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Emirates in trade talks with South American quartet

UAE South America sugar-plantation Pexels/Plato Terentev
Brazil's exports of raw sugar to the UAE totalled $445m in 2022
  • Brazil, Argentina, Paraguay and Uruguay involved
  • Bloc has population of 295 million
  • Current UAE trade worth almost $8bn

The UAE is talking to the four South American countries of the Mercosur bloc to deepen trade relations and boost two-way commerce currently worth almost $8 billion a year.

The group, which consists of Argentina, Brazil, Paraguay and Uruguay, is in the preliminary stages of negotiations “to define next steps” of a free trade deal with the UAE.

Rafael Lameiro da Costa Rocha, who is heading negotiations on behalf of the current Mercosur lead, Brazil, told AGBI: “We expect to hold an introductory meeting with the UAE with a view of exploring how to deepen our partnership.”

Initial consultation with private sector companies and other interested parties took place late last year.

The Mercosur bloc has a population of 295 million, with a combined GDP equivalent to the world’s fifth biggest economy.

The Mercosur countries and the UAE had joint trade totalling nearly $8 billion in 2022, according to the Observatory of Economic Complexity, a database of global trade.

Robert Mason, a non-resident fellow at the Arab Gulf States Institute in Washington and the Gulf Research Centre, said a deal with the four South American countries was important for expanding UAE relations in a region which has only recently experienced a higher profile within the GCC.

“I’m sure there will be headway, but there are complicating factors. Mercosur is interested in an EU deal and yet resistance from countries such as France may push interest in other directions such as the UAE,” he told AGBI

Mason said that the leadership of Mercosur is due to pass from Brazil to Paraguay later this year, which may speed up negotiations, as trade ties with Brazil, the largest country in South America, were more important.

Figures from the OEC show Brazil’s exports to the UAE in 2022 exceeded $3.3 billion, with foodstuffs and gold dominant, while the UAE’s exports to Brazil, mostly refined petroleum, totalled nearly $2.9 billion.

Argentina, the biggest debtor to the International Monetary Fund, with a total outstanding debt of $43 billion, is the UAE’s second biggest partner in Mercosur, with trade between the two countries worth more than $1.2 billion. The main products include refined petroleum, plastics, corn and iron pipes. 

Rail cooperation

Last month, Gabriel Martínez, Argentina's under-secretary for international economic negotiations, suggested in comments published by the UAE state news agency Wam that the UAE could support the bi-oceanic corridor rail project, which aims to join the Brazilian port of Santos, on the Atlantic coast, to the ports of Iquique and Antofagasta in Chile, on the Pacific coast.

In December, officials from the UAE, Brazil and Paraguay were in Dubai to witness the signing of a joint declaration for cooperation on the project.

Uruguay and Paraguay are smaller trade partners of the UAE with a combined value of about $330 million in 2022. Uruguay’s National Meat Institute said this week it was targeting the GCC beef and lamb markets for growth after exporting Halal-certified beef worth a record $13 million last year.

However, Joan Domene, chief economist at Oxford Economics, played down prospects of a UAE-Mercosur trade deal anytime soon. 

“The Mercosur deal with the EU took 20 years. I’m unaware of the state of current negotiations with the UAE, but an actual deal could still take some time,” he said.

The UAE has just signed comprehensive economic partnership agreements (Cepas) with Colombia, Costa Rica and Chile and it announced this week its intention to start negotiations with Ecuador.

  • The UAE is the largest Middle Eastern investor in Brazil, with investments of $10 billion, and the presence of companies such as Mubadala and DP World. 
  • In April 2023 the UAE agreed to invest $2.5 billion in Brazil over the next 10 years.
  • Exports from Brazil to the UAE were worth $1.6 billion in the first 11 months of 2023. Only Saudi Arabia received more in the Middle East, with $1.9 billion.
  • The UAE defence giant Edge announced in January that it will expand its headquarters and manufacturing base in Sao Paulo, after acquiring a 50 percent stake in the Brazilian smart weapons specialist Siatt. 
  • Argentina is a relatively closed market to international trade, which accounted for around 32 percent of its GDP in 2022. Its main export destinations were Brazil, China, the US, Chile and India.
  • A free trade agreement between Egypt and the members of the Mercosur trade bloc came into force in 2017, but Brazil is looking to make other deals in the region.

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