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Argentina Takes Over Mercosur’s Presidency as Challenges Rise for Trading Bloc

Amid Bolsonaro's protectionism and divergent stances on the Venezuelan crisis.

By | [email protected] | December 18, 2018 2:17pm

18-12-2018_uruguay_el_presidente_mauricio_macriPhoto via Télam.
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On Tuesday, Argentina assumed a new pro-tempore presidency of the Mercosur, which will hold until mid-2019, a year that promises to be of extreme importance for the regional trading bloc.

Its member countries, Argentina, Brazil, Uruguay and Paraguay, will try to lock down – or at least make significant progress towards – trade agreements with different countries and/or other trading blocs around the world that could bring some life to an organization that is struggling to stay relevant.

Although the long-negotiated Free Trade Agreement with the European Union continues to be the most sought-after achievement, the Mercosur is also currently negotiating with the EFTA (comprised of Iceland, Lichtenstein, Norway and Switzerland), Canada, Japan, the ASEAN and the Eurasian Economic Union.

However, these long-awaited opportunities might collapse soon as Brazil’s president-elect Jair Bolsonaro remains reluctant to embrace multilateralism and has repeatedly hinted at adopting protectionist measures instead.

Argentina has reasons to be weary. Bolsonaro’s pick for Economy Minister Paulo Guedes has called the Mercosur trading bloc “not a priority. And both the French and German heads of state, Emmanuel Macron and Angela Merkel have indicated that Bolsonaro’s presence will be an obstacle for reaching a Mercosur-EU deal.

The German Chancellor has not elaborated on her statements, but Macron has, explaining that the main obstacle, he said on the sidelines of the G20, is the possibility that Brazil does not take all necessary steps to abide by the Paris Agreement. Even though Bolsonaro backtracked on a promise to pull out from the agreement, Brazil abandoned plans to host crucial UN climate talks in 2019. Moreover, Bolsonaro’s future Foreign Minister, Néstor Araujo claims “climate alarmism” is part of a cultural Marxist plot.

Nonetheless, Bolsonaro reportedly expressed interest in progressing with the deal, so it is definitely too early to predict that the deal is dead.

But leaving the future leader’s position on climate change aside, it is its overarching commercial policy, contrasting with its counterparts, that will probably result in the need to find middle ground at the Mercosur negotiating table. And Argentina has already showed willingness to do so.

Talking to reporters, Foreign Minister Jorge Faurie recently highlighted the need for “a complete reform of the Mercosur’s institutional architecture.” Faurie went on to say that the bloc needs to be “in line with the times we live in,” something that demands “flexibility.”

According to Cronista, the government will lead a revision of the bloc’s common external tariff, in an attempt to reach middle ground with the Bolsonaro administration, which allegedly favors the dissolution of the customs union. If Brazil, and not the entire Mercosur, reduces its external tariffs, it becomes a much more attractive commercial partner, in detriment of its counterparts that remain with higher tariffs.

If this were to be the case, the Mercosur would go from being a customs union to a free trade area, which is a lesser form of inter-governmental commercial integration. According to Infobae, Bolsonaro also intends to relax the norms regarding the member countries’ ability to reach individual agreements in parallel to the bloc. Although the news site indicates that Macri is not against this potential measure, the near future could see the member countries competing to offer the most favorable conditions to third parties.

Speaking in Montevideo today, Macri confirmed this position: “our initiative will be able to adapt to the dynamic of regional and global changes. I invite you to continue betting on a Mercosur that is open an integrated with the world.”

Bolsonaro.

The challenge, then, seems to lie on increasing the Mercosur’s competitiveness by relaxing its internal norms to such an extent that becomes attractive enough to the Bolsonaro administration, but that at the same time is not detrimental to the interests of the three other countries.

The future is not less challenging in the political landscape, as the Venezuelan crisis continues to dominate the regional agenda.

Last year Bolsonaro vowed to “do whatever is possible to see that government deposed.

“It’s the Venezuelans who must solve the Venezuelans’ problems,” his vice-president, Hamilton Mourão, told the magazine Piauí recently. Venezuela’s Nicolás  Maduro, on his end, has said that Bolsonaro’s inner circle was planning “a military adventure against the Venezuelan people”.

More than one specialist has speculated with the possibility that Bolsonaro would favor a military intervention. But the possibilities are slim to none and the main question – in this completely hypothetical scenario – is who would lead it.

However, Bolsonaro has toned down his rhetoric in the past months, and his official stance once he takes office remains to be seen. And even if this extreme option is not in the cards, Bolsonaro would probably still become the strongest critic of the Maduro regime in the region.

We will not have to wait much to see if Macri and Bolsonaro are on the same page when it comes to Venezuela: the countries’ foreign ministers are set to converge in January for the next Lima Group meeting where, according to EFE agency, the Peruvian government will propose all members cut diplomatic ties with the Caribbean country.

The governments’ decisions will likely come into effect on January 10, when Maduro begins a new six-year term, following the results of the 2018 presidential elections that most of the international community – Brazil and Argentina included – did not acknowledge as legitimate.

Nicolás Maduro.

Although the Macri administration does not have diplomatic contact with Venezuela – apart from exchanging criticism – Argentine officials will have to determine whether breaking up with it will end up being beneficial to the ultimate interest of the Venezuelan people.

Bolsonaro, on his end, does not seem to want to have anything to do with Maduro. On Monday, he instructed the Foreign Ministry to withdraw Cuba and Venezuela’s invitations to his inauguration. “Naturally, regimes that violate the freedom of their people and, along with the defeated group [the PT] they are ideologically aligned with, openly act against the future Brazilian government, will not be present at the inauguration,” Bolsonaro said.

Macri will not be in Brasilia on January 1 either, but because he chose not to interrupt his holidays for the inauguration, even though Minister Jorge Faurie had confirmed that the President would in fact attend the event: “For us, Brazil is extremely important and our main partner. Therefore, the President understands he has to be present at that moment, in the same way other regional leaders will be,” Faurie said.

This was the last case of what can be considered as successive snubs between Macri and Bolsonaro: Macri had invited Bolsonaro to the G20, but despite initially confirming his attendance, Bolsonaro eventually decided against it. And Bolsonaro’s first overseas trip will be to Chile, not Argentina.

Both heads of state finally agreed to hold their first meeting on January 16 in Brasilia. The meeting will begin to shape the new bilateral relation, key for the region’s economy and geopolitics.