Uruguay Reviewing Links with Mercosur

Given the mounting difficulties with Mercosur Uruguay is quietly considering different options for different scenarios including the possibility of abandoning the South American customs union, revealed the Uruguayan press in Montevideo.

“For the current Uruguayan government, Mercosur is a strategic priority and we are looking forward to a larger and better Mercosur, not the one we have now plagued with difficulties. Uruguay wants a Mercosur that fairly contemplates all countries, no matter the asymmetries”, said Vazquez Wednesday in Caracas during a meeting with President Hugo Vázquez.

However before leaving for Chile President Vazquez allegedly left precise instructions for the consideration of other options including closer trade and eventually political links with United States.

A first option would be to insist on a better deal from Brazil and Argentina for Mercosur junior members, Uruguay and Paraguay. Currently Uruguay is blocked by land from Argentina by pickets and to the east, Brazilian farmers have successfully lobbied to prevent Uruguayan rice from entering the country.

A second option would be to follow the Chilean experience. From the very beginning Chile made a clear cut between the political and trade fields. Full support for a strong Mercosur in world forums but given its more ambitious tariff and open economy policies it never joined the trade agreements.

Finally abandon crisis plagued Mercosur and look for more practical options such as trade agreements with United States, currently under consideration, with China, India and the European Union.

This is not the first time Uruguay has considered extra-Mercosur options particularly given the trade impediments regularly imposed by the larger partners, following on strong internal lobbying in Argentina and Brazil. The Brazilian press refers to Uruguay as the “grumpy” member of the block.

When Mercosur was surging in the late nineties almost half of Uruguay´s trade was with its two large neighbors. Since the Brazilian crisis of 1999 and the melting of the Argentine economy in 2001/02, the percentage has dropped to 20 percent and NAFTA countries (United States, Canada and Mexico) have become the main trading partners.