The Economic Implications of Russia’s War against Ukraine on Mercosur Countries

Abstract

The Russian invasion of Ukraine in February 2022 brought consequences not only to Russia and Ukraine, but also to the world. Disruptions in the supply of wheat were a concern for food security of some countries, the energy crisis in Europe caused a significant increase of price to the consumer, fertilizers costs also increased the price of food production all over the world. As a consequence of the aggression to Ukraine economic sanctions were lifted in an effort to revert Russia’s decision on continuing the attack, but the effectiveness of them is yet to be seen. The economic impact of the war forced countries to search for new trade partners and the market had to reorganize its supply chain. Although Mercosur is geographically distant from the affected areas, due to a globalized world trade the effects can be felt in South America. This thesis has the goal to analyze the political and economic rationale of Mercosur towards Russia’s war against Ukraine. The understanding of Russia’s attack on Ukraine can be understood within the theoretical frame of realism, but alone it cannot explain how trade, a form of cooperation, is a form of generation of power to the State and how it promotes self-interest; the use of rationalist methods can contribute to a wholesome comprehension of the motivations behind Mercosur’s neutrality position. The quantitative analysis brings clarity to the impact of the war in the world trade, and it awakes reasons for the political decisions taken by countries in the following months of the war. The data provided by the International Monetary Fund, Observatory of Economic Complexity, World Bank, Mercosur, The European Union and several news agencies provide the main sources for empirical data. The result shows that Mercosur is benefiting from the Russian war against Ukraine by increasing trade with Russia as well as with China.