Mercosur

Also known as Mercosul (the so-called Southern Common Market), a trading zone among Brazil, Argentina, Uruguay, and Paraguay, which was founded in 1991. The purpose of the Southern Common Market, or MERCOSUR, is to promote free trade and movement of goods and peoples, skills, and money between and among those countries. The organization represents a total population of 190 million individuals, living in an area larger than Europe. In addition to the official four members, Bolivia, Chile, Peru, Venezuela, and Mexico have associate member status in MERCOSUR.

Although officially founded in 1991, MERCOSUR's origins date back to the early 1960s. During that period, Latin America was taking its first steps toward regional integration. Created in 1960, the Latin American Free Trade Association (ALALC) provided for the formation of a free trade zone by means of periodic and selective negotiations between its member states. As U.S. government programs withdrew under the political pressures of domestic fiscal policy and free trade ideology, ALALC was replaced in 1980 with the Latin American Integration Association (ALADI). In March 1991, a new treaty was signed in Asuncion, Paraguay, creating a common market among the four participants, to be known as the Southern Common Market.

MERCOSUR has a number of major objectives. The first is the free transit of production goods and services among the member states, with the elimination of customs rights and lifting of nontariff restrictions on the transit of goods. The association also works to establish a common external tariff (TEC), adopt a common trade policy with regard to nonmember states or groups of states, and coordinate positions in regional and international commercial and economic meetings.

Another objective of MERCOSUR is the coordination of macroeconomic and sectorial policies of member states relating to foreign trade, agriculture, industry, taxes, monetary system, exchange and capital, services, customs, transport, and communications to ensure free competition among member states. The member states are also committed to making the necessary adjustments to their laws in pertinent areas to allow for the strengthening of the integration process.

The general aim of the MERCOSUR is to increase regional economic cooperation, but the common market was weakened significantly by the collapse of the Argentine economy in 2002. Many South Americans see MERCOSUR as an economic defense against U.S. commercial infringement in the region. According to critics of U.S. policy, the Free Trade Area of the Americas (FTAA) and bilateral treaties have encroached on Latin America's economic space. Many of these critics also believe the refusal of the administration of President George W. Bush to bail out Argentina was based on its desire to undermine MERCOSUR, which might pose a threat to U.S. economic and political interests in Latin America.