In a strategic move to expand its international trade relations, Uruguay has elevated its ties with China, aligning its level of engagement with that of its fellow Mercosur members, Brazil and Argentina. This development signifies Uruguay's ambition to explore beneficial deals beyond its regional trade bloc, while China continues to deepen its connections in South America, primarily to secure essential raw materials.
During a meeting in Beijing's Great Hall of the People, Chinese President Xi Jinping and Uruguayan President Luis Lacalle Pou discussed the prospects of a comprehensive strategic partnership, signaling a new era in bilateral cooperation. This initiative is poised to enhance trade and investment opportunities between the two nations.
China, as the world's second-largest economy, has already established itself as a significant investor in South America. Uruguay's initiative to propose a free trade agreement (FTA) with China in 2021 was motivated by the desire to offer its exporters similar benefits as those enjoyed by other nations with established FTAs with China.
Despite facing resistance from other Mercosur members who are focusing on an FTA with Europe, Uruguay is determined to boost its exports, particularly in raw materials, industrial goods, and technology sectors. This effort is particularly relevant considering the current 12% tariff on Uruguayan beef exports to China, a significant component of Uruguay's exports.
The potential benefits of an FTA with China are substantial for Uruguay. A study by the National Meat Institute of Uruguay in 2021 suggested that a 0% preferential tariff on meat could result in a $150 million reduction in tariffs. The recent meetings between Xi and Lacalle Pou also led to the signing of various cooperation agreements across sectors such as agriculture, education, science and technology, and customs inspections, which could greatly benefit Uruguay's exports, particularly in the meat industry.
Uruguay's proactive approach in international trade is further illustrated by its application to join a major trans-pacific free trade pact, a move that coincides with China’s aspirations. However, both countries face challenges due to political hurdles and existing commitments within their respective trade blocs.
The deepening of Uruguay-China relations not only enhances Uruguay’s trade prospects but also has broader implications for the Mercosur bloc. Paraguay, the only South American nation with ties to Taiwan, finds itself increasingly isolated within the regional trade dynamics.
President Xi's vision of building "a model of solidarity and cooperation between countries of different sizes, systems, and cultures" resonates with Uruguay's trade ambitions. President Lacalle Pou's invitation to Xi to visit Uruguay next year further cements the growing rapport between the two countries.
This strategic partnership is a testament to Uruguay’s successful trade diplomacy, as evidenced by its burgeoning trade surplus with China, which notably doubled last year. The strengthening of ties between Uruguay and China marks a significant step in reshaping the landscape of South American international trade relations.
