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by Peter Marko Tase

In 1991 the Governments of Argentina, Brazil, Paraguay and Uruguay established MERCOSUR with the signing of the Treaty of Asuncion, making it South America’s largest multilateral agreement assigned to tackle the commercial, economic and political matters in the continent. With the Treaty of Asuncion, the four nations agreed to ensure a “free movement of goods, services, and factors of production between countries.”

According to a publication of the Council on Foreign Relations (CFR): the four nations reached an agreement to “eliminate customs duties, implement a common external tariff of 35 percent on certain imports from outside the bloc, and adopt a common trade policy toward outside countries and blocs.”

For Shannon K. O’Neil, Ph. D. a Senior Vice President at CFR and Latin America Expert: “’MERCOSUR had grand ambitions, it was going to be a customs union with a political side’.” The Mercosur stamp is emblazoned on member countries’ passports, and license plates display the Mercosur symbol. Residents of the bloc are authorized to live and work anywhere within it. In 1994, the group signed the Protocol of Ouro Preto, formalizing its status as a customs union.”

Although Argentina and Brazil aspired to mend ties and establish a greater level of regional cooperation in the fields of commerce, economy and political dialogue; the integration of the Republic of Paraguay within MERCOSUR has been highly partial, with a total lack of coherence shown in the alarming levels of poverty across the nation. Moreover, Asuncion has suffered from rampant domestic corruption at the highest levels of government, and its current economic stagnation (above-neutral growth) is the result of political bickering and disagreements that have taken shape between Argentina and Brazil. In the early 1990s, when the two South American Giants were keen to promote their bilateral dialogue and synchronize their commercial partnership, trade and commercial relations among the four countries experienced a significant growth. On the other hand, since the beginning of the XXI Century until today, MERCOSUR has lost its relevance and simply became a platform of empty talk were the Nation of Paraguay was always discriminated by the Leftist Governments of Argentina and Brazil, it has become clearly evident that the only landlocked country of the bloc is treated as a junior partner (Speronews, 2012). The recent implementation, enforcement of external tariffs – applied outside of MERCOSUR – to the Paraguayan automotive industry that is exporting auto parts in Brazil, is a typical example of Brasilia’s brash and arrogant attitude towards the Paraguayan products that are crossing the border (ABC Color, 2019).

Despite these political hurdles and geographical disadvantages, the Republic of Paraguay has always shown a political support, reflected a great sense of responsibility and complied with all multilateral agreements signed within the framework of MERCOSUR. The Paraguayan six-months long Presidency of MERCOSUR in the first half of 2018, marked an important milestone in the overall history of the organization and particularly reached concrete results on its ongoing negotiations with the European Union. Furthermore, Paraguay has provided a constant political support for MERCOSUR to establish close cooperation agreements with the Governments of the Republic of Korea, Republic of Singapore, Republic of China (Taiwan), and the Socialist Republic of Vietnam. This chapter presents a broad range of opportunities and challenges in Paraguay’s Foreign Policy; promotes the efforts of the current Paraguayan Government to further strengthen economic globalization thereby fostering international circulation of goods, services, technologies and capital.

Paraguay, MERCOSUR and the European Union

On July 17th, 2019, in Santa Fe - Argentina, President Mario Abdo Benítez celebrated the historic agreement signed between MERCOSUR and the European Union. The Paraguayan head of state stated that the latest strategic alliance will change the history of integration within MERCOSUR and generate great opportunities for the development of nations. In this context Mr. Abdo Benítez stressed that cooperation with European Union must go beyond commerce and trade partnership, it should incorporate new models of regional integration so that the MERCOSUR Bloc can be consolidated as a competitive platform of production (PY-MFA, 2019). In the plenary session of MERCOSUR Summit, the ongoing projects in information technology and lowering the costs of internet connection in the region were also discussed (PY-MFA, 2019).

Before his counterparts of MERCOSUR, the President of Paraguay H. E. Mr. Mario Abdo Benítez, expressed his satisfaction on the current agreement that was signed between the Southern Common Market and the European Union; an important pillar for the integration and development of South American Nations.

The Paraguayan Head of State emphasized the relevance of this Alliance and the opportunities that European markets represent for the agricultural products of Paraguay and the other member nations of MERCOSUR. In his statement, President Abdo Benítez added: “this agreement will change the history of integration of our people in MERCOSUR, it opens opportunities for our products and companies to reach new markets with zero tariffs, in a market with more than 500 million consumers and inhabitants of 28 countries, with a GDP of over US$ 34 Billion, a market with a consolidated flow of capital that will open huge opportunities to our people while engaging in the highest standards of competition at the global level (PY-MFA, 2019).”

In 2015-2017, Paraguay and the European Union have enjoyed a fairly mild level of trade and investment cooperation; E.U. imports from Paraguay registered a minor increase, from €1.006bn to 1.153bn. At the same time, Paraguay’s imports from E.U. recorded a moderate increase in the same period, from €610 million in 2015 to €682 million in 2017 (EC, 2019). In 2017, the European Union was Paraguay's third most important trading partner (after Brazil and Argentina); accounting for 10 percent of Paraguay’s total trade; in 2017, E.U.-Paraguay trade amounted for €1.798 billion (EC, 2019).

It must be emphasized that E.U. imports from Paraguay are dominated by agricultural products (87.2 percent of total imports from Paraguay into the E.U. in 2017). In the same period, E.U. exports to Paraguay are dominated by manufactured goods, particularly 42.9 percent in machinery and transport equipment and 22.7 percent in chemical products (EC, 2019). The E.U. is an important investor in Paraguay; between 2014 and 2016, E.U. Foreign Direct Investment (FDI) stocks in Paraguay increased from €863 million to €1.2 billion (EC, 2019).

On October 21st, 2016, the Vice Minister for Regional Economic Integration of Paraguay, Ambassador Rigoberto Gauto Vielman was interviewed by the national media to report on the status of negotiations between MERCOSUR and the European Union. The Paraguayan Chief negotiator stressed the importance of reaching an agreement on the Intellectual Property, Public Contracts and Customs and Border Inspection legislation (PY-MFA, 2019).

In 2015 - 2016, Ambassador Gauto was engaged in extensive negotiations with his counterparts in Brussels; the Paraguayan delegation addressed a number of issues that are related to fair trade and fulfilment of treaties signed within the framework of World Trade Organization, that guarantee free trade and open markets as well as expressed Paraguay’s commitment to follow the requirements that enable parties to reach a better flow and development of commerce (PY-MFA, 2016).

Conclusion and Policy Recommendations

The Republic of Paraguay, as a dynamic member of MERCOSUR, has vigorously promoted the relations of South America’s trade bloc with European Union and the countries of Southeast Asia, including the Association of Southeast Asian Nations (ASEAN). In this regard the bilateral dialogue of Paraguay with Singapore, Vietnam and other countries, has further developed Asuncion’s commercial and trade cooperation with this part of the world.

On May 23-24 2025, President of Paraguay Santiago Peña made a State Visit to Singapore accompanied by the Minister of Foreign Affairs Rubén Ramírez Lezcano, Minister of Public Works and Communications Claudia Centurión, Minister of Industry and Commerce Francisco Javier Giménez García, Minister of Environment and Sustainable Development Rolando de Barros Barreto. This was the first State Visit by a Paraguayan Head of State to Singapore. President Peña’s visit affirms the warm relations between Singapore and Paraguay and provided a unique opportunity for both nations to pursue a path of greater economic and political cooperation, including the ratification of the MERCOSUR-Singapore Free Trade Agreement that was signed in December 2023.

In addition, Paraguayan bilateral diplomacy has, simultaneously, forged a trusted partnership between MERCOSUR and the Southeast Asian Economic Tigers that have established an admirable leadership in terms of strengthening global trade and are emerging as pioneers of global development principles in South America. In this context, at a slower speed paired with a greater level of bureaucracy, the European Union aims to further explore the trade advantages with MERCOSUR countries. Nevertheless, over the next decade, the nations of South America will have an opportunity to experience the positive impact of ever growing trade partnership with European Union countries.

In the contrary to the aspirations, spirit of harmonious partnership, and information included above, the Government of Paraguay decided in September 2018 to close its embassy in Jerusalem (State of Israel), in 2014 closed its embassy in Jakarta, Republic of Indonesia, and continues to maintain frozen relations with one of the most important countries of the Association of Southeast Asian Nations (ASEAN). As the only landlocked country in South America, a founding member of MERCOSUR; the Republic of Paraguay is poised to defend its national interests and continues to forge, with the assistance of Washington, practical initiatives in economic diplomacy so that Itapúa’s agricultural commodities and organically grown food products nationwide, can reach new markets and new consumers. In the same vein, Paraguayan Government must take firm actions towards establishing medium size logistical parks in the deep-water ports of Chile and Peru, both countries may very well serve as lasting natural bridge heads connecting Paraguayan agricultural and food industry products with Southeast Asian markets. According to Distinguished Professor Blerim Olluri, Chancellor of AAB College (Kolegji AAB) – Prishtina in Kosova: “The development of an expanded intermodal rail shipping network and modern highway transportation system connecting the cargo shipyards on the shores of Paraguay and Parana Rivers with the two South American countries, Chile and Peru (crossing through Argentina), would be a strategic advantage to Paraguay and all countries involved, including Argentina and Bolivia. In the same context MERCOSUR would earn a reputation for its advanced transportation infrastructure and secure a greater leverage when negotiating with countries on the other sides of the Pacific and Atlantic.” Establishing air shipment routes through Paraguay’s regional airports is another strategic necessity for Asuncion to secure a better presence in international commercial platforms as well as increase its leverage on negotiations conducted within MERCOSUR or independently reaching Free Trade Agreements with ASEAN and other regional trade blocs.

At the moment Paraguay has only one international airport, six regional airports only suitable for landing of small passenger planes and a large, unfinished, military airport in the Chaco-Paraguay. In the next three years, the Government of Santiago Peña Palacios must establish a strong partnership with Washington to secure a geopolitical support so that new trade routes and shipping harbors can be established in the territories of Chile and Peru, provided that Argentina’s Government allows Paraguayan trucks to use its road infrastructure. The geopolitical pressure from the north is also imperative to preserve Paraguay’s energy sovereignty and establish new airline routes that could further help mitigate the country’s surging need to satisfy an ever-growing demand for its organic products in many parts of the world, including Europe and Central Asia Nations that maintain friendly ties with North America. The National Economy of Paraguay is deeply connected to International Trade and Economic Diplomacy. The primary task of the Ministry of Foreign Affairs is to further strengthen the national presence in international markets and rapidly, consistently improve Paraguay’s national image abroad.

The views and opinions expressed by guest columnists in their articles may differ from those of the editorial board and do not necessarily reflect its views.