MERCOSUR Development - MERCOSUR Alliance for the South American Region
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MERCOSUR Development - MERCOSUR Alliance for the South American Region

MERCOSUR will strengthen mutually beneficial cooperation among members in the post-epidemic era, to achieve the goals of expanding export markets, consolidating industrial development, attracting foreign investment, creating employment opportunities, and revitalizing the economy.
Published: Oct 18, 2022
MERCOSUR Development - MERCOSUR Alliance for the South American Region

The History of MERCOSUR:

Mercosur is the largest economic integration organization in South America and the first common market in the world entirely composed of developing countries. On March 26, 1991, Argentina, Brazil, Uruguay, and Paraguay signed the Treaty of Asuncion in Asuncion, the capital of Paraguay, announcing the establishment of the Southern Common Market. On January 1, 1995, Mercosur was officially launched, and the Customs Union came into effect. Since then, MERCOSUR has successively accepted Chile, Bolivia, Peru, Ecuador, and Colombia as its associated countries. The purpose of the organization is to promote the scientific and technological progress of member countries by effectively utilizing resources, protecting the environment, coordinating macroeconomic policies, strengthening economic complementarity, and ultimately achieving economic and political integration.

The four founding member states of Argentina, Brazil, Paraguay, and Uruguay have mutually exempted most of the trade tariffs on goods and adopted common tariffs for foreign countries. The current average tax rate is 13%. Since its establishment nearly 31 years ago, MERCOSUR has actively expanded its economic and trade cooperation with foreign countries. The agreements that have been signed and entered into force include economic complementarity agreements with Bolivia, Chile, Colombia, Mexico, Cuba, Comunidad Andina, India, and the Southern African Customs Union (SACU) signed preferential trade agreements respectively, signed free trade agreements with Israel and Egypt respectively, and established dialogue mechanisms with the European Union, the Eurasian Economic Union (EAEU), Singapore, Canada, South Korea, etc. to facilitate the initiation of free trade agreement negotiations.

According to MERCOSUR statistics, the four founding member countries have a total population of 295 million. In 2020, the total foreign trade volume is 437.322 billion US dollars, and the export value is 250.349 billion US dollars, accounting for 57%. The top three export markets are China, the United States, and the Netherlands. The main export products include Oilseeds and oleaginous fruits, ores (such as iron ore), and fossil fuels (such as diesel and petroleum crude oil), etc. The import value was US$186.974 billion, accounting for 43%. The top three import sources were China, the United States, and Germany. The main imported products included machinery, electrical equipment, and petroleum.

Mercosur is the world's first common market entirely formed by developing countries. It aims to utilize the resources of member countries, protect the environment, coordinate internal macroeconomic policies, strengthen economic complementarity among countries, and promote science and technology among member countries. Progress and modernize the economy, and promote the development of the Latin American economic integration process. After ten years of development, Mercosur has become an important force on the political and economic stage of South America and even the world, playing an increasingly important role in international affairs.

MERCOSUR Key Work Items:

  • Defend universal values such as democracy, freedom, rule of law, and human rights.
  • Improve the inefficient system and bureaucratic problems that hinder the development of MERCOSUR.
  • Adjust the MERCOSUR common external tariff in line with the changes in the current situation.
  • Constructing an interconnected network of land and river transportation.
  • Create economic prosperity and improve people's well-being, and call on MERCOSUR member countries to work together to show the world MERCOSUR's development strength in South America.

Problems Faced by MERCOSUR:

  • There are many differences among member states, and internal coordination needs to be strengthened.
    There are not many historical entanglements between the 5 member states and the 5 associated countries of Mercosur, but because they are both developing countries and have similar economic structures, the interests of the member states and the associated countries have converged, which will inevitably lead to some interests. dispute. Since its establishment in 1995, differences and disputes within the Mercosur have been uninterrupted. Among them, the contradiction between Brazil and Argentina is the most prominent. The trade dispute between the two countries has even risen to the political level, which directly affects the realization of the overall goal of Mercosur and hinders the further deepening of integration. Although the Mercosur has a more international strategic nature in Brazil's foreign policy, from the perspective of actual effects, Brazil, as a regional political and economic power, has not fulfilled its responsibilities as a leading country. On the one hand, the level of economic development within MERCOSUR varies, including not only Chile, which has a relatively high degree of economic openness, but also Brazil and Mexico, two regional economic powers, as well as poorer countries such as Bolivia, Paraguay, and Peru. On the other hand, member countries and associated countries cannot achieve the subjective goal of macroeconomic policy consistency. How to seek balance in development and take care of the difficulties of weak countries in free trade is a difficult problem for Mercosur.
  • The US policy of divide and rule and the centrifugal tendency within the Mercosur made it difficult for the Mercosur to form an organic whole.
    In addition to internal factors, Mercosur encountered huge challenges from the Free Trade Area of America's policy implemented by the United States during its development. With the United States and Latin America in a deadlock in the negotiations on the Free Trade Area of the Americas, the United States adopted a divide-and-rule policy to spread the power of South America, especially the Mercosur. Due to the influence of factors such as the economic crisis in Latin America in recent years, Mercosur members once gave up their position of joint foreign negotiation and sought solutions to get rid of the crisis on their own.
  • It is greatly influenced by politics and the discontinuity in policy makes the development of Mercosur have strong stage characteristics.
    In Latin American history, there is an obvious tradition that foreign policy is largely determined by the wishes of those in power. Due to the influence of this factor, Mercosur has shown discontinuous staged development since its establishment. Since the establishment of Mercosur, nearly 100 agreements have been signed, but only 21 agreements have been voted through by the parliaments of the four member states. In recent years, due to the rise of leftist political parties in Brazil and Argentina, the foreign policies of the two countries have shown a relatively obvious tendency to return to South America. It has also been further expanded, and the cooperation mechanism has also begun to gradually improve. In addition, the Mercosur is greatly influenced by the political situation of the member states. Due to the frequent political and economic instability of the member states of the Mercosur, the development prospect of the Mercosur is not very bright.

The Common Development of MERCOSUR in the Future:

  • Before the establishment of the Free Trade Area of the Americas, the Mercosur will be further strengthened. Although MERCOSUR member states and associated countries have different political and economic intentions to join MERCOSUR, MERCOSUR has an absolute strategic priority in foreign policy. Brazil, relying on the platform of Mercosur, on the one hand, enhances its political and economic influence in South America, on the other hand, seeks a greater voice in international affairs and strives for a more important international status. Brazil's current international influence, in addition to its own political and economic factors, the role of the Mercosur is obvious. Although Argentina does not have the strength of Brazil, Mercosur is an important platform for it to participate in international affairs. Brazil's vision for the establishment of the Americas Free Trade Area is to expand Mercosur first, then establish the South American Free Trade Area, conduct free trade negotiations with Central America and the Caribbean, and finally conduct reciprocal negotiations with the North American Free Trade Area. Therefore, before the establishment of the Americas Free Trade Area, the northward expansion of the Mercosur and the southward extension of the North American Free Trade Area will occur simultaneously. In addition, the pace of negotiation between Mercosur and Europe, Asia, and other regions is likely to accelerate.
  • Brazil, Argentina, and other major countries will use the power of Mercosur to ask the United States for a price without much compromise in the negotiation of the American Free Trade Area. Since the United States is the largest trading and investment country of all Mercosur countries, it is unlikely that the Mercosur countries will simply boycott the United States. However, it should also be noted that the group strength of the Mercosur has been reflected in the previous negotiations and achieved certain results. Objectively speaking, it may only be a matter of time before the Free Trade Area of the Americas is finally available, but this situation where the collective force of Mercosur is asking the United States for a price will continue.
  • If the Free Trade Area of the Americas advocated by the United States is finally realized, the regional and international status of Mercosur will be greatly weakened, which will inevitably affect the international strategic considerations of South American powers. Therefore, how to deal with the new situation that free trade in the Americas will bring to the whole region is the key to the future development of Mercosur.
Published by Oct 18, 2022 Source :moea, Source :mbalib

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