ECONOMY-MERCOSUR: Trade Bloc Reaches a Turning Point

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jul 7 1999 (IPS) - The Southern Common Market (Mercosur) has reached a critical moment as its two largest members, Argentina and Brazil, suffer declines in trade and economic activity, but the bloc still attracts an important share of direct foreign investment.

Jorge Campbell, Argentina’s lead Mercosur negotiator, declared as much during the seminar “Mercosur at the Crossroads,” held this week as part the annual meeting of the Argentinean Association of Banks, the country’s principal forum for economic debate.

Campbell, who is secretary of International Economic Relations for the Argentinean Ministry of Foreign Affairs, tried to instill a more optimistic tone at a moment when scepticism predominates in Mercosur, apparent prisoner to stagnation after last year’s drop in inter- and extra-regional trade.

Following a series of presentations criticising the alleged slowdown in talks between Mercosur members (Argentina, Brazil, Paraguay and Uruguay), Campbell underscored that, despite its problems, the bloc is still one of the world’s primary destinations for direct foreign investment.

More than 100 million dollars in foreign investments were made in Mercosur over recent years, a market of approximately 190 million people, he said.

“Mercosur is a region of economic certainty, peace, and democracy, where countries apply healthy macroeconomic policies,” explained Campbell in response to the criticisms of economists, exporters and bankers.

He recognised, however, that Mercosur is an exercise in reality. “We must not compare it with a theoretical Mercosur that does not exist, because we will never have a Mercosur that is more serious or more rigorous than each one of its member countries,” Campbell warned.

Felipe de la Balze, an economist with the Latin American Social Sciences University (FLACSO), said in his presentation, prior to Campbell’s, that “in the last five years, Mercosur’s negotiating dynamic fell down hard.”

De la Balze attributed the fall, in part, to the lack of political will among Mercosur governments, who were more concerned with domestic issues. Another factor is the persistence of culture. “There was a reason that extreme protectionism reigned for 50 years in Argentina and Brazil,” he remarked.

The president of the Exporters Association of Brazil, Marcos Pratini de Moraes, maintained that his country “is as closed today as it was 15 years ago, and more so than 30 or 40 years ago,” adding that Argentina is just as closed in some respects.

Beatriz Nofal, an economist with Eco Axis consulting firm, said Mercosur should define its willingness to advance toward a customs union in the next 18 months and comply with its agreements. Otherwise, she said, the bloc is just a free trade zone, an option which requires less commitment.

De la Balze, who was more pessimistic, put forth a third scenario that would imply returning to the 1970s, when integration was spoken of in grandiloquent speeches, but the region’s countries remained closed to the world and to their neighbours, he said.

In defence of the region’s politicians, Uruguayan Colorado Party presidential candidate, Jorge Batlle, acknowledged that the fight against protectionist tendencies among Mercosur member countries “is a job for titans” and, as such, progress made must be measured against this resistance.

Responding to criticisms about the slow rate of negotiations, Batlle said that the bloc is not trying to force compliance with its goals, because then deadlines might arrive with even stronger protectionism. What Mercosur wants is to create a customs union with the lowest possible tariffs, he added.

Campbell maintained that Mercosur is the regional response to the new international paradigm, which requires countries to be part of a group in order to negotiate better insertion into the world’s markets.

Martin Redrado, an economist with the Capital Foundation, agreed with Campbell, but added that the context is about scepticism and uncertainty.

“It is a turning point. We either take steps to deepen integration – and make crisis into opportunity – or we enter a period of lethargy, and transform the bloc into another compendium of good intentions,” warned Redrado.