Argentina to exit Mercosur trade talks to focus on problems at home

BUENOS AIRES (Reuters) - Argentina has decided to withdraw from ongoing trade negotiations with South American trade bloc Mercosur as it turns its focus on the growing economic crisis at home, the bloc said in a statement late on Friday.

The decision marks yet another setback for the four nation common market, which has recently been hobbled by political squabbling and government changeovers. The bloc also includes Uruguay, Paraguay and Brazil.

Only potential new trade deals will be affected. Argentina’s Foreign Ministry said separately it would continue to work with Mercosur to push forward trade agreements with the European Union and the European Free Trade Association (EFTA), which have already been agreed in principle.

Argentina said it had previously communicated concerns to the bloc over fast-tracking new free trade agreements with South Korea, Singapore, Lebanon, Canada and India, among others.

“Argentina made it clear that international uncertainty and the state of our economy suggest halting progress on those negotiations,” Argentina’s foreign ministry said in a Friday statement.

Paraguay’s Foreign Ministry, which currently holds the presidency of Mercosur, said Argentina had taken the decision to focus “on internal economic policy, aggravated by the COVID-19 (Coronavirus) pandemic.”

“They abandoned ship,” Pedro Miguel Costa e Silva, a Brazilian diplomat who leads regional and bilateral negotiations in the Americas, told Reuters.

Costa e Silva said it was “no surprise” given that Argentina recently changed governments, with center-left President Alberto Fernandez replacing center-right Mauricio Macri in December.

The Mercosur bloc said in the statement it was evaluating next moves to ensure Argentina’s decision would not disrupt ongoing trade negotiations.

Costa e Silva said a mechanism would be developed to ensure the other three countries in the bloc could move forward in negotiations in potential new trade deals.

It would not be the first time such an arrangement is being made. Venezuela, currently suspended from Mercosur for never fulfilling membership requirements, decided to stay out of the bloc’s trade talks with the European Union in 2012.

Reporting by Hernan Nessi; additional reporting by Lisandra Paraguassu; writing by Dave Sherwood and Jake Spring; Editing by Marguerita Choy and Chizu Nomiyama