On April 24, Argentina announced it would withdraw from ongoing and future Mercosur negotiations. While President Alberto Fernández cited the move as a temporary measure to re-center resources on the national economy, the decision raises questions about the trade bloc’s future as countries confront the COVID-19 crisis. More broadly, Argentina’s inward turn points to a slate of concerns regarding the impact of COVID-19 on regional integration in the Southern Cone. An examination of three vectors of integration—travel, migration and everyday exchange—offers a look at the challenges ahead.
Following its Mercosur announcement, Argentina again made headlines by grounding commercial flights until September. The decision has been criticized by the country’s low-cost carriers that, without significant government subsidies, may follow the fate of other recently-shuttered airlines in Latin America.
A dismal short- and medium-term outlook for the aviation industry squeezes a country that, prior to the pandemic, aimed to strengthen international connections. Both the Fernández administration and its predecessor have promoted tourism as a solid pillar in its shaky economy. In Argentina, the industry employs 1.1 million people, generates $15 billion a year, and brings a needed influx of dollars to a devalued peso and deepening debt crisis. “Conectividad o muerte” was the unofficial slogan of Gustavo Santos, Argentina’s previous tourism minister. By 2019, the country experienced the seventh-highest growth of tourism in the world.
In Buenos Aires, the Ezeiza International and Jorge Newbery Airports receive nine in ten tourists who land in Argentina. The former will soon inaugurate an expanded international terminal, while the latter planned to reopen several international routes this year to directly connect foreign travelers to existing destinations in the Argentine interior. It will be difficult for Argentina to reap the fruits of these recent investments as the COVID-19 crisis threatens a tourism industry that had become a bright spot in a struggling national economy.
Neighboring Paraguay was also eager to grow its international profile prior to the pandemic. Looking to capitalize on several years of economic stability and favorable conditions for foreign investment, government officials see Asunción’s six-gate Silvio Pettirossi International Airport—which does not service direct flights to the United States or Asia—as an obstacle to greater connectivity and tourism. The construction of a new terminal, slated to begin this year and finish in 2022, was projected to increase annual capacity fourfold, from 1.5 to 6 million travelers. With the ongoing grounding of flights, the national aviation agency’s financial straits have postponed the $200 million expansion indefinitely.
Internal and international migration
Over the past several years, Latin America has experienced a mass movement of people, mainly from Venezuela and the Northern Triangle. Many of these migrants are directly exposed to the economic uncertainty caused by COVID-19. Colombian officials estimate up to 50,000 migrants have returned to Venezuela since Colombia’s lockdown began; deportations of asylum seekers from the U.S. have compounded COVID-19 fears in Central America. In Peru, tens of thousands of unemployed workers in Lima have requested to return to their rural hometowns during the nationwide lockdown. Across the hemisphere, remittance flows from migrants are projected to fall significantly.
Although Southern Cone countries are home to less vulnerable migrants—the average socioeconomic status of Venezuelans in Argentina, Chile, and Uruguay, for example, is higher than in Colombia and Peru—and do not depend as heavily on remittances as El Salvador or Honduras, migration will remain a critical issue for the region during and after the pandemic. In Argentina and Chile, migrants make up a high percentage of the informal sector. Worldwide, informal workers have lost sixty percent of their income in the first month of the COVID-19 crisis alone. Coordinated action is critical to stem greater displacement of the region’s most vulnerable demographic.
In contrast, Uruguay has made an effort to turn outward and attract immigrants. Prior to the pandemic, President Luis Lacalle Pou aimed to incentivize immigration with relaxed residency laws. An Argentine economy further destabilized by COVID-19 may prompt middle and upper-income Argentines to move across the Río de la Plata in increasing numbers. Other regional flows could follow as the economy continues to slide: authorities estimate the crisis could cause up to 100,000 Paraguayans abroad to return to the country. Paraguay’s relatively low debt-to-GDP ratio has allowed the government to take on increasing levels of debt to prop up public health and social safety nets, but a prolonged crisis will strain countries with even the strongest macroeconomic fundamentals.
Economies of integration extend beyond travel and migration; daily transnational flows of goods, services, and people in the Southern Cone are also affected by COVID-19.
The region’s clearest example is the Triple Frontier of Argentina, Brazil, and Paraguay, where porous borders facilitate everyday life. Buses whisk tourists over the Argentina-Brazil border to both sides of Iguaçu Falls, with passports rarely checked. Forty-thousand vehicles per day cross the international bridge between Foz do Iguaçu, Brazil and Ciudad del Este, Paraguay as people commute to work and school. The bridge is Brazil’s busiest border crossing, and traffic from Brazil into the markets of Ciudad del Este can stretch for hours. Just to the south, construction is underway on a second bridge to relieve congestion.
COVID-19 lockdowns have brought this everyday exchange to a halt, leaving frontier economies like Ciudad del Este caught between a rock and a hard place. Worried that a rapidly-spreading virus in Brazil is bound to cross borders, officials from Paraguay to Argentina and Uruguay are doubling down on border security. Increased militarization of the Triple Frontier border comes as commercial and trade associations in the area call for a controlled opening of international traffic. At a crossroads defined by transnational exchange—Ciudad del Este is the world’s third-largest free-trade zone, with Brazilians generating 95 percent of its commerce—the ramifications of long-term restrictions on mobility are ripe for speculation.
Near the Triple Frontier, a more productive international exchange has emerged. Lockdowns have reduced demand for electricity in Brazil and Paraguay, which, combined with drought, has lowered the discharge of water from the binational Itaipu Dam. As a result, the Paraná River is at its lowest level in 49 years, limiting the cargo capacity of vessels that ship Argentine and Paraguayan agricultural exports downriver. In response, Argentine diplomats recently persuaded Brazil to release flow from dams spanning Brazilian tributaries of the Paraná. Whether Argentina and Brazil can mount a similar spirit of cooperation to confront the broader health and economic crisis ahead remains to be seen.
Integration follows isolation
In the Southern Cone, Argentina and Paraguay emerged as early models for enforcing effective quarantine measures, especially in the face of failed responses in the U.S. and Brazil. Restricting travel, migration, and mobility is a critical priority to protect public health. Yet a temporary inward turn should not preclude long-term policy that promotes regional cooperation and integration. Although Argentina’s withdrawal from Mercosur complicates ongoing trade negotiations, policymakers in the region should use this moment as an opportunity to consider other channels for a coordinated approach to the challenges ahead.
After Brazil, Paraguay, and Uruguay reaffirmed their support for Mercosur, Argentina signaled its willingness to engage moving forward, while arguing that a re-examination of the bloc is in order. Amid a deepening crisis and absent leadership from the U.S. and Brazil, governments in the hemisphere must indeed re-examine their place in a changing world. In the Southern Cone, a coordinated regional strategy is central.
Greg Ross is an incoming M.A. student at the Paul H. Nitze School of Advanced International Studies (SAIS). He is a recipient of a Fulbright research grant to Paraguay, former research assistant at Centro para la Apertura y el Desarrollo de América Latina (CADAL), and holds a B.A. from the University of Chicago.