Uruguay has been looking at doing a deal with China for several years. Observers note that, for instance, New Zealand, like Uruguay, a small country with an efficient agricultural sector, has had a free trade agreement with China since 2008. When Uruguay raised the issue at an earlier Mercosur summit, Argentine president Alberto Fernandez responded with bluster, saying:

I apologize. We don’t want to be a burden for anyone. If this burden weighs (on you), it’s better to abandon the ship [i.e., leave Mercosur]. We don’t want to be a weight on anyone. Let’s be finished with these ideas. For me, it’s an honor to be part of Mercosur.

 

Brazil made somewhat more encouraging noises but made it clear that it would insist that any negotiation would have to be undertaken by the bloc as a whole (which given Argentine views essentially means “no”). Paraguay, the poorest of the four, and most dependent on its neighbors, showed no interest.

But Uruguay has been unwilling to take no for an answer and, at the most recent summit in July, made it clear that it planned to continue discussions with China, now that the feasibility study has been completed. But it is unclear whether this will actually result in agreement, and what if anything its Mercosur colleagues will do if it is reached. Brazil, at least, under the conservative government of Bolsonaro and his Chicago-trained minister of economy, Paulo Guedes, may take a less than hard-line position. It has shown some modest free trade instincts, successfully pressing Mercosur to make a small cut in its common external tariff (having previously done so itself unilaterally). It may also feel some inclination to treat Uruguay, also with a conservative president, relatively leniently.

But if, as seems probable right now, former President Lula de Silva returns to power in Brazil, he may be inclined to pressure Uruguay to stay in step with the bloc. And, Argentina, convulsed by its seemingly permanent crisis, is not likely to be helpful to Uruguay. Of course, Uruguay may be so fed with Mercosur’s decay that it decides that even expulsion from the bloc is a price it is willing to pay to continue with its effort to penetrate global markets.

China Moves while the United States Stands Still

One might ask why China is interested in a free trade agreement with a country whose economy is little more than a rounding error in comparison with its own. Despite the disparity, Beijing may feel that securing one more source of agricultural products and other raw materials is worth pursuing. It may also see an agreement with Uruguay as a wedge to eventually reach a deal with Mercosur as a whole. And it may view negotiations in the context of its overall effort to deepen its presence in Latin America, having already signed agreements with Chile, Costa Rica, and Peru.

It is ironic to note that during the George W. Bush administration, Uruguay actually pressed for a free trade agreement with the United States. It was brushed aside, as presumably it was felt that this small economy was not worth the heavy lifting with Congress that would be required. While the rhetoric of a new commitment to great power competition with China is now the order of the day in Washington, an Uruguay-China free trade agreement, despite whatever hurdles the other Mercosur members may put on it, seems more likely than any such agreement with the United States.

Richard M. Sanders is a Global Fellow of the Woodrow Wilson International Center for Scholars. Formerly a member of the Senior Foreign Service of the U.S. Department of State, his postings included positions at embassies in Chile, Colombia, Uruguay, Venezuela, and Nicaragua and as Director of the Office of Brazilian and Southern Cone Affairs.

Image: Reuters.