Mercosur

Mercosur stands for Mercado Común del Sur, the Spanish term for the Common Market of the South. In Portuguese, it is called Mercosul. It refers to a group of South American countries that joined forces in 1991 for the purposes of improving free trade and promoting the free flow of people, currency, and goods in a manner that would result in a common market. While it has succeeded in some ways, the union has been hampered by disagreements among its members and the need to sanction some member nations for not adhering to the terms of membership. Mercosur has also encountered difficulties negotiating agreements with the European Union (EU) and the United States. Despite these challenges, it has provided valuable benefits for the region.

Background

South America is the world's fourth-largest continent at just under 7 million square miles (17,840,000 square kilometers). Its population stands at more than 426 million. Some citizens reside in densely populated cities, while others live in isolated villages of just a few people. It is very diverse geographically, hosting both the world's largest river—the Amazon—and the rainforests around it. Conversely, South America is also home to one of the driest areas in the world, the Atacama Desert. This diversity means there is a variety of industries, including the petroleum, coal, and natural gas industries. Mining of ores such as copper, iron, lead, zinc, and tin are also economically important. Agriculture is another vital industry that includes fishing and cattle and sheep ranching as well as the growth of crops such as cotton, tobacco, cocoa, coffee, pineapples, and papayas.

The continent of South America is shared by twelve independent countries and three dependent territories. In 1991, some of these countries agreed to form a union to help them compete in the global economy. On March 26 of that year, representatives of Argentina, Brazil, Paraguay, and Uruguay signed the Treaty of Asunción, named after the capital city of Paraguay in which it was signed.

These four countries are full members of Mercosur, which is headquartered in Montevideo, Uruguay. Five other countries are associate members. The countries of Bolivia, Chile, Colombia, Ecuador, and Peru are allowed to participate in the trade agreements negotiated by Mercosur, but they are not part of its customs union. A customs union is a group of countries that agree to all charge the same import duties and allow free trade among themselves.

The Treaty of Asunción established Mercosur and a second agreement, 1994's Protocol of Ouro Preto, established its internal structure and governance. The Common Market Council makes policies for Mercosur. It is made up of the foreign and economic ministers of the member countries. The Common Market Group implements the decisions made by the council and polices the member nations for compliance. A president chosen from one of the member nations leads Mercosur. The presidency changes every six months, and it is rotated alphabetically through the member countries. In addition, the Parlasur, a parliament made up of additional representatives from the member nations, was formed in December of 2006 and began meeting in May of 2007; it is hosted in Montevideo. Mercosur also includes a Structural Convergence Fund that helps the members coordinate mutually beneficial infrastructure projects.

Mercosur's leadership negotiates trade agreements and controls imports and exports for its members. It sets a diplomatic and financial agenda for the member nations to help advance the economic status of them all in the world market. It also helps to arbitrate disputes among member nations.

Overview

Mercosur was formed with the intention that it might someday include all the countries in South America, much as the European Union encompassed all of Europe for a time. Initially, plans called for the formation of a universal currency, the gaucho, patterned after the euro in Europe.

In the decade following its formation, the initial four nations involved in Mercosur increased trade among them from $4 billion to $20 billion, a rate that was five times the pre-Mercosur rate. The four associate nations were added during these first ten years as well. Mercosur also began trade negotiations with the European Union in 1999.

By 2015, trade among Mercosur participants had increased to around $108 billion. However, this represented a 5 percent decrease in the members' overall trade rate. In the intervening years, Mercosur had experienced a number of challenges that possibly interfered with it reaching the optimistic goals of its organizers.

Initial attempts to negotiation with the European Union stalled; they were restarted in 2010 and then shelved temporarily in 2012. Negotiations began again in 2016 and were ongoing to establish tariffs and duties on imports and exports and address issues that would interfere with trade. During negotiations, the EU and Mercosur were engaged in some trade, with Mercosur exporting items such as agricultural and mineral products to the EU, and the EU exporting machinery, vehicles, chemicals, and pharmaceuticals to the South American countries in Mercosur.

While Mercosur has met some of its objectives since its formation, it has also encountered various difficulties. The organization admitted Venezuela as a full member in 2012. This membership was suspended in December of 2016 after Mercosur said Venezuela did not comply with requests to meet the trade organization's requirements for democratic behavior, particularly with regard to human rights and freedom of the press issues. Venezuela was in the midst of a great deal of political and economic upheaval at this time.

Mercosur also suspended one of its founding countries, Paraguay, for a brief period in 2012. This occurred after the Paraguayan president was impeached; some in Mercosur viewed the impeachment as a coup against the president. Paraguay was reinstated in 2013 after presidential elections were held. The trade organization was also forced to arbitrate some disagreements among its members. These included an issue that arose between Argentina and Brazil in 2000 regarding a disagreement over steel tariffs. Another such incident occurred in 2006, when Argentina and Uruguay were in a dispute over two pulp mills along their shared border.

Bibliography

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