mercosur’s Common External Tariff (TED). Earlier this year, the Bolsonaro government’s new economic team sold the idea that they would like to see the work completed by the end of 2019.
For more than 20 years, since the bloc was created, the Common External Tariff has not been revised and today there is a consensus among the four countries that it should be changed to help Mercosur trade flow with countries outside the bloc. However, different points of view among the four governments have always prolonged negotiations. This year, the revision of the TEC came to the table, but not at the speed that the Brazilians wanted.
According to Ambassador Pedro Miguel da Costa e Silva, secretary of bilateral and regional negotiations for Itamaraty in the Americas, the Brazilian objective was to move towards a negotiation of the TEC, which will not now take place in Bento Gonçalves.
"There is a lot of discussion and negotiation required. What was done this semester was an exchange of information, ideas and evaluations between the four countries on the process. We arrived at the end of the year knowing which positions and spaces each government has to work on."He said.
Asked whether Brazil perhaps needed to “throw in the towel” in its desire to see changes to the TED in the short term, the ambassador said that is not the case.
"All these agreements and amendments were a very ambitious goal to be concluded before the end of the year. But you have to have an ambitious goal to go as far as possible.“e,” he admitted.
However, these spaces may change with changes in government in the bloc. Despite having a centre-left government, Uruguay has always been more open commercially, and the election of Luis Lacalle Pou should not change the panorama.
In contrast, the election of Fernández in Argentina, a Kirchnerist candidate, has sent shivers through the Brazilian economic team, to the point that both Bolsonaro and Economy Minister Paulo Guedes have threatened to leave the bloc, without there having been any positive or negative signals on any issue discussed in Mercosur.
Asked about the impact of the Argentine elections, Costa e Silva said we had to wait.
"I, at my level, will wait for the definition of the new Argentine authorities and with the other authorities of Mercosur I will sit down and talk with them. The new authorities will have to take their place in Mercosur and then there will be space for us to talk. I prefer to work with facts."He said.
The director of the Mercosur Department, Minister Michel Arslanian, is more optimistic. According to him, a final meeting on the subject will be held in Bento Gonçalves and it is feasible to think of an agreement by the end of the next semester.
«The political calendar has an influence, but this perception that this revision of the TEC is necessary is very intrinsic to the modernization of the bloc's agenda.", He said.
Agreement with the European Union
Ambassador Rubens Barbosa, president of the Institute of International Relations and Foreign Trade (IRICE), said that he considered it hasty to put any setback in the Mercosur negotiations behind Alberto Fernández's back.
"“It is not known what their economic policy will be. When they sit there, we will see. They will have to negotiate with the IMF, analyse the Mercosur agreements, they have a lot to do,” he told Reuters. “For example, the agreement with the European Union has not yet been signed, but does anyone think they will not do it? Of course they will. It is important for them.”«.
The four presidents must sign the agreement with the EU at the Summit. This is the first step for the treaty to be subsequently ratified by the parliaments of the member countries. Although it will still be in the hands of Macri, it will need the political support of Fernández to pass through the Argentine Congress.
According to Brazilian negotiators, during these six months of pro tempore presidency, negotiations on trade agreements with Canada, South Korea, Singapore and Lebanon have also made progress, and exploratory contacts have been initiated with Indonesia and Vietnam. But there are no forecasts of announcements on the subject during the Summit.
Brazil is still working to try to conclude the automotive agreement with Paraguay, the only one of the three Mercosur countries with which it does not have a valid agreement, to announce it during the meeting in Bento Gonçalves, but until this week there was still one point of discussion without an agreement.
The Brazilian government is still trying to convince Paraguayans to stop importing used cars, and Mario Abdo's government, like its predecessors, has not agreed to budge on that point. According to one source, Brazil intends not only to expand the market for its cars, but also to prevent used cars imported through Paraguay from flooding Brazilian streets.
"An agreement with Paraguay closes the gap between the three countries and paves the way for the adaptation of the automotive sector to the Mercosur customs union. This creates a positive momentum for matching the agreement with the EU."Arslanian said.
Two concrete measures are to be signed during the summit. The four countries were able to reach an agreement on the recognition of geographical indications for products similar to those of the existing EU.
"Take for example Cerrado coffee, Canastra cheese, Vale dos Vinhedos wine. This will ensure that you do not misuse a trademark from a particular country.“, explained Costa e Silva.
The second agreement creates an accelerated import-export channel within the bloc for authorised economic operators who receive a seal of trust, reducing paperwork and time for companies that regularly sell to neighbouring countries.
Source: Reuters
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