Despite the close economic ties to Brazil and Argentina that created economic problems in Uruguay starting in 1998, Batlle remained deeply committed to the Mercado Comun del Cono Sur (MERCOSUR), the trade pact uniting Brazil, Argentina, Uruguay, and Paraguay. He has met with the Brazilian and Argentine presidents to discuss widening the scope of MERCOSUR, including a speedy process to accept Chile into the trade pact. Chile and Bolivia are associate members. The deep recessions in Argentina and Brazil, however, forced Batlle to fire his finance minister, Alberto Bensión, to avoid collapse of his coalition government. Argentinians have been withdrawing money from Uruguayan banks, causing panic among Uruguay's citizens. In 2002, Batlle found himself in trouble for describing the Argentinians as "a band of thieves."
Batlle firmly believes in a world economy, and was expected to press for greater ties with several nations. He envisions an economic pact that would cover all of the territories between Alaska and Patagonia. He also wants MERCOSUR to reach beyond the economy, acting as a cultural, intellectual, and technological ambassador for the region.
Diplomatic ties with Cuba, which have often been shaky, were broken in April 2002 after Uruguay supported a United Nations (UN) human rights resolution against the Cuban government. Uruguay recalled its own ambassador from Cuba and ordered the Cuban ambassador in Uruguay to leave the country. Cuban President Fidel Castro took no formal actions but took to the Cuban airwaves accusing Uruguay of "genuflecting" to the U.S. by sponsoring the resolution.
In October 2002, Li Peng, the chairman of the Standing Committee of the Chinese National People's Congress, met with Batlle to promote the development of Sino-Uruguayan relations. The two countries have diplomatic ties and have cooperated in trade and scientific endeavors.
The government of Uruguay took an active role in the 2001 Summit of the Americas and follow-up working groups. Uruguay vigorously supports the establishment of a Free Trade Area of the Americas.