A political standoff between the Paraguayan government and the customs union known as Mercosur has been underway since June 2012, when Paraguay's voting rights in the bloc were temporarily suspended in response to former Paraguayan President Fernando Lugo's removal from office. Recent democratic elections in the country have cleared the way for its voting rights to be restored, and Mercosur members — Brazil, Argentina, Uruguay and most recently Venezuela — are expected to discuss reintegrating Paraguay at the bloc's upcoming summit in Montevideo on July 12.
Mercosur is the world's fourth-largest trade union (behind the European Union, the North American Free Trade Agreement and the Association of Southeast Asian Nations) and the largest in Latin America, with a total population of around 277 million people and a gross domestic product of around $3.3 trillion. The union is significantly larger than the Pacific Alliance — comprising Mexico, Colombia, Peru and Chile — to which Paraguay recently gained observer status. More than half of Paraguay's exports head to Mercosur members, and nearly all of its foreign trade passes through Mercosur countries at some point, making the country highly dependent on the bloc.
Paraguay is still upset over the suspension, which it considered to be a violation of the bloc's founding treaty, and over the subsequent admission of Venezuela during Paraguay's suspension and without Paraguayan consent. Moreover, Paraguay believes it should be given the presidency of the union, since its turn was skipped during the suspension. But despite its objections, the country relies on Mercosur states for roughly half its exports and as corridors to other global markets. So while Paraguay may threaten to postpone its re-entry into the bloc or leave it altogether, such threats ultimately would be used as political leverage to rejoin the union on its own terms.
