Brazil is reviewing a trade deal announced between the United States and Argentina last week, citing suspicions that the agreement would violate South American trade bloc Mercosur’s rules, three sources familiar with the matter told Reuters.
Brazilian diplomats are reviewing the document released by Washington on Friday to determine the scope of the deal.
The deal on first reading seemed to go beyond what Mercosur members have set as the limits for bilateral pacts, two of the sources said.
Mercosur limits the extent to which its countries may sign individual trade agreements with other countries.
The regulations aim to bolster the bloc’s bargaining power by restricting individual deals.
Tariff exemptions are at the heart of the dispute
In the midst of international trade tensions brought on by US President Donald Trump, Argentina requested and was granted a temporary extension of Mercosur’s common external tariff exemptions last year.
Uruguay and Paraguay were given bigger quotas, while Argentina and Brazil were each given 150 exceptions.
The tariff cuts announced for US goods, according to an Argentine official, are among the 150 exclusions Argentina is allowed to employ.
But according to Brazilian officials who spoke to Reuters, the new US-Argentine pact seems to include more than 200 topics.
According to the report, officials were closely reviewing the deal to make sure the evaluation was impartial.
Concerns extend beyond tariffs
Another source told the news agency that the bilateral trade agreement could face additional non-tariff obstacles, including Mercosur rules of origin, services regulations, and technical barriers.
The same source said Argentine President Javier Milei’s decision to pursue unilateral talks with Washington, as one of US President Donald Trump’s closest allies in the region, would make it difficult to fit the agreement within the exceptions established last year.
At a press conference on Friday, when asked whether Mercosur could block the deal, Argentine Foreign Minister Pablo Quirno said the trade bloc does not prevent member countries from entering into such agreements.
He added that Milei could implement parts of the agreement by decree, although a comprehensive trade and investment pact would require congressional approval.
Recurring tensions in the bloc
Founded 35 years ago, Mercosur has frequently experienced tensions as member countries have sought to pursue independent economic relationships.
In 2006, Uruguay came close to signing a free trade agreement with the United States but withdrew over concerns that it could be expelled from the bloc.
More recently, its efforts to pursue a free trade pact with China have strained relations with Brazil, Paraguay, and Argentina.
In 2019, then finance minister Paulo Guedes threatened to withdraw Brazil from Mercosur under former president Jair Bolsonaro, arguing that the organisation was hindering the country’s trade ambitions.
Neither Bolsonaro nor his successor, Luiz Inacio Lula da Silva, formally exited the bloc.
Some rules have to be followed, said a Brazilian official when asked about potential consequences if the Argentine deal falls outside the permissible limits.
The official said that if a violation is found, Brazil would have to summon the Mercosur Council to determine the response by the bloc.
The next summit of the group will be in late June in Asuncion, where Paraguay will pass the rotating presidency to Uruguay.
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