Lackluster Mercosur looks to revive trade ties | Business| Economy and finance news from a German perspective | DW | 29.07.2014
  1. Inhalt
  2. Navigation
  3. Weitere Inhalte
  4. Metanavigation
  5. Suche
  6. Choose from 30 Languages


Lackluster Mercosur looks to revive trade ties

The South American trade alliance Mercosur is trying to strengthen its clout worldwide. A free trade agreement with the EU is in the works, but some member states' domestic agendas are proving distracting.

When the Mercosur summit begins in Caracas on Tuesday, Venezuela will hand over the rotating presidency to Argentina. Both countries find themselves in fraught situations - Venezuelan president Nicolas Maduro has faced months of public protests against his government and Argentina's second default in 13 years looms overhead.

That precariousness has come to define the state of Mercosur, the "common market of the South," that also counts Brazil, Uruguay and Paraguay as members.

"Mercosur is struggling at the moment to regain its regional and international relevance," Roberto Bouzas, an economist from the University of San Andres in Buenos Aires, told DW.

Founded in 1991, Mercosur is South America's biggest economic entity and represents some 270 million people in five member states. Its aim is to foster political and trade ties among its members by gradually abolishing tariffs.

Things went well at first - trade grew steadily and talks with the European Union over a free trade agreement that began in 1999 looked promising.

"A deal with the EU was meant to strengthen Mercosur's standing in the global trade arena," Bouzas said.

That enthusiasm has since evaporated, and a free trade agreement with the EU seems a long way off.

"Mercosur is more of a diplomatic forum than a trade and tariffs union," Bouzas said.

Baby steps

Trade between Mercosur and the EU has risen in the last seven years, according to the European statistics office, Eurostat. Experts believe both sides would benefit from a free trade deal.

"Mercosur is the fifth-biggest trade bloc in the world - that's highly significant," said Mark Heinzel, an expert on Latin America at the German Chambers of Commerce (DIHK).

The EU currently exports mostly industrial goods to the Mercosur countries, which in turn export raw materials back to Europe. Free trade talks have been interrupted on several occasions due to agricultural subsidies in the EU that make it hard for Mercosur economies to access the European market.

On top of that, free trade agreements frequently face opposition from the bloc's left-leaning governments in Venezuela and Argentina.

In March, however, Brazil's foreign minister, Luis Alberto Fiqueiredo, said a deal could soon materialize. Mercosur member states must now agree on which products and services to include in a potential deal.

Brazil under pressure

That Brazil, as the bloc's largest economy, is banking on the success of free trade talks is hardly surprising, Heinzel said.

"Brazil is putting a lot of pressure on fellow member states," he said.

Brasilia is closely monitoring the negotiations over a transatlantic free trade pact, commonly referred to as TTIP, as it is worried that it could be marginalized from global trade politics.

Brazilian President Dilma Rousseff

Can Brazil rev up Mercosur's engine?

Another competitor is the Pacific Alliance, a free trade zone between Chile, Colombia, Mexico and Peru that is becoming more powerful by the day. Almost all of the alliance's members have signed bilateral free trade agreements with the EU.

What Brazil needs is access to more markets, politicians and business representatives have long maintained. But within Mercosur, negotiations are conducted as a bloc rather than on a bilateral basis, making it hard for Brasilia to balance its own needs with those of the group.

Brazil going it alone?

Meanwhile, the EU is still weighing a deal with Mercosur despite a variety of alternatives, according to Bouzas.

"People don't talk about it much, but the European car industry in particular, with all its subsidiaries in Mercosur countries, are very keen," Bouzas said.

In Europe, news of TTIP still overshadows negotiations between the Europeans and the South Americans.

"The relations between the EU and the US have always been more intense," DIHK's Heinzel said. "For many, Brazil is far away, Argentina is even farther away, as is Venezuela, and as for Paraguay, well, most people don't even know where it is."

When an EU-Mercosur trade deal could emerge remains unclear.

"Fifteen years of talks have yielded nothing," Bouzas said. "Either a free trade agreement is simply unachievable or they're not talking enough."

DW recommends

Audios and videos on the topic