Mercosur begins its 65th summit this Thursday with Brazil and Argentina, the bloc’s main economies, on opposite sides. The difficult relationship is reflected in a drop in trade and clear divergences on several issues, even though both have reached a consensus on the trade agreement with the European Union, which may finally be concluded.
Data from the Brazilian Ministry of Development, Industry, Commerce and Services (MDIC) show that between January and October this year Argentina purchased 24.8% fewer Brazilian products than in the same period last year, while Brazil increased imports by 9 .7%.
The Brazilian trade balance with its neighbor still remains positive, but fell from US$4.75 billion to US$69 million in the same period.
Ambassador Gisela Padovan, secretary for Latin America and the Caribbean at Itamaraty, credits the drop to the fiscal adjustment made by the government of Argentine president, Javier Milei.
“I’m not prepared to comment in detail on the Argentine economy, but it’s the only explanation. From one moment to the next you have a drop of this size. What changed this year? A new government came in that promoted a very strong adjustment and has unfortunately negative implications for us”, said the ambassador in an interview about the Mercosur summit, which will be held on Thursday and Friday in Montevideo.
In 2023, Brazil had a surplus of around US$6 billion with Mercosur countries, according to the ambassador, while this year the result was more balanced. Between Brazil and Argentina alone, trade between the two countries fell by US$10.8 billion, according to MDIC data.
“Balance is desirable, but with more trade, not less, as is happening”, stated the ambassador.
There are no new internal trade barriers that have led to the drop in trade between Brazil and Argentina, but there is a difficult relationship that does not facilitate the resolution of possible problems or an active effort to improve trade.
This will be, for example, the first Mercosur summit that Milei will attend. Last year, during the bloc’s meeting in Asunción, the Argentine preferred to travel to Camboriú (SC) to participate in the meeting of right-wing leaders Conservative Action Political Conference (CPAC), where he met with former president Jair Bolsonaro. It was the first time that a president of the four founding countries of Mercosur – Brazil, Argentina, Uruguay and Paraguay – missed a summit of the bloc on his own initiative.
The Argentine president has criticized Mercosur and even threatened to take Argentina out. He wants to make trade agreements with other countries outside the bloc, but the possibility of the agreement with the European Union moving forward held the Argentine back.
The four founding members of Mercosur have declared that they agree with the current terms of the long-awaited free trade agreement with the EU and now hope that the European bloc will agree to the terms outlined after last-minute negotiations for the agreement to be concluded, they told Reuters this Wednesday two sources who follow the negotiations.
