Mercosur-EU trade deal can change Argentina’s destiny
“Mercosur-European Union: A Step Towards An Argentina More Integrated To The World”
By Ivan Cachanovsky, courtesy of Libertad y Progreso
For several decades Argentina has had problems growing and generating development opportunities. Today we are faced with a scenario of growing poverty and informality, which forces us to take actions to correct our course.
One of the main causes behind this decline is that the country has turned its back on trade as a generator of growth opportunities. Our exports are low, they are concentrated in few markets, largely explained by few products and only 1.5% of registered companies manage to export.
However, in June 2019 Argentina and Mercosur took an important step to change this trend by closing a Strategic Association Agreement with the European Union.
The work “Mercosur – European Union: A Step Towards an Argentina More Integrated with the World” [in Spanish] carries out an in-depth diagnosis on Argentina’s international insertion, on the contents of the Mercosur-EU Agreement and on the opportunities and improvements it would imply for Argentine development.
The Agreement is based on 3 main pillars to help break the vicious cycle of economic stagnation in which Argentina is. First, it eliminates tariffs and provides better export opportunities in one of the largest international markets. The EU is the 2nd largest global economy, grouping together 27 countries and 450 million high-income people.
In addition, by improving the conditions for trading between the two blocks, it also encourages the attraction of European FDI to Argentina. It must be remembered that a large part of international investment flows are closely linked to the development of regional value chains.
Finally, the Agreement contemplates a gradual opening of up to 15 years, allowing companies to progressively adapt to greater European competition and to carry out reforms to improve competitiveness. In this way, a balance is achieved in line with the Argentine productive reality, balancing the opening of new opportunities for growth and the necessary reciprocal commercial opening.
From the geopolitical point of view, the Agreement means to revalidate and invigorate Mercosur as Argentina’s integration platform, while giving a strong signal in favor of international cooperation and integration in a scenario of high uncertainty.
The Mercosur-EU Agreement is a historic opportunity to change Argentina’s economic and institutional course.
Ivan Cachanovsky has a Lic. in Business Administration, Master in Applied Economics of the UCA, and PhD in Economics from the UCA.