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Home / Monitored IGOS / America / South American Common Market

South American Common Market

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Mercosur

Name: Mercosur

Acronym: Mercosur
Year of foundation:1991
Headquarters: Montevideo, Uruguay
Official website: go to page
Mercosur documents: go to page

FOCUS ON
Mercosur Parliament

Description

Mercosur or Mercosul (Spanish: Mercado Común del Sur, Portuguese: Mercado Comum do Sul, Guarani: Ñemby Ñemuha, English: Southern Common Market) is a Regional Trade Agreement (RTA) among Argentina, Brazil, Paraguay and Uruguay founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people, and currency.

Mercosur origins trace back to 1985 when Presidents Raúl Alfonsín of Argentina and José Sarney of Brazil signed the Argentina-Brazil Integration and Economics Cooperation Program or PICESpanish: Programa de Integración y Cooperación Económica Argentina-Brasil, Portuguese: Programa de Integração e Cooperação Econômica Argentina-Brasil). The program also proposed the Gaucho as a currency for regional trade.

Bolivia, Chile, Colombia, Ecuador and Peru currently have associate member status. Venezuela signed a membership agreement on 17 June 2006, but before becoming a full member its entry has to be ratified by the Paraguayan and the Brazilian parliaments. The founding of the Mercosur Parliament was agreed at the December 2004 presidential summit. It should have 18 representatives from each country by 2010.

The following countries are full members, in the process of becoming full members, associate members or observers.

Member states

Argentina Brazil Paraguay Uruguay

Applying for full membership

Venezuela

Associate members

Bolivia Chile Colombia Ecuador Peru

Observers

Mexico

History

The precedents of Mercosur

In Latin America, the trend towards integration appeared in the 1960s, with the establishment of the Latin American Integration Association (Asociación Latinoamericana de Integración, ALADI), a trade association based in Montevideo whose main goal was the establishment of a common market. After this, a number of regional treaties and agreements intended to break up the commercial barriers between countries; those treaties were based on different criteria: geographical, political, ideological, etc., though there has always been an economic background or a set of economic mechanisms in their actual operation.
Among these examples of early integration we can mention the Latin American Economic System (Sistema Económico Latinoamericano, SELA), founded in 1975; or the aforementioned ALALC, established in 1960 and converted into the Latin American Integration Association (Asociación Latinoamericana de Integración, ALADI) in 1980. It is remarkable that the four member states of Mercosur (Argentina, Brasil, Uruguay and Paraguay) were members of SELA, ALALC and ALADI.
Nevertheless, during the transition to democracy in Argentina and Brazil, the Presidents of both countries (Raúl Alfonsín and José Sarney) noticed the weakness of the new democracies and the need to strengthen them by creating regional links. The first material outcome of these summits was the Declaration of Foz de Iguazú (1985), that sought to consolidate the democratic process in Latin America.
Following the guidelines established by the Iguazú convention, between 1986 and 1990 several declarations were issued, all of them claiming that integration would bring economic prosperity, which would accelerate the consolidation of democracy, and this would in turn deepen the integration process.

 

Mercosur and its evolution

However, the 1990s brought neoliberalism to Latin America under the principles of the Washington Consensus; and, with it, a swerve from the aforementioned political goals to a strictly economic, free-trade oriented view as the basis of the integration process (it is important to take into account the firm support of the Bush administration to this commercial-oriented project).

In this context, after a relatively brief period of negotiation, the 24-article agreement establishing Mercosur (Treaty of Asunciòn) was signed on 26 March 1991 by the heads of state of Argentina, Brazil, Paraguay and Uruguay, and entered into effect on 29 November 1991. Consistently with what has been stated above, it was a strongly depoliticized agreement – focused on trade matters, instead.

The signatory countries committed themselves to the progressive reduction of barriers to trade, the establishment of a common external tariff and the harmonization of economic policies. As required by the Treaty of Asunciòn, before the completion of the Common Market by the end of 1994, an extraordinary meeting had to be held to decide on the permanent institutional structure of Mercosur and the voting procedures.


Accordingly, on 17 December 1994, the member countries signed the Protocol of Ouro Preto which amended and upplemented the founding treaty delineating the institutional framework and conferring on the organization the international legal personality.

Participation in Mercosur was opened to other countries of the Latin American Integration Association (LAIA) after the expiration of an initial five-year moratorium on new memberships. The Treaty of Asunciòn, however, forbids in principle dual affiliations to economics integration schemes.

 

The democratic commitment

Throughout the twenty four articles of the Asunciòn Treaty, there is not a single mention of democratization.


In June 1992, the Las Leñas Presidential Declaration stated that “fully functioning democratic institutions are an indispensable condition for the existence and development of Mercosur”. But democratization returned to the shadows after the issue of this Declaration; and it took seven years, until the Ushuaia Protocol on Democratic Commitment  was signed in July 1998, for the concept of democracy to be considered as one of the core issues of Mercosur’s development. Although the topic of this document was the way States Parties should act if there was a coup d’état in any other Member State (and not the democratization within Mercosur itself), the idea of democracy as one of the fundamentals of Mercosur was already taking shape.
By the end of the 1990s, however, it started to become clear that the integration process was, in all of its sides, at a standstill. The commercial agreements, as well as the political bonds, had proven completely ineffective. The situation became even worse, due to the serious economical problems that affected the two major countries (Argentina and Brazil), which led to trade disputes between them. Having reached rock bottom, the Heads of State of the Member Countries started a new set of conversations, headed for a relaunch of Mercosur, which was finally achieved through an agreement signed in 2000.
This relaunching process culminated in the Ouro Preto II meeting and the corresponding Protocol. This new stage of Mercosur meant a breakthrough in the field of democratization, since two new institutions were incorporated: the Mercosur Parliament and the Fund for the Structural Convergence of Mercosur (Fondo para la Convergencia Estructural, FOCEM). These are, together with the Democracy Observatory, the most relevant bodies for the Mercosur democratic commitment.

 

Mercosur structure and decision-making procedures 

The institutional structure of Mercosur - as redefined by the Protocol of Ouro Preto - includes three principal organs with decision making powers: the Council of the Common Market; the Common Market Group; and the Trade Commission.

The Council of the Common Market

The Council of the Common Market, which is the supreme body responsible for the formulation and the implementation of the integration process, meets at ministerial level whenever necessary. It consists of the Foreign Affairs and Economic Ministers of the member countries but other ministers may be invited depending on the issues under considerations. At least every six months the Council is to hold a meeting with the participation  of the Heads of State of the member countries. The presidency of the Council rotates at six-month intervals among the member countries in alphabetical order. The Council adopts, by consensus, decision binding for all member countries.
Although it was created as Mercosur’s highest-level decision-making organism, the Council has delegated some responsibilities to the Common Market Group, which meant a decrease of its functions and power.

The Common Market Group

The Common Market Group is the executive organ whose activities are co-ordinated by the ministries of foreign affairs. It is composed of four delegates and four alternates form each member country representing the ministries of foreign affairs and economy (including industry and foreign trade) and the central banks. The Group oversees, within the limits of its competence, the implementation of the Treaty of Asunciòn and its Protocols, adopts the  necessary measures to carry out the decisions of the Council, proposes concrete actions for the co-ordination of macroeconomic policies and the negotiationa of agreements with non-member countries, and approves the budget submitted by the Administrative Secretariat. Resolution adopted by the Group, by consensus, are binding for all member countries.

The Trade Commission

The Trade Commission assists the Group and oversees the implementation of the instruments of the common commercial policy agreed upon by member countries, dealing with all issues related to trade between members and with third countries. It is composed of four delegates and four alternates form each member country meeting at least once a month under the co-ordination of the ministries of foreign affairs. The Commission adopts directives and proposals, the former having a binding character for all member countries. It is worth noting that the Trade Commission was not envisaged by the Treaty of Asunciòn; it was established by a decision of the Council in August 1994 and subsequently incorporated by the Protocol of Ouro Preto into the institutional structure.

The Mercosur Parliament

It is a representative body of the citizens of the State Parties of Mercosur. It aims to contribute to reinforce the institutional and popular dimensions of the integration process and to facilitate the process of incorporation of Mercosur's law by the State Parties.

The Economic and Social Consultative Forum

It represents the economic and social sectors and may submit recommendations to the Group.

 

The Administrative Secretariat

The Administrative Secretariat, based in Montevideo, has been changed by the Protocol of Ouro Preto form a body servicing the whole Mercosur. The Secretariat is headed by a Director elected by the Group, on a rotating basis, for a non-renewable two-year term.

The procedure to follow for the settlement of disputes had been outlined by the Protocol of Brasilia adopted in December 1991, the first decision actually to be taken by the Council of the Common Market. In 2003, with a view to strengthening the institutional structure, a Committee of Permanent Representatives of Mercosur was established. A permanent dispute settlement body has been created through the Protocol signed in Olivos (Argentina) on 18 February 2002 comprising a legal representative from each member country plus one member appointed by consensus.

 
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