• Mercosur was established in 1991 by the Treaty
of Asunción, which was later amended and
updated by the 1994 Treaty of Ouro Preto.
• Mercosur originated in 1985, when Presidents
Raúl Alfonsín of Argentina and José Sarney of
Brazil signed the Argentina-Brazil Integration and
Economics Cooperation Program or PICE.
• Mercosur is composed of 5 sovereign member
states: Argentina; Brazil; Paraguay; Uruguay; and
Venezuela. Bolivia became an acceding member
on 7 December 2012.
• Mercosur, the "Common Market of the South," is an economic and political
agreement among Argentina, Brazil, Paraguay (which is currently suspended), and
Uruguay to promote the free movement of goods, services and people among
• Mercosur's primary interest has been eliminating obstacles to regional trade, such
as high tariffs and income inequalities.
• The Mercosur trade bloc's purpose, as stated in the 1991 Treaty of Asunción, is to
allow for free trade between member states, with the ultimate goal of full South
American economic integration.
• The population of Mercosur's full membership totaled more than 260 million
people in 2011; including Venezuela, it has a collective GDP of $2.9 trillion and is
the world's fourth-largest trading bloc after the European Union (EU), North
American Free Trade Agreement (NAFTA), and the Association of South East Asian
• The free transit of produced goods, services and factors
among the member states.
• Fixing of a common external tariff (CET) and adopting of a
common trade policy with regard to nonmember states or
groups of states, and the coordination of positions in
regional and international commercial and economic
• Coordination of macroeconomic and sectoral policies of
member states relating to foreign trade, agriculture,
industry, taxes, monetary system, exchange and capital,
services, customs, transport and communications, and any
others they may agree on, in order to ensure free
competition between member states.
• The commitment by the member states to make the
necessary adjustments to their laws in pertinent areas
to allow for the strengthening of the integration
• The common market will allow the free movement of
manpower and capital across the member nations, and
depends the grating of equal rights and duties to all
• Member states to implement the trade liberalization at
different speeds, during the transition period the rights
and obligations of each party should be discussed.
Mercosur’s founding documents set up three decision-making
bodies for Mercosur: the Common Market Council, the
Common Market Group, and the Trade Commission.
• The Common Market Council is Mercosur’s highest
decision-making body. It conducts Mercosur policy and
assesses compliance with the bloc’s regulations.
• The Common Market Group is controlled by members’
ministries of foreign affairs, economy, and Central Banks’
presidents. The group coordinates macroeconomic policy
between the members and negotiates trade with non-
• The Trade Commission deals with everyday trade matters
between constituent countries. Five members from each
country meet monthly.
TYPE OF PRODUCTS EXPORTED
• The Mercosur custom union was established in
1991. Since then Bolivi and Chile have become
associated members (1996). The Mercosur is an
important agrifood producer and a net exporting
region. Valued at around 47 billion US$ in 2004
and around 90 billion US$ in 2009.
• The principle agricultural products include
soyabean, sunflower, rice, wheat, maize, pork
chicken, beef, fish, milk products, honey, fruits,
• Principle export dimensions are EU, NAFTA,
Russia, Saudi Arabia, China, Japan and intra
• A brief description of the boom in Latin
America's reciprocal trade during the nineties
will enable us to define South America's
importance, particularly MERCOSUR's position
within this process, as seen in earlier table.
Between 1990 and 1995, total exports of
Mercosur countries increased by 34%. During
the same period, imports into these countries
increased by 64%.
MERCOSUR’S EFFECTS ON TARIFF
RATES AND TRADE VOLUME
• The removal of tariff barriers between
Mercosur countries following the 1991 treaty,
coupled with the more general trade
liberalization undertaken by these same
countries in 1988-91, sharply reduced the
countries’ average tariff rates
HOW DOES MERCOSUR AFFECT
OTHER REGIONAL GROUPS?
• Because Mercosur's charter does not allow its member nations to have
FTAs with non-member nations, Mercosur members are not permitted to
be part of the Andean Community of Nations (CAN), a smaller trade bloc
that includes Bolivia, Colombia, Ecuador, and Peru. When Venezuela
signed the Protocol of Adhesion, it was required to resign from CAN, as
Bolivia will have to do if it is admitted. Bolivia, however, has said it will not
leave CAN. CAN and Mercosur leaders signed an agreement to form a
third organization, UNASUR, in May 2008. UNASUR is meant to encompass
trade, security, and political issues, much like the European Union.
UNASUR has held meetings on regional defense issues, including a
controversial planned U.S. military expansion into Colombia (AP). Some
analysts believe that UNASUR could eventually replace Mercosur.
• Mercosur played a key role in the failure of the Free Trade Agreement of
the Americas (FTAA). Spearheaded by the United States, the FTAA was
intended to unite Latin America and North America in one broad trade
accord. Mercosur members and then-autonomous Venezuela rejected the
agreement at the Summit of the Americas in November 2005 over
concerns it would lead to increased inequality in the region (Guardian).
Proponents of the FTAA have not been able to make progress in forging
that deal since.
HOW HAS MERCOSUR STIMULATED
COOPERATION AMONG ITS MEMBERS?
• Agreements among Mercosur members range from debt relief
(Brazil and Argentina renegotiated Paraguay's debt) to trade deals.
Argentina and Venezuela, for example, signed a host of bilateral
agreements in the energy, industrial, agriculture, and health sectors
in January 2009. It is declared that Venezuela is ready to supply
Argentina with oil and later liquefied gas for the next 100 years.
• The most controversial project is the Bank of the South, a monetary
fund and lending organization established in September 2009 by
Argentina, Brazil, Paraguay, Uruguay, Ecuador, Bolivia, and
Venezuela with an initial capital of $20 billion. The intention of the
bank is to allow member countries to fund projects and
investments without World Bank or International Monetary Fund
involvement. They consider the bank as an important initiative
toward South America's financial independence.
• Perhaps one of the main difficulties is the
harmonization of economic policies. The traditional
stabilization policies, via fiscal and monetary
adjustments and those via price controls, so common
in Latin America, create an obstacle to meet the goals
• The Common External Tariff, another important factor
characterizing the Common Market, in view of the
enormous difficulties that its adoption conveys.
• Regarding agroindustrial policies, the Mercosur
countries must meet some natural comparative
advantages and put an end to the unfair practices in
• It is, thus, necessary that member countries achieve
tax system harmonization, in order to make taxation as
neutral as possible over the costs of production.
• Transportation is another question of great importance
• Mercosur has helped its members to lock in domestic
reforms, and contributed to tripling intra-regional trade in
less than a decade.
• Internationally, the regional association has given its
members a degree of visibility that they would not have
• Increased visibility is politically and strategically relevant in
and of itself, but it also contributed to massive foreign
investment in the 1990s, a decade of vast capital
• Mercosur has turned an area of low mutual confidence and
historical rivalries into an area where inter-state violence
has been ruled out, international cooperation has become
the norm and high-tension controversies have ceased to
• Economically, Mercosur also attained initially
good results. Intra-regional trade tripled in the
seven years following the signature of the
Treaty of Asuncion.
• The increase resulted from trade creation
rather than diversion, since extra-regional
trade also augmented.
• Mercociudades lack real power and are not directly
accessible to individual citizens.
• Representation is also weak or non-existent: the
Mercosur parliamentary body represents national
parliaments not citizens and it lacks effective
• The Mercosur flag and its associated symbols are not
widely used, remaining limited to the diplomatic arena.
• Unlike the EU, which put the so-called four freedoms at
the heart of economic integration, ‘MERCOSUR has not
gone beyond goods’ trade liberalisation.
• The chosen integration technology has also proved to
be either insufficient or inefficient. Since all decision-
making, dispute-settlement and implementation
capacities are in the hands of the member countries,
Mercosur operates through diplomatic rather than
• As regards the international dimension, Mercosur has
failed to enlarge its membership.
• Mercosur’s institutional deficits are probably the most
visible but not always the best understood.
• There are two main deficiencies in the legal structure:
normative inconsistency and an internalisation gap.
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