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Paraguay assumes Mercosur presidency

In July 17th the Paraguayan president, Horacio Cartes, assumed the rotating role of presidency of the Mercado Común del Sur (Mercosur, the Southern Cone customs union) at the trade bloc’s 48th summit in the Brazilian capital, Brasília.

Analysis

Mr Cartes received the post from the Brazilian president, Dilma Rousseff, who had occupied the role for the previous six-month period. This development is particularly important for Paraguay, as it marks the first time that the country has held the position since the country’s temporary suspension from Mercosur in 2012, following the highly controversial lightning impeachment of its president at that time, Fernando Lugo (2008‑12). Paraguay’s suspension was a politically contentious topic in the country throughout the interim government of Federico Franco (2012‑13), and the country was reinstated following the inauguration of Mr Cartes in August 2013.

Upon assuming the Mercosur presidency, Mr Cartes underlined his desire to promote “trade without obstacles” among members of the bloc (currently Argentina, Brazil, Paraguay, Uruguay and Venezuela, with Bolivia expected to be formally admitted in the near future). In particular, protectionist trade policy in Argentina has caused friction.

During the summit, Mr Cartes also reiterated his position on a Mercosur‑EU trade deal that has been debated since the 1990s, but has faced numerous obstacles and delays, particularly in recent years, owing mainly to Argentina’s intransigence. Discussion of a potential two‑speed process—allowing the countries to reach deals with the EU in separate rounds rather than all at once—has come to the fore recently, with Brazil, Paraguay and Uruguay all having expressed an interest in such an arrangement. However, this would necessitate an elimination of a consensus clause in the bloc’s founding treaty, which requires all members to be in agreement in order for a decision to be made. Talks with the EU have been scheduled for the third quarter of this year, with both parties expected to exchange lists of proposals. Paraguay’s new position will be important, as in its role as president it will in effect be leading the negotiations on behalf of Mercosur.

Impact on the forecast

The designation of Paraguay as temporary president of Mercosur substantiates our forecast that the country will continue to bolster its links with the bloc following its temporary suspension. Although Mr Cartes’s enthusiasm for a deal with the EU should help to keep such a pact on the agenda, we retain our view that a trade agreement will be slow to materialise.

Ecomomist

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