South American trade partners pile pressure on rebel Uruguay

South America’s largest economies warned that Uruguay’s move to chase trade deals without the agreement of its Mercosur partners risks undermining or even rupturing the three-decade-old customs union.

“We view with concern that a path is being taken that would appear to be unilateral and very probably could lead to a rupture,” Argentina’s Foreign Minister Santiago Cafiero said Monday at a Mercosur summit in Montevideo, referring to Uruguay’s decision to seek its own deals with China and other countries. 

Brazil’s outgoing Foreign Minister Carlos Franca flagged “inevitable” legal and commercial problems for the bloc if member nations negotiate bilateral trade agreements. Mercosur’s smallest economy, Paraguay, also pushed back against Uruguay’s independent trade agenda.

“For Paraguay, unilateral initiatives are inappropriate and they are in opposition to the founding principals and regulatory commitments” of the bloc, Foreign Minister Julio Arriola said.

The three nations threatened last week to take undisclosed measures against Uruguay if it goes alone in pursuing trade deals, including its attempt to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the so-called CPTPP deal currently signed by 11 nations. 

‘Failure, Insignificance’

Fed up with Mercosur’s foot dragging on trade deals, the administration of President Luis Lacalle Pou has started negotiations with China and applied to the CPTPP while pledging to remain in the South American bloc. 

Uruguay’s Foreign Minister Francisco Bustillo, the summit’s host, said Mercosur faces “failure and insignificance” if it doesn’t modernize by clinching more trade agreements and reducing internal trade barriers. 

In a conciliatory gesture, Bustillo said Uruguay wants to modernize, not destroy, the bloc. Uruguay shipped goods worth almost $3 billion, about 26% of its overall trade, to its Mercosur partners between January and November.

“There has not been nor will there be a single action by my country that can be interpreted as Uruguay promoting the end of Mercosur,” he said.

Heads of state from Argentina, Paraguay and Uruguay, as well as Brazil’s vice president are scheduled to close the summit Tuesday, when Argentina will take over the bloc’s six-month presidency. 

Lacalle Pou has used Mercosur’s normally sedate gatherings as a forum to publicly criticize the organization’s reluctance to open foreign markets to its goods. A March 2021 summit led to an acrimonious exchange between the Uruguayan president and his Argentine counterpart Alberto Fernandez.