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Publication Date

Fall 2006

Program Name

Southern Cone: Regional Integration, Development and Social Change

Abstract

This study analyzes the foreign economic policy of Uruguay, concentrating specifically on the current administration’s proposed policy changes as reflected in recent free-trade negotiations with the United States. The paper begins with an historical evaluation of Uruguay’s current strategy of international insertion via the Common Market of the South (MERCOSUR), a fifteen year-old economic bloc also including Argentina, Brazil, and Paraguay. The first section then concludes with a brief examination of Uruguayan-American bilateral trade negotiations leading up to the 2006 Free Trade Agreement (FTA) talks. The second part of the study identifies three possible future scenarios of Uruguayan foreign economic policy. Each scenario is then evaluated in terms of its primary economic advantages and disadvantages for Uruguay with respect to certain key objectives of successful foreign economic policy: (based on but not limited to) greater access to advantageous global markets, attraction of foreign investment, internal commercial development and regional integration. In addition, each distinct policy program is also evaluated in terms of certain political complications that result from foreign economic policy initiatives. Specifically, MERCOSUR has recently come under fire as a stagnant economic bloc with little to no positive effect on Uruguay’s economic development. Facing a considerable uphill battle to achieve the necessary structural, political, and ideological reforms within MERCOSUR, President Vázquez has strongly promoted a FTA with the US that, while it would violate tariff norms of MERCOSUR and subsequently compromise their membership status, could potentially present Uruguay with a more viable and economically advantageous policy option. Regardless of the future of the Uruguay-US FTA, the central question remains for Uruguay and her policy makers to decide if the promise of a better MERCOSUR transcends its rigid structural development and significant commercial inadequacies.

Disciplines

International Economics | Political Economy

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