Uruguays president has sounded the alarm over rising
trade protectionism in South America as the country battles to
find new export markets in a bid to diversify its economy.
He singled out the Argentine government for criticism in the
wake of its move to impose tariffs on hundreds of items and is
examining the possibility of applying tariffs to another batch
of 100 manufactured items.
The moves represent the most severe crisis facing the
Mercosur, South Americas two-decade old trading bloc, he
said.Mercosur is in crisis, Jose Mujica, said in
wide-ranging interview with Emerging Markets in his
presidential office on the eve of the IDB annual meeting.
We export to the world, but value-added products we
sell within the region, he said. This option is
being closed by Argentina and we do not have the option to sell
to other parts of the world. This is why it is so serious for
Exports to Argentina fell precipitously in February,
dropping to $25.8 million from $46.5million the same month last
year. Exports to Argentina in 2011 totaled $587 million.
The Argentine government has moved to compel companies to
sign agreements that they will invest in the country, use local
products and hire new people in exchange for the new controls
on foreign products. However, Mujica denied plans to impose
tit-for-tat protectionism barriers were imminent for
now. We have not touched trade directly, we have not
established barriers. I cannot discard that this is something
we might have to do, but it is not in our plans. We continue to
purchase from Argentina without disruptions, said
The president highlighted the challenge of finding new
export markets given the economys small size and
location, vowing to remain within the trading bloc.
Before we can make any important decision in Uruguay
on this issue we need to be clear about what Brazil will do.
There are people already calling for us to break from Mercosur,
but where would we go, Antarctica?
A growing market is Venezuela, which wants to join Mercosur
but was blocked by a decision of the Paraguayan Senate.
Asked whether free trade agreements (FTA) with China and the
US could boost the countrys export prospects, Mujica
said: A trade agreement between a country as large as
China and one as small as Uruguay has implicit dangers. This
does not mean that we cannot sign agreements that would be more
practical, exchanging lists of goods.
He added: I do not think that the cur-rent
administration in Washington is interested in FTAs at this
moment. And it would not resolve the problem we have right
Julio Velarde, Perus central bank president, said
while protectionist measures were primarily affecting the
Mercosur countries, they were also a stumbling block to efforts
to create greater integration.
We are talking about integration, about strengthening
regional mechanisms, but at the same time there are increasing
problems with trade barriers. It is does not make sense to talk
about integration if there are still basic issues like trade on
the table, he said.