This has been a bumper year for Latin American trade, and it is set to get even better. Argentinian Foreign Minister, Jorge Faurie, said he expected an agreement to be signed between Mercosur (the South American trading bloc), and the EU before the end of September. This will put an end to 20 years of negotiations and is only the latest in a string of recent achievements. Apart from this, Mercosur signed an agreement weeks ago with another Latin American trading bloc, the Pacific Alliance, and recently opened official discussions with Canada in pursuit of a free trade agreement.
While cynical rhetoric around free trade continues amongst some world leaders, Mercosur is meanwhile exploring possibilities for agreements across the globe. It is clear that member countries (Argentina, Brazil, Paraguay and Uruguay) are invested fully in the principles of free trade, as they seek to establish and leverage economic relationships in several regions. Products are becoming cheaper and Latin American goods are finding new markets. Quality of life for the booming middle class is also rising. But the time for complacency and celebration has not yet arrived – there is a long way to go. Mercosur countries must sustain the momentum of this recent progress by pressing ahead with new agreements around the world. Current political climates across the globe show that now is an ideal moment to make deals. Agreements with the most important players, such as the US and China, could make Mercosur one of the best-served trading blocs in terms of market access.
Mercosur trade deals with the US and China are, for the first time, beginning to look feasible. This is more than speculation. Uruguayan President Tabaré Vásquez argued last month that Mercosur should be pursuing opportunities with countries like China in the time between negotiations with the EU and the signing of a free trade agreement. There are significant and wide-ranging mutually beneficial reasons, which explain both sides’ drive for this.
Firstly, China is increasing its presence in the region and seeking to promote its soft power through trade. Secondly, the US is looking to trade as a means of entrenching principles of democracy in a region that has struggled with these concepts. Everyone knows that trade is not just about economics. There are many in the West who believe promoting democracy in Latin America is an important foreign policy, especially given China’s interest in the region. This could lead to Sino-American competition for market access in areas of South America that are pro-trade, with the Mercosur countries the likely beneficiaries.
Latin America’s relative political agnosticism will probably lead it to prefer Chinese trade to US trade. The Chinese are famously relaxed about attaching non-economic conditions to their agreements, whereas the US will likely enforce some democratic stipulations. The US has the potential to create significant discontent in Latin America, especially given the history of American involvement in the region. However, democracy can be enhanced through free trade even without formal stipulations. It is widely accepted that the economically liberalising measures of the NAFTA agreement played a significant factor in the democratisation of Mexico between 1989 and 2000 – it is therefore reasonable to believe this could work in Brazil, Argentina, Paraguay and Uruguay.
Ultimately, the upcoming trade deal between the EU and Mercosur is a fantastic and promising step forward for member nations, on both sides. The market expansion and money saved on duties will bolster the bloc’s finances significantly, in addition to hopeful implications for the future of trade and democracy in four very important Latin American countries.