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Arestas do Brasil / Edges of Brazil

Uruguay and the back door exit

Bruno Peron, 23 March 2017

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Uruguay is not afraid of injurious events in the Latin American integration, as it can be observed in the process that has been called Uruexit. The line of conduct of the Uruguayan president Tabaré Vázquez has been that of commercial opening, whatever it costs. Indeed, everything has a price. But it seems Uruguay is willing to pay for it.

It is widely accepted that the Common Market of the South, which emerged in March 1991 with the initial purpose of reducing taxes for customs integration, has suffered a setback. While the entry of Venezuela as a full member causes disagreements in the bloc (the Brazilian and Paraguayan legislative powers were not favourable to accepting Venezuela), both countries of small territory (Paraguay and Uruguay) demand that the biggest (Argentina and Brazil) do not suffocate them.

Even Argentina and Brazil conflict between them about the tributes (low, high or none at all) to what crosses through their borders. In the essence, these two countries had moments of higher protectionism and inherited the form of regulating their economies through the strong presence of the State. Perhaps the development incentive that predominated during the 1960s and 1970s ­–which had an impulse in the ideas coming from the Economic Commission of Latin America and the Caribbean (ECLAC) ­–may be recovered in a certain way with the fear of losing markets and of competing unfairly.

However, some Latin American countries are ruled by leaders who believe in a different horizon for economic development. Chile and Peru follow increasingly the steps of Mexico and the United States; such is the example of the formation of the Pacific Alliance, which opens up to the world in a model of open regionalism. In the meantime, the Common Market of the South operates with restrictions in the international market – it is all or nothing, that is, it negotiates only in bloc with other countries and regions –and offers few remedies for its countries to win its crises. Uruguay has done everything not to give its back to the world because its leaders understand that the losses would be immeasurable.

This is how Uruexit has been reported in the same way as Brexit (in reference to Britain, or the exit of the United Kingdom) brings about serious implications for the European Union. In a decade in which radicalisms intensify, economies struggle to survive and war refugees crowd and dwell on the streets, the United Kingdom will leave the bloc to which it belongs. Naturally, the exchange rate fluctuations, the migratory uncertainties and the economic speculations increase in Europe.

Almost by imitation, Uruexit reveals the shortages and difficulties that the Common Market of the South has faced to keep up. This hesitation of the bloc comes from the divergence of purposes that each member country pursues. While Argentina lives from the past (“don’t cry for me, Argentina”; authoritarianism still blows in their memories), Brazil hurries an uncertain future (in its claim to greatness and leadership).

Few alternatives remain for the smallest countries of the Common Market of the South. It is in this context that the Chinese dragon approaches Uruguay as a strategic port territory for access to Latin America. I do not mean here that this is the only gateway, since China would get into (as it already does) in a way or another in these markets, but that the attraction of Uruguay would shake the support pillars of the Common Market of the South.

I add up that the strategic reorientation of Uruguay is preceded by its commerce increase and its approach to Chile. The concern, at this moment, is that Uruguay may withdraw from the Common Market of the South through the back door exit in order to pursue its national interests. Therefore, this pillar of the Common Market of the South would propose an enormous challenge for the other countries in the bloc. It is that of how to conduct in a new way this part of Latin America so that it effectively overcomes the most urgent problems of integration.

The pride of the great is not always listening to the little ones.