-Analysis-
BUENOS AIRES — The current strained relations between Argentina and Brazil may hide a problem about the region that goes deeper — and wider. Argentina’s scarce participation in the July 8 Mercosur summit is the latest signs of the South American trading bloc’s precarious state.
The absence of the Argentine president, Javier Milei, and resurgent political divisions between the two neighbors (with this time a right-wing president in Buenos Aires and a socialist in Brasilia) are part of a bigger and so far irreversible reality: That Mercosur is more a source of discord than unity.
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There is of course a context to incidents like a president skipping a summit, which should be examined on its own. As the philosopher Hegel stated, only totality is real, and the bigger reality here is that Mercosur is gradually losing importance.
And while negative circumstances may not be enough to provoke a radical political decision, Mercosur, as a bloc formed to facilitate trade, is just not working as intended.
Declining exports
Over the past decade, Argentinian exports to Mercosur countries have fallen in value by billion (dropping from billion in 2023 to billion today). In 2013, 28% of our exports were to Mercosur states, compared with 20% more recently.
As the mathematician William Thomson (Lord Kelvin) observed, if you can say it in numbers, you’re closer to the answer. The bloc has effectively lost its treaty provision of the “free circulation of goods, services and productive factors between [members] by means including the elimination of customs rights and non-excise restrictions,” pursuant to Article One of the Treaty of Asunción.
Bloc members have likewise forgotten their commitment to harmonize their laws “in pertinent areas, to [help strengthen] the integration process.” The bloc is riddled with restrictive customs, technical and administrative norms, not to mention taxes inside countries that hamper trade.
Add to this the failure to impose a single, external tariff and forge a single external trade policy (with members implementing their own rules as they ramp up external trade). As a single trading space, Mercosur provides few exportation or investment incentives with the rest of the world, with only 15% of its total GDP being attributable to trade with the rest of the world (against a global average of 30%).
This is the smallest external trade/GDP ratio among the world’s 20 trading blocs, and due mainly to the absence of collective trade agreements with external partners. Another reason is that the bloc has barely moved beyond cutting tariffs when other blocs have rapidly evolved in other, crucial areas like regulatory harmonization covering many areas.
The feud with Brazil
For Argentina, of course, there are the current difficulties of our political and trading ties with Brazil. While Brazil remains (for now) the chief destination for goods (but not services) exported from Argentina, here too figures are sagging. In the late 20th century or the early years of our alliance with Brazil, the country received 26% of all our exports, up from 10% beforehand, while today the figure is 16%. While Argentina had billion worth of exports to Brazil in 2013, their value in 2023 was just over billion. Likewise, 35% of all our imports in 2005 were from Brazil, in contrast with 22% today.
The other side of this otherwise lackluster coin is an increase in these years of our exports elsewhere — above all to China, then also to India, Vietnam and Indonesia. And part of the reason is in another, inevitable reality: two-thirds of our exports are linked to agriculture, and those countries are big markets for this productive offer.
Perhaps more importantly, Argentina’s exports to the Asian continent already exceed all its exports to South America, which relates to an even bigger ‘totality,’ namely that trade with Asia is ten times the size of the world’s trade with South America.
All of this means that the politics and ideas of a Milei or a Lula certainly affect their decisions, but let us not forget that bigger picture: the sheer weight of trade and the billions of dollars tied to the Asian market.
