Mercosur
The Southern Common Market is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Bolivia, Brazil, Paraguay, and Uruguay. Venezuela is a full member but has been suspended since 1 December 2016. Chile, Colombia, Ecuador, Guyana, Panama, Peru, and Suriname are associate countries.
Mercosur's origins are linked to discussions for the constitution of a regional economic market for Latin America, which go back to the treaty that established the Latin American Free Trade Association in 1960, which was succeeded by the Latin American Integration Association in the 1980s. At the time, Argentina and Brazil made progress in the matter, signing the Iguaçu Declaration, which established a bilateral commission, followed by a series of trade agreements the following year. The Integration, Cooperation and Development Treaty, signed between the two countries in 1988, set the goal of establishing a common market that other Latin American countries could join. Paraguay and Uruguay joined the process and the four countries signed the Treaty of Asunción, which established the Southern Common Market, a trade alliance aimed at boosting the regional economy, moving goods, people among themselves, workforce and capital. Initially a free trade zone was established, in which the signatory countries would not tax or restrict each other's imports. As of 1 January 1995, this area became a customs union, in which all signatories could charge the same quotas on imports from other countries. The following year, Bolivia and Chile acquired membership status. Other Latin American nations have expressed interest in joining the group.
Mercosur's purpose is to promote free trade within the zone and the fluid movement of goods, people, and currency. Its functions have been updated and amended many times; it currently confines itself to a customs union, in which there is free intra-zone trade and a common trade policy between member countries. Beyond trade, Mercosur prioritizes deeper regional integration by enabling the free movement of people across borders, supported through its December 2014 agreement with the International Organization for Migration. In 2023, the Mercosur generated a nominal annual gross domestic product of around 5.7 trillion US dollars, placing the bloc as the 5th largest economy in the world. The bloc places very high on the human development index.
History
Background
Before the independence of the South American countries, most of their commercial and political ties were mediated by the Spanish Empire, which prohibited significant trade with Brazil. In the 19th century, the process of political emancipation in South America accentuated the various competing interests of the countries of the region. They often found themselves at war, such as the Cisplatine War, the independence of the Republic of Uruguay, the Uruguayan Great War, the Ragamuffin War, the dispute between unitaries and federalists in Argentina and the Paraguayan War.In 1941, in the middle of the Second World War, Brazil and Argentina for the first time tried to create a Customs Union between their economies. However, this did not happen due to the countries' diplomatic differences in relation to Axis policies, after the attack on Pearl Harbor. With the end of the war, the need for interaction between nations became imminent and, consequently, economic blocs formed. In Latin America, however, there was no union that obtained satisfactory results.
Foz do Iguaçu Declaration
In December 1985, Brazilian President José Sarney and Argentine President Raúl Alfonsín signed the Iguaçu Declaration, the basis for economic integration of the so-called Southern Cone. Both countries had just come out of a dictatorial period and were facing the need to redirect their economies to the outside and globalized world.Both countries had contracted a large external debt during the period of the military governments and did not enjoy credit abroad. There was a great need for investment in the countries, but no money. This common situation made them both realize the mutual need. Shortly after the signing of the Iguaçu Declaration in February 1986, Argentina declared its intention of a "preferential association" with Brazil. In a private home in Don Torcuato, there was a meeting to discuss the matter. The discussion, lasting two days, took place in an atmosphere of exchanging ideas and stating positions regarding the status of the area's economy.
After a few weeks, Brazil invited Argentina to a similar meeting, in Itaipava, also in a private residence. This signaled acceptance of the Argentine initiative and the formation of an agreement, with the objective of promoting the economic development of both countries and integrating them into the world. Out of this meeting came the Argentina-Brazil Integration and Economics Cooperation Program or PICE. Protocol Number 20 of the program proposed the Gaucho as a currency for regional trade. For many, the idea of integration in South America seemed more like an abstraction, owing to various unsuccessful experiences in the past. However, this was perceived as different.
The Buenos Aires Act
On 6 July 1990, the President of Brazil, Fernando Collor, and the President of Argentina, Carlos Menem, signed the Buenos Aires Act aimed at total customs integration between the two countries. It was decided that all measures for the construction of the customs union should be completed by 31 December 1994. To ensure compliance with the deadlines, the Binational Working Group was created, the body whose responsibility was to define methods for creating the common market between the two nations. In September, the governments of Paraguay and Uruguay showed a strong interest in the regional integration process, leading to the full perception by the signatories that a more comprehensive treaty was needed.Founding
Mercosur was finally established in 1991 by the Treaty of Asunción, based on the Buenos Aires Act, the Treaty of Asunción defined rules and conditions for the creation of a free trade zone among its four signatories. Likewise, it was decided that all measures for the construction of the common market should be completed by 31 December 1994 with the amendment of the Treaty of Ouro Preto. In 2001, celebrating the 10th anniversary of the bloc's creation, the Mercosur flag was hoisted for the first time at Mercosur's headquarters in Montevideo.The main implications of this free trade zone are:
- The free movement of goods, services and productive factors between countries, through the elimination of customs duties and non-tariff restrictions on the movement of goods and any other measure to the same effect, with the establishment of a common external tariff and the adoption of a common commercial policy towards third countries or economic blocs;
- Products originating in the territory of a signatory country will have, in another signatory country, the same treatment applied to products of national origin;
- The coordination of foreign trade, agricultural, industrial, fiscal, monetary, foreign exchange and capital policies, of others that are agreed, in order to ensure adequate conditions of competition between members, with the commitment of these countries to harmonize their legislation, especially in areas of general importance, to strengthen the integration process;
- In relations with non-signatory countries, members of the bloc will ensure equal conditions of trade. In this way, they will apply their national laws to inhibit imports whose prices are influenced by subsidies, dumping or any other unfair practice. At the same time, the bloc's countries will coordinate their respective national policies in order to develop common rules on trade competition.
- Common Market Group: a body formed by four full members and four alternate members from each country, from the respective Ministry of Foreign Affairs, Ministry of Economy and Central Bank. Until the creation of the Arbitral Tribunals, the Common Market Group was the main authority in resolving disputes;
- Common Market Council: the institution with the highest authority in the treaty, created to manage political decisions and ensure compliance with established deadlines.
The founding of the Mercosur Parliament was agreed upon at the December 2004 presidential summit. Up to 2010 it was planned to have 18 representatives from each country, regardless of population.
Venezuela adhesion and suspension of Paraguay
Venezuela's history in Mercosur began on 16 December 2003 during a Mercosur summit held in Montevideo, when the Mercosur Economic Complementation Agreement with Colombia, Ecuador and Venezuela was signed. This agreement established a timetable for the creation of a free trade zone among the signatory states and the full members of Mercosur, with a gradual reduction in tariffs. In this way, these countries were successful in negotiations for the formation of a free trade zone with Mercosur, since an economic complementation agreement, with full compliance with its schedule, is the item required for the rise of a new associate. However, on 8 July 2004, Venezuela was elevated to associate member status, without even completing the schedule agreed with the Common Market Council. The following year, the bloc recognized it as an associated nation in the process of accession, which in practice meant that the state had a voice, but not a vote.The Caribbean country's Accession Protocol was signed in 2006 by all presidents of countries in the bloc. Subsequently, the Uruguayan and Argentine congresses approved the entry of the new member. The Brazilian congress did so only in December 2009. However, the Paraguayan congress did not approve it and, therefore, made it impossible for the Caribbean nation to fully join. Subsequently, on 29 June 2012, in response to Fernando Lugo's summary dismissal of the presidency, the Mercosur presidents decreed the Paraguayan suspension until the next presidential election, in April 2013. A month later, the bloc presidents acknowledged their adhesion of Venezuela and several trade agreements have been signed. It was suggested that the decision could be reversed with the Paraguayan return by exercising its veto power, which was not the case. The decision was the subject of controversy. For some economists, Venezuela's acceptance as a full member of Mercosur expands the bloc's economic importance and opens up new business and investment opportunities. However, for others, the decision was seen as hasty, imposed by the governments of Brazil and Argentina and motivated purely by political interests.