Indonesia-Mercosur Cooperation: Potential and Impact for Indonesia


Mercosur (Mercado Común del Sur) stands as one of the most significant blocs in South America, operating primarily in the economic sector, particularly in trade. This bloc was established with the goal of enhancing economic cooperation among its member countries, which include Brazil, Argentina, Uruguay, and Paraguay. Following its success in facilitating regional trade, Mercosur continues to explore opportunities for greater cooperation with non-member countries. In this context, the primary commodities that dominate Mercosur’s exports and imports are agricultural and livestock products.

Indonesia, a country that is not excluded from the effects of globalization and international trade, also possesses key commodities that serve as superior export products. These commodities encompass palm oil, rubber, coal, electronics, as well as agricultural products such as coffee and cocoa. To bolster its trade, Indonesia is actively fostering trade collaborations with partner countries, both within the Southeast Asia region and beyond Asia, through multilateral and bilateral agreements. The expansion of their trade activities is driven by several factors, including ongoing developments in international politics and global conditions post-Covid-19, and the escalation of the conflict between Russia and Ukraine. These issues have motivated the country to explore additional alternatives and potential trade partners. Consequently, forging cooperation with Mercosur becomes a crucial effort.

The Potential for Cooperation:

The potential for cooperation in enhancing economic diplomacy is a key priority for the Indonesian Ministry of Foreign Affairs (Kemlu), as outlined in their strategic plan. This strategic emphasis reflects the nation’s commitment to fostering economic growth and strengthening its international presence. Within this broader framework, Indonesia is actively pursuing strategies to build and reinforce connections with various economic blocs worldwide. Notably, the country places particular significance on fostering relations with the Latin American trade bloc, Mercosur. In addition, the global landscape has been profoundly impacted by recent crises, including the COVID-19 pandemic and the Russia-Ukraine conflict, have prompted Indonesia to adapt and expand its cooperation efforts, both bilaterally and multilaterally. In light of these developments, the initiative to establish cooperation with Mercosur assumes even greater importance in Indonesia’s foreign policy agenda.

Cooperating with Mercosur is a strategic move that aligns with Indonesia’s overarching goals of expanding economic diplomacy and promoting trade. Mercosur presents a wealth of economic opportunities for Indonesia. These opportunities include trade in agricultural products, natural resources, and various other commodities. Furthermore, by engaging with Mercosur, Indonesia gains access to a significant market with a combined population of over 270 million people. This, in turn, can stimulate economic growth, job creation, and increased foreign exchange earnings. As Indonesia and Mercosur work together, the potential for mutual benefit and collaboration in diverse sectors, such as agriculture, energy, technology, and culture, becomes increasingly promising. Indonesia’s commitment to enhancing economic diplomacy through partnerships with major economic blocs like Mercosur underscores the country’s strategic vision for economic growth and global engagement. The ongoing pursuit of cooperation with Mercosur stands as a testament to Indonesia’s adaptability and its dedication to realizing these goals in the face of evolving global challenges.

Impact on Indonesian Trade and Commodities:

While the Indonesia-Mercosur Comprehensive Economic Partnership Agreement (IM-CEPA) promises several positive outcomes, it is crucial to consider potential negative impacts on Indonesia’s commodities and exports. One of the major concerns centers around the environmental issues faced by both Indonesia and Mercosur. Both regions have drawn attention, particularly from the European Union, for their contributions to deforestation and climate change (Nolte, 2021). Although these environmental concerns are not directly related to the IM-CEPA cooperation, there is a legitimate apprehension that this trade agreement could inadvertently worsen these ecological problems. This is a crucial concern, as environmental issues are a global priority, and the international community is closely monitoring nations’ actions. Another potential challenge arises from inter-commodity competition between Indonesia and Mercosur. Both regions may rely on the same set of commodities for their exports, leading to possible clashes in the global market. However, it is important to recognize that this is not an inevitable outcome. Market competition is influenced by numerous factors, such as price, quality, and market demand. The success of Indonesian commodities in Mercosur and vice versa will depend on their competitiveness in these key areas.

To mitigate the negative environmental impact, it is essential for both Indonesia and Mercosur to prioritize sustainable practices and adhere to international environmental agreements. This includes taking measures to address deforestation and reduce carbon emissions. Collaborative efforts in this regard can promote a more responsible and ecologically sustainable trade partnership. Regarding inter-commodity competition, Indonesia and Mercosur can engage in dialogue to identify areas of complementarity rather than direct competition. By diversifying their product offerings and finding niches in the global market, both parties can reduce the likelihood of detrimental competition and promote mutually beneficial trade relations. In conclusion, while there are potential negative impacts associated with the IM-CEPA agreement, these challenges can be effectively addressed through careful consideration, cooperation, and a commitment to sustainable and responsible trade practices. By proactively addressing these concerns, Indonesia and Mercosur can maximize the benefits of their economic partnership while minimizing the potential downsides.

Aulia Rahmatin Masyhuri
Aulia Rahmatin Masyhuri
Aulia Rahmatin Masyhuri is a graduate of International Relations with an interest in diplomacy, political economy, and tourism topics.