Mercosur/Mercosul

The Southern Common Market—Mercosur in Spanish, Mercosul in Portuguese—is an international and intergovernmental organization with the objective to create first a free trade area, and subsequently, a customs union and a common market. It was instituted on March 26, 1991, by the signing of the Treaty of Asuncion that constituted a common market between Argentina, Brazil, Paraguay, and Uruguay, as a culmination of the process of a bilateral program of integration and cooperation already engaged by Brazil and Argentina since 1985.

The initial stage of the Latin American integration process was the creation of the Latin American Free Trade Association (LAFTA) with the first Treaty of Montevideo in 1960. The objective was a free trade area in South America, with expanded markets and facilitated trade with the elimination of protectionist measures through multilateral negotiations.

Political problems and a lack of flexibility posed practical difficulties to this negotiating process. Thus, a more flexible Regional Integration Agreement was created in 1980, the Latin American Integration Association (LAIA), with the signature of a second Treaty of Montevideo. It is an intergovernmental organization that continues the process started by LAFTA. Its main objective is the establishment of a Latin American common market in order to assist economic and social development of the region.

Under the LAIA system, Brazil and Argentina in 1986 signed the Brazil-Argentina Integration Treaty, at Foz de Iguaçu, among 12 commercial protocols. The Integration, Cooperation and Development Treaty was signed in 1988 and the Economic Cooperation Agreement in 1990, setting the stage for a common market between the two countries within 10 years with the gradual elimination of all tariff barriers, harmonization of the macroeconomic policies of both nations, and with the achievement of the free movement of goods, services, and production factors in line with the objective of creating a bilateral common market. These agreements were the immediate precursors of Mercosur.

Uruguay and Paraguay feared becoming isolated economically, leading to their joining these agreements, and later to the creation of Mercosur. With them, the integration process evolved from bilateralism to multilateralism, as first envisaged in the LAFTA model.

In 1996 free trade agreements were signed with the governments of Bolivia and Chile, thereby enhancing the geographic scope of the group, but both countries are just partners of Mercosur, not members yet. Colombia and Peru have already evinced interest in joining, and on July 4, 2006, Venezuela became the fifth member of Mercosur with the signing at Caracas of a membership protocol.

The integration of these four member states represented an effort toward the progressive development of Latin American integration through the free transit of goods and services and factors among them, with, inter alia, the elimination of customs rights and lifting of nontariff restrictions on the transit of goods, or any other measure with similar effect. It also fixed a common external tariff (TEC) and adopted a common trade policy with regard to nonmember states, and the coordination of positions in regional and international commercial and economic meetings.

The agreements contained the coordination of macroeconomic and sectorial policies of members relating to foreign trade, agriculture, industry, taxes, monetary system, exchange and capital, services, [Page 1112]customs, transport, and communications in order to ensure free competition between member states. And it provided, in addition, the commitment by the member states to make the necessary adjustments to their laws in relevant areas to allow for the strengthening of the integration process.

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