The coronavirus crisis is not only associated with health risks, but as a result of this and other factors, it represents profound changes in global economic directions. Countries saw their economic activities suddenly change with the decree of “lockdown” in several regions until their respective governments could have some control over the health emergency.
The virus that began in the Wuhan region of China quickly spread to all continents. According to the International Monetary Fund (IMF) forecast, the crisis, which is still ongoing, could be even greater than the Great Depression of 1929, with a drop in the global economy of almost 5%, according to the latest forecast in June. In Brazil, the bloc's main country and largest exporter, the forecast is for a drop of more than 9%, Argentina almost -10%, Paraguay -1% and Uruguay -3%.
DATAGRO spoke with José Pimenta, PhD in International Relations from the University of São Paulo (USP) and specialist in International Trade and Government Relations and Flávia Loss de Araújo, PhD candidate at IRI-USP, professor at Unicsul and researcher at ODR (Observatory of Regionalism ) to find out the impacts that the pandemic could have on Mercosur, an intergovernmental organization founded in 1991 following the Treaty of Asunción and encompassing Brazil, Argentina, Paraguay and Uruguay.
Venezuela joined the bloc in 2012, but has been suspended since 2016 due to non-compliance with its Accession Protocol and, since August 2017, due to violation of the Bloc's Democratic Clause. Bolivia has the “status” of an Associated State in the accession process, without a resolution yet.
“Mercosur has felt the effects of the pandemic in a very similar way to those countries that have a partial insertion in global value chains and that live off growing global demand. As a shock occurred in terms of global supply and demand, the countries that make up Mercosur tend to feel the effects of the decrease in exports, for example”, says Pimenta.
“ECLAC [Economic Commission for Latin America and the Caribbean] made an estimate for the countries in our bloc and the data is worrying. Argentina was already coming from a crisis last year, with negative growth and high public debt, and the estimate now would be a drop of up to 10%. Brazil, between 6% and 9% of drop, however, our case is a little different, it would be due to the drop in exports of industrialized products”, explains Flávia.
On the other hand, Paraguay and Uruguay have better situations, according to the survey, with estimated drops of 2% and 5%, respectively. “Both countries controlled the pandemic well”, says Flávia. Despite impacts on Brazil due to global trade, agribusiness should contribute to the Brazilian balance in this pandemic year and contribute to less significant drops in annual GDP.
“The agro sector was the protagonist in the last crises, it was the spearhead for Brazil to recover. We are talking about the ongoing pandemic scenario and we have already had a surplus in exports, so this is great, with an increase in agricultural exports of 60% and largely driven by China”, says Flávia. “We know that countries like China and others in East Asia are major buyers and will need quality food, traceability, with scale and we know that Mercosur is a fundamental part of meeting global demand for products”, adds Pimenta.
China is known as Mercosur's main partner, with emphasis on purchases from Brazil and Argentina, mainly. Despite this, Pimenta understands that increases in exports in some sectors, during the pandemic and with friction between the United States and China, may be temporary. “These momentary leaps are welcome, but they cannot serve as a pure and unique basis for long-term planning in the private sector”, says the specialist in International Trade and Government Relations.
Mercosur and the post-pandemic
The previous year, before the pandemic scenario, Mercosur and the European Union (EU) reached a historic trade agreement on June 28th. However, in any case, it will only come into full operation after ratification by the respective national congresses following the new coronavirus crisis. Another factor that could dictate the rules of the trade game are the North American elections, which are being followed more closely due to the Trump administration's diplomatic problems involving China, mainly.
“A lot will depend on the US election and who will win, maybe we will see a more protectionist world and less market or not. According to ECLAC, economies will be more regionalized, that is, the world closes down and the focus becomes its own region. These pending Mercosur issues are more important, as the bloc could be its own recovery strategy”, analyzes Flávia, highlighting that the EU is extremely restricted in certain trade issues.
For Araújo, China has managed to use commercial strategies to its advantage post-pandemic, but fears the scenario involving Mercosur countries. “I feel that Latin America does not know how to position itself as a whole and Brazil was expected to lead this way, as a regional leader”, he ponders.
Coronavirus
According to data from the World Health Organization (WHO) analyzed by DATAGRO for the last six months of the first coronavirus diagnoses in Mercosur countries, from February to July, Brazil leads the number of cases and deaths from the virus, with almost 2.5 million cases and more than 90 thousand deaths. In July, the mortality rate in the country was around 3.50%, with data up to July 26th.
Argentina began identifying its first cases in March and currently has around 160,000 cases and 3,000 deaths, with a rate of 1.81%. Paraguay has more than 4 thousand cases and around 40 deaths, with a rate of 0.92%. Uruguay records, according to WHO data, just over a thousand cases of coronavirus and 34 deaths, with a mortality rate of 2,85%. It is worth noting that the number of cases is directly related to the greater number of tests in the country.
Source: DATA
READ TOO:
{module 441}
{module 442}
