Restraint to Mercosur

By Pittaluga Abogados

Since April 8th the Uruguayan National Direction of Customs is applying the “Zero Kilogram” policy, which prohibits the introduction of any type of goods from Argentina to Uruguay to those persons that enter and depart Argentina in the same day.

For political analysts, the measure confirms the degradation trend that Mercosur is suffering, and also represents a blow to the already wounded bilateral Argentina-Uruguay commercial integration. Mercosur, an agreement established in 1991 by Argentina, Brazil, Paraguay and Uruguay, promotes as its main goal the free trade and movement of goods, people, and currency between its members. However, currently those countries have macroeconomic differences and diverse economic and financial strategies and objectives, leaving Mercosur in a weakened position, without combined actions.

"Zero Kilogram" aims to stop an illegal yet very common and not sanctioned practice performed by Uruguayan informal traders popularly known as “bagayeros”, who on the same day travel to Argentina and buy different types of goods, especially basic ones like food and sanitary products, then sell them back in Uruguay taking advantage of the exchange rate and therefore Argentinian lower prices.

The practice has spawned awareness in the commercial sector of Uruguayan border cities, concerned about inevitable unemployment and economic losses as a consequence of the price advantage that the “bagayeros” offer to Uruguayan consumers.

Colonia, Carmelo and Nueva Palmira (department of Colonia), Fray Bentos (department of Río Negro), Paysandú (department of Paysandú), Salto (department of Salto) and Bella Unión (department of Artigas) are the seven border cities in which the measure is being executed.

Commercial organizations are conformed with the new government policy, nevertheless they pointed out it doesn´t confront neither resolve the three pending and most important problems: massive smuggling, exchange rate and a healthy Mercosur.