MERCOSUR Tensions

Despite Brazilian President Fernando Henrique Cardoso’s attempts to defuse trade tensions with Argentina, conflicts within MERCOSUR appear to be broadening. The Folha de São Paulo reported on February 16 that Brazil asked the World Trade Organization (WTO) to open a dispute panel on the issue of textiles with Argentina. This is the first time that a member of MERCOSUR has brought one of its partners before an international forum on trade-related questions. In addition, the government of the province of Buenos Aires has just announced that it will refuse to do business with companies that have moved their operations to Brazil. Many fear that this “buy Argentina” attitude will spread to other provinces, especially those that are controlled by the opposition Peronist Party (as is Buenos Aires, the country’s largest). These tensions further complicate Brazil’s “building block” approach to hemispheric trade negotiations.