30 Years of Mercosur – Europe Becoming Less Important for South America

Europe has lost importance as a trading partner for the Mercosur countries, concludes an ifo Institute article that takes stock of the South American economic alliance on its 30th anniversary. “With China’s rise, trade flows shifted away from Europe to the Chinese market. As a result, Mercosur’s imports and exports to and from Europe are declining overall. Mercosur exports to Europe fell by almost 25 percent in the past six years alone,” says Lisandra Flach, Director of the ifo Center for International Economics and one of the article’s authors.

In contrast, China’s share of Mercosur’s total exports increased rapidly from 2 percent to 22.1 percent over the 2000–2018 period. China is now the most important sales market for the member states of Mercosur by a clear margin. It has overtaken the European Union, historically the region’s most important trading partner. China’s share of Mercosur imports has also grown rapidly over the past 20 years and was only slightly behind the EU’s share in 2018.

Overall, the ifo experts’ assessment of the trade bloc 30 years after its founding is mixed. “Trade within the bloc was liberalized, leading to an intensification of intra Mercosur trade in the early years. This development can be chalked up as a success. On the other hand, the transformation from a trade agreement to a customs union failed, and steps toward deeper integration, such as the free movement of workers, hardly seem feasible,” Flach says. She points out that the proportion of Mercosur members’ total trade accounted for by trade with other members is currently back to the level it stood at when the bloc was founded. What’s more, integration into international production networks has been successful only in places.