At a Glance
- Mercosur, the South American trade bloc, held its 11th Business Forum this week to coordinate approaches to economic policy and advance interests in private sector growth.
- Sustainability was top of the agenda and many participants stressed the importance of a multilateral approach between businesses and governments within the bloc to maximize the benefits of innovation and business development.
- Other priorities identified at the forum include strengthening intra-regional trade, increasing integration of the bloc’s production chains, and advancing the harmonization of regulations, procedures, and models.
- Discussions suggested broad support for the long-delayed EU-Mercosur trade agreement that will be debated at a Mercosur summit in December.
- The bloc’s future will largely depend on willingness to cooperate and ideological differences between the governments of its two largest economies—Lula in Brazil and newly-elected Milei in Argentina.
Context
On November 27, Mercosur held its 11th Business Forum to highlight the role of the private sector in advancing the South American trade bloc’s economic agenda. The forum was held in Brazil, and featured three panels: Commerce and Sustainability, Productive Integration in Mercosur, and Female Entrepreneurship.
This forum precedes Mercosur’s 63rd Summit of Heads of State to be held in Rio de Janeiro on December 7, which is expected to focus on the EU-Mercosur trade agreement. Leading up to the summit, an Ordinary Meeting of the Mercosur Common Market Council will gather foreign affairs and economic ministers and central bank presidents of Mercosur and the Mercosur Social Summit as well as authorities and representatives from civil society.
Analysis
The future of Mercosur will largely depend on the future relationship between the governments of Lula da Silva in Brazil and newly-elected Milei in Argentina. Lula has announced that he is unlikely to attend Milei’s inauguration on December 10, despite a personal invitation, so it remains to be seen how South America’s two largest economies will interact moving forward.
Recent economic headwinds in Argentina had led the previous ruling party to impose protectionist measures, such as import restrictions and multiple exchange rates, leading to challenges in regional integration, especially within Mercosur. However, Argentina’s future Foreign Minister, Diana Mondino, recently met with her Brazilian counterpart, Mauro Vieira, to discuss negotiations for the EU-Mercosur trade agreement that will be discussed at December’s summit. Argentina’s new government is expected to support advancing the long-delayed agreement, as it aligns with Milei’s economic plan to boost exports and reintegrate Argentina. Milei declared during his campaign that he would immediately remove any barriers to foreign trade, but we will see if Argentina can actually do so without worsening its already fragile economy.
For Brazil and Argentina, the question remains whether pragmatism will prevail over their ideological principles. Paraguay is likely to align itself with Brazil. Uruguay is pressuring Mercosur to conclude the long-awaited agreement with the EU, even suggesting the possibility of leaving the bloc if the agreement is not finalized soon.
Highlights of the Event
Interconnectivity of business and sustainability
Forum panelists emphasized that global neo-industrialization has reinforced the interconnectivity of business and sustainable development. This interconnectivity requires strategic and structured cooperation between the public and private sectors to ensure the smooth integration and execution of sustainable initiatives. Discussions revolved around the complexities of successfully transitioning from current practices to a green economy based on international best practices. Encouraging a multilateral approach between businesses and governments, including both public and private actors, will ease the burden of the transition and maximize its benefits. Cooperation decreases the cost of decarbonization and increases efficiency, which pushes bloc members to put in place environmentally responsible practices that result in sustainable development.
Innovation and Sustainability
Panelist consensus was that Mercosur countries, particularly Brazil, are innovators in transitioning to green economies and should gain more recognition and leadership internationally in this area. Panelists recommended positioning Mercosur as a bloc with experience in navigating the successful transition to sustainable development. To advance Mercosur’s trade and sustainability agenda while bolstering international commerce, panelists recommended promoting the following initiatives: energy transition, carbon market, circular economy, and forest conservation.
EU-Mercosur Agreement
Participants suggested closing the long-delayed EU-Mercosur deal is an opportunity Mercosur cannot afford to lose. A trade agreement between the two groups of nations has been debated for over 20 years and even reached “a deal in principle” in 2019, but finalization of details remains stalled—most recently over the EU’s sustainability requirements. A key takeaway from the business forum was that the EU-Mercosur deal represents an important advance in the bloc’s international presence and a critical opportunity that would benefit its businesses.
Regional Integration
Strengthening intra-regional trade is a priority.Geraldo Alckmin, Vice President of Brazil and Minister of Development, Industry, Trade, and Services of Brazil (MDIC) affirmed that true economic and commercial integration is carried out by companies and private actors. He said that within Mercosur, much more can be done to increase trade and physical integration among partners while also increasing exports to the world. He aims to deepen the integration and resilience of the bloc’s production chains.
Ambassador Gisela Padovan, Secretary for Latin America and the Caribbean, Ministry of Foreign Affairs of Brazil (MRE) also affirmed that trade must be strengthened intra-regionally across Mercosur countries. She highlighted the importance of advancing the harmonization of regulations, procedures, and models. She said that Mercosur must bring concrete benefits to the population, business people, and small business owners, who have greater difficulties in accessing the benefits of international trade. She also reaffirmed the importance of sustainability cutting across all industries. Mercosur is made up of countries with great ecological and environmental diversity, therefore policies that guarantee environmental protection must be implemented.
Harmonization of Regulations
Panelists widely emphasized the benefits of harmonization of regulations to increase efficiency and increase the region’s global competitiveness. Mercosur provides the opportunity for consistent and stable channels that promote dialogue on challenges bloc members are facing while harmonizing norms and regulations. Regional convergence is essential to maximize trade potential internationally, facilitating complementary and productive expansion while stimulating sustainable economic growth. Lack of coordination and conversion affects the flow of commerce, inhibiting development.
Chamber of Industries of Uruguay (CIU) Secretary Guillermo Pons Zolessi discussed Mercosur’s priority agenda, top of which is development of a cross-country strategy that counters unilateral measures from both countries and regions. It is an absolute priority to have mechanisms that guarantee international equity in relation to sustainable trade. He also proposed that Mercosur’s agenda should include jointly addressing sustainable development and environmental preservation due to the need to harmonize regulations across member states. He affirmed that working on regulatory harmonization not only promotes regulatory convergence but also creates a more predictable and attractive environment for companies.
