What is Lula’s strategy to stop Uruguay’s agreement with China

President Luiz Inácio Lula da Silva arrived in Uruguay this Wednesday (25) with a main mission: to try to prevent the government of Luis Alberto Lacalle Pou from closing a free trade agreement with China. In the assessment of the PT government, the Uruguayans’ agreement could represent the “destruction” of Mercosur. After the meeting in Montevideo with Lacalle Pou, Lula left with the signal that the Uruguayan government is willing to negotiate with the other countries of the South American bloc on the bilateral agreement with the Chinese.

Created in 1991, Mercosur comprises Brazil, Uruguay, Argentina and Paraguay. Venezuela joined the group in 2012, but has been suspended since 2016 for failing to comply with the membership protocol. Bolivia is an associate member.

Among other points, the Mercosur treaty prevents member countries from closing commercial and customs agreements in isolation with other nations. The idea is that the bloc’s unity cannot be maintained if one of its members provides more advantageous trade conditions for a country outside the group.

In recent days, however, Uruguay has been signaling that it was about to close the bilateral agreement with Beijing, which would mean that tariffs and import quotas between the two countries would be eliminated. The measure, however, is criticized by the other members of Mercosur. There is a risk of Chinese products being “made up” in Uruguay and circulating in Brazil with the advantages granted only to goods from member countries.

Before Lula’s meeting with Lacalle Pou, members of the Planalto Palace had already moved to list the counterparts that the Brazilian government intends to offer the Uruguayan government to dissuade it from joining the agreement with the Chinese. Among them is the resumption of infrastructure works that connect or benefit Brazil and Uruguay; the return of Brazil’s contributions to a fund to promote projects within the bloc; and the promise that Brazilians will no longer make unilateral reductions in tariffs on imports of products from outside the bloc.

As part of Lula’s commission on his visit to Uruguay, Finance Minister Fernando Haddad said this week that an agreement with China outside Mercosur could impact, for example, the Brazilian industrial sector. “We are not aware of the terms under which China’s agreement with Uruguay is being negotiated. But this kind of thing is not new. It is a visit to strengthen Mercosur. I believe that South America, its successful destination, passes through the economic bloc. About that, I have not the slightest doubt”, said Haddad.

Lula defended the strengthening of Mercosur during his visit to Uruguay

On the agenda in Montevideo, Lula sought to signal to the Uruguayan president that the strengthening of Mercosur will be one of his government’s priorities. The movement is part of the strategy that Lula has adopted in his first international trip, which also passed through Argentina. The new Brazilian government wants to seek international leadership through integration with Latin American countries.

“When we assumed the Presidency for the first time, in 2003, we decided that Brazil, as the largest country in South America and with the strongest economy, should have a generous policy with its partners that have less economic support. And so we did with all the countries of South America. During this period, the trade balance between Brazil and Uruguay had a surplus for Uruguay of 8 billion dollars. This is because it was part of our vision to contribute for all countries to grow together “, said Lula after the meeting with Lacalle Pou.

Before his visit to Uruguay, Lula had already repeated this speech during the meeting of the Community of Latin American and Caribbean States (Celac), in Buenos Aires, Argentina. “We are going to recreate and strengthen Mercosur and Unasur together. Alone we are weak. Together, we can grow and develop the region”, said Lula.

One of the arguments used by Lula to convince the Uruguayan president to review the agreement with China was that his predecessor, former president Jair Bolsonaro (PL), abandoned Mercosur and policies to strengthen South America. The petista, however, said that he intends to re-establish the bloc’s treaty as a way to expand foreign trade throughout the region.

“This was the first of a series of meetings that we are going to have from now on. So that we can begin to discuss in depth the things that we can settle. I returned to the Presidency not only to solve Brazil’s problems, but because I believe in multilateralism and I’m going to strengthen Mercosur, Unasur and CELAC,” added Lula.

President of Uruguay signals opening of dialogue with Mercosur

After the meeting with Lula, the president of Uruguay, Luis Alberto Lacalle Pou, indicated that his government is willing to negotiate with the Mercosur countries the agreements that it had been negotiating with China. The signal marks a change in posture by Lacalle Pou, who went so far as to classify Mercosur as “protectionist” on the eve of the meeting with Lula.

“We didn’t fight, but we left our points of difference to move forward and improve the relationship between Brazil and Uruguay as members of Mercosur. I believe that we have good intentions to close new agreements”, said the president of Uruguay.

Lacalle Pou said that he explained to the Brazilian president about the need for Uruguay to open up to the world. And that, therefore, Mercosur needs to update itself. “I explained the need for Uruguay to open up to the world. But we have no problems showing Brazil and other Mercosur members everything that is necessary,” said Lacalle Pou.

According to him, a group will be created to debate with Mercosur members on Uruguay’s needs with China. “We are going to create a technical team to know what we really want and need in the relationship with China. Everyone knows Brazil’s economic and demographic weight. Uruguay has its dialogue with China and we are going to negotiate all together. We belong to Mercosur But we want a Mercosur that is flexible, modern and open to the world”, completed the Uruguayan president after the meeting with Lula.

On the other hand, Lula pledged to debate with the other Mercosur members an update of the bloc’s treaty, created in 1991. In the Brazilian president’s assessment, it is Uruguay’s right to seek to expand its business with the world. “I want to tell President Uruguay that the claims are more than fair, because the president’s interests are to defend the interests of his country, its economy and its people. It’s fair to want to produce more and sell more. That’s why it’s important to open up as much as possible for the business world,” Lula waved.

Still according to the PT, the objective in the coming months will be to bring together the other representatives of the Mercosur bloc to assess the conditions of the treaty. “I want to say that we are in agreement with the ideas of discussing the renewal of Mercosur. We are going to sit down with technicians, ministers and presidents so that we can discuss what we need to do to modernize Mercosur,” said Lula.