Changing Mercosur bloc meets in Brazil after US tariffs blow

South America's four-nation trade bloc Mercosur began a tense meeting Wednesday reeling from US steel and aluminium tariffs and a spat between its two biggest members.

Foreign ministers of Brazil, Argentina, Paraguay and Uruguay opened the two-day meeting in the southern Brazilian town of Bento Gonçalves, paving the way for a heads of state summit on Thursday.

Recent elections have laid bare ideological tensions between Brazil and Argentina, threatening to hamper ratification of June's historic Free Trade Agreement with the European Union.

Brazil's President Jair Bolsonaro said Buenos Aires had "much more" to lose in case of tensions with Brasilia than vice-versa, but he would focus on "pragmatism" in his dealings with Argentina's incoming president Alberto Fernández.

The far-right leader has already said Fernández would turn his country into "the Venezuela of the south."

Fernández antagonised Bolsonaro by championing the release of Luiz Inácio Lula da Silva from prison, and the Brazil president will snub Fernández's inauguration in Buenos Aires next Tuesday, having dubbed him a "red bandit."

"Argentina took a left turn. We are going to rely on pragmatism. If we fight, we all lose, but Argentina loses much more," Bolsonaro said.

Macri's last trip

The bloc's 55th summit – the last for market-friendly President Mauricio Macri– has more immediate concerns however, coming in the aftermath of US President Donald Trump's decision Monday to impose tariffs on steel and aluminium from Argentina and Brazil.

Trump accused them of manipulating their currencies to gain an unfair advantage for agricultural exports, thereby hurting US farmers.

Both countries stepped in to replace American exports of soybeans and other agricultural goods to China, benefiting from the US trade war with the Asian giant.

Longer term, the tension between South America's two biggest markets has concerned business leaders in both countries, particularly given their economic interdependence. 

No date has yet been set for the first meeting between Bolsonaro and Fernández, who takes office on December 10.

Brazil is Argentina's largest trading partner, and Argentina is Brazil's third-largest, behind China and the United States. 

Brazil has even threatened to leave Mercosur, worried that Fernández, who inherited a serious economic crisis from Macri, will fall back on protectionism. 

"We still don't know whether the Brazilian government really intends to leave Mercosur or whether its statements are a way of putting pressure on Argentina to adopt a more liberal stance on international trade," said Mauricio Santoro, of the international relations department at the State University of Rio de Janeiro.

Together?

Trump's announcement that he was imposing tariffs has put the two countries in the same boat. 

"That decision should bring Brazil and Argentina together. The tensions are not to their advantage," said Rubens Barbosa, head of Brazil's Institute of International Relations and Foreign Trade. 

"We will see if this can be settled at the Mercosur meeting," he said.

At the summit, the four countries are to sign a border police cooperation agreement to prosecute fugitive criminals. They will also discuss the reduction of the Common External Tariff and the increase in the rate of imports from third countries.

– TIMES/AFP