More details are starting to come out with respect to last week’s Mercosur summit meeting and the decision to suspend Paraguay’s political rights. The online newspaper Mercopress has a series of fascinating reports on Uruguay’s reaction to the whole process, which can be summarized as follows:
Story #1 — Uruguay agreed to Venezuela’s July 31 entry into Mercosur as part of a negotiation to prevent Argentina and Brazil from imposing economic sanctions on Paraguay. Why? The political class staged the disruption so why punish the people, mused Uruguay.
Story #2 — There was not a unanimous agreement between the three remaining Mercosur presidents (Dilma, Kirchner, Mujica) that Venezuela should join the bloc, although Argentina and Brazil contest this.
Story #3 — Brazil and Argentina will benefit most from Venezuela’s accession to Mercosur. Brazil has a large trade surplus with Venezuela (and its firms get paid with regularity).
Story #4 — Uruguay vice president Astori is calling the outcome of the last Mercosur meeting a major blow against the already fragile institutional framework of the bloc.
Story #5 — Uruguay is claiming that it was Brazil that pushed so hard to bring Venezuela into the bloc. (This fits with much of the sustained pressure from various presidential advisors in Brasília.)
Story #6 — Former Mercosur cheerleaders and ex-Brazilian diplomat, Rubens Barbosa is now publicly worrying that Argentina is going to kill the trade bloc. Barbosa is currently head of the foreign trade council of the São Paulo Federation of Industrial Entreprises (FIESP), one of Brazil’s most important business groups.
Story #7 — The opposition in Brazil’s congress is complaining that the Dilma government is reducing Mercosur to little more than a political plaything. The bloc was once a critical part of Brazil’s foreign economic engagement strategy.
Rapid Analysis: Mercosur is not really in any more trouble than it has been for the last several years. The difference with this latest instance is that the internal discord and contradictions are now becoming very public. Ultimately, it will take a political decision from Brazil that trade deals with other countries are critical for things to move in Mercosur. Argentina matters and Paraguay and Uruguay have demonstrated they can exercise a veto, but none of these countries, or Venezuela for that matter, will be willing to block a major shift in Mercosur policy direction if it is something that Brazil really wants.