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Mercosur: Experts detail impacts on the bloc with the Coronavirus pandemic

Posted by Marina
The coronavirus crisis is not only associated with health risks, but represents, as a result, and other factors, profound changes in global economic directions. Countries saw their economic activities change suddenly with a lockdown decree in several regions until their respective governments could have some control over the health emergency.

The virus that started in the Wuhan region of China has spread rapidly across all continents. According to the forecast of the International Monetary Fund (IMF), the crisis, which is still ongoing, could be even greater than the Great Depression of 1929, with a fall in the global economy of almost 5%, according to the last forecast in June . In Brazil, the main country in the bloc and the largest exporter, the forecast is for a fall of more than 9%, Argentina almost -10%, Paraguay -1% and Uruguay -3%.

DATAGRO spoke with José Pimenta, PhD in International Relations at the University of São Paulo (USP) and specialist in International Trade and Government Relations and Flávia Loss de Araújo, PhD student at IRI-USP, professor at Unicsul and researcher at ODR (Observatório do Regionalismo) ) to learn about the impacts that the pandemic can have on Mercosur, an intergovernmental organization founded in 1991 after the Treaty of Asunción and encompasses Brazil, Argentina, Paraguay and Uruguay.

Venezuela joined the bloc in 2012, but has been suspended since 2016 due to non-compliance with its Accession Protocol and, since August 2017, for violation of the Bloc's Democratic Clause. Bolivia has the status of an Associated State in the process of accession, still without a resolution.

“Mercosur has felt the effects of the pandemic in much the same way as those countries that have a partial insertion in global value chains and that live from a growing world demand. As there was a shock in terms of global supply and demand, the countries that make up Mercosur tend to feel the effects of the decrease in exports, for example, ”says Pimenta.

“ECLAC [Economic Commission for Latin America and the Caribbean] made an estimate for the countries in our bloc and the data are worrying. Argentina was already coming from a crisis last year, with negative growth and high public debt, and the estimate now would be a drop of up to 10%. Brazil, between 6% and 9% drop, however, our case is a little different, it would be due to the drop in exports of industrialized products ”, explains Flávia.

On the other hand, Paraguay and Uruguay have better situations, according to the research with falls estimated at 2% and 5%, respectively. "The two countries controlled the pandemic well," says Flávia. Despite reflexes in Brazil due to global trade, agribusiness should contribute to the Brazilian balance in this year of pandemic and contribute to less significant falls in the annual GDP.

“The agricultural sector in the last crises was the protagonist, it was the spearhead for Brazil to recover. We are talking about the pandemic scenario in progress and we have already had a surplus in exports so this is great, with an increase in agro exports of 60% and much driven by China ”, says Flávia. “We know that countries like China and others in East Asia are big buyers and will need quality food, with traceability, with scale and we know that Mercosur is a fundamental part to supply the world demand for the products”, adds Pimenta.

China is known as the main partner of Mercosur, with emphasis on purchases from Brazil and Argentina, mainly. Despite this, Pimenta believes that the increases in exports of some sectors, during the pandemic and with friction between the United States and China, may be temporary. "These momentary leaps are welcome, but they cannot serve as a pure and unique basis for long-term planning in the private sector," says the specialist in International Trade and Government Relations.

Mercosur and the post-pandemic

In the previous year, before the pandemic scenario, Mercosur and the European Union (EU) closed a historic trade agreement on 28 June. However, in any case, it will only become fully operational after ratification by the respective national congresses after the crisis of the new coronavirus. Another factor that may dictate the rules of the trade game is the American elections, which are being more closely monitored due to the diplomatic problems of the Trump administration involving China, mainly.

“A lot will depend on the US election and who will win, maybe we will see a more protectionist world and less market or not. According to ECLAC, economies will be more regionalized, that is, the world closes and the focus becomes its own region. These pending issues from Mercosur are more important, since the bloc could be its own recovery strategy ”, analyzes Flávia, emphasizing that the EU is extremely restricted in certain trade issues.

For Araújo, China has been able to use trade strategies in its favor for the post-pandemic, but fears the scenario involving Mercosur countries. "I feel that Latin America does not know how to position itself as a whole and Brazil was expected to pull this off, as a regional leader," he ponders.

Coronavirus

According to data from the World Health Organization (WHO) analyzed by DATAGRO for the last six months of the first diagnoses of coronavirus in the Mercosur countries, from February to the partial of July, Brazil leads the number of cases and deaths by the virus, with almost 2.5 million cases and more than 90 thousand deaths. In the partial of July, the mortality rate in the country was around 3.50%, with data until July 26th.





Argentina started to identify its first cases in March and currently has about 160 thousand cases and 3 thousand deaths, with a rate of 1.81%. Paraguay has more than 4,000 cases and about 40 deaths, with a rate of 0.92%. According to WHO data, Uruguay records just over a thousand cases of coronavirus and 34 deaths, with a mortality rate of 2.85%. It is worth mentioning that the number of cases is directly related to the greater number of tests in the country.


Source: DATAGRO

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