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Argentina and Brazil hope to revive Mercosur

Americas / 08-02-17 / by
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Argentina_Report

Argentinean President Mauricio Macri’s first visit to Brazil since his inauguration was an opportunity to show unity between the two countries, with promises to improve Mercosur and boost intra-regional trade.

Following their meeting this week, Brazil’s President Michel Temer said the two heads of states had discussed ways to remove “obstacles to trade” within Mercosur, as well as regional integration – namely with the Pacific Alliance – and a trade agreement with the European Union (EU).

One of the biggest sticking points between the two countries has been phytosanitary controls at border points, which Brazilian exporters say are a barrier to trade with their neighbour. Temer said he had reminded Macri of the need to remove such barriers for Mercosur to work.

But according to Edward Glossop, Latin America economist at Capital Economics, the two countries have a lot of work to do if they are to revive the 1991 agreement, which many consider a disappointment.

“What Brazil and Argentina need to do first is get their own houses in order: sort out their domestic problems, ie, bring inflation down, bring their fiscal deficits down, and only then will they really be in a good position to actually reduce trade barriers in any meaningful way. Only then will they be able to compete on the world stage as a credible trading bloc, which [Mercosur] currently isn’t,” he tells GTR.

Brazil and Argentina also see US President Donald Trump’s attack on Mexican trade as an opportunity to further integrate the region, as Mexico could be encouraged to look south to make up for lost revenue from the US.

“You do get this sort of shift in economies, so there could be a shift over time with Mexico exporting more to Brazil, for example, and that would be a good thing and help to compensate some of the export revenue lost from the US,” explains Glossop. “But we’re a long way away from that. I would also question what would be the demand for Mexico’s exports in the rest of the region. The biggest export market for most of the region is still China, and that’s going to remain the case for the foreseeable future.”

Macri’s Brasilia visit also resulted in the signing of a co-operation agreement between Brazila’s export promotion agency, Apex, and Argentina’s investment and international trade agency. The deal aims to help the two entities exchange information, boost joint trade missions and promote the formation of Argentino-Brazilian companies able to do business in other countries.

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