MERCOSUR: an agreement that have to be renewed

Pierre Varasi, 23/04/2015
Translated by Ilaria Oberti

MERCOSUR (or MERCOSUL, Southern Common Market) was established on March 26th 1991 by the Treaty of Asunción between Brazil, Argentina, Uruguay and Paraguay. Four years later came into force bringing various improvement in the economy of these countries. The measures of this Treaty were different and represented an innovation for the Latin American countries. First of all, the free trade of products, services and raw materials between the members. Since 1995 duties and trade restrictions had been removed. This Treaty is similar to the EU’s common market: the members of the MERCOSUR has always stated that the EU was taken as example concerning the economical agreement between states.

Another fundamental issue was the creation of a common tariff towards thirds States. Gradually, entities have been established, which would coordinate the relationship between the member countries – with particular reference to agriculture, industry and everything significant from an economical point of view. These entities gave also advices to the states about which internal changes were needed to let the MERCOSUR grow: in fact the Treaty expected some obligations among which the real common market – this would have provided a free trade of not only money but also workforce. In the end, the member countries should have been democratic and guaranteed the same rights.

Since 1996 new states had joined MERCOSUR, among which Bolivia and Chile. In 2003 Peru joined and in 2004 Colombia and Ecuador. The last one was Venezuela in 2012. It was the entrance of Venezuela that called into question the foundation which this agreement was based on. Venezuela had Hugo Chávez as president from 1992 to 2013. For sure, there had been some boost of the Venezuelan economy, and not only, but Venezuela wasn’t a real and proper democracy. His nickname was “Socialist Dictator”. He died in 2013 and since then the new president of Venezuela has been Nicolas Maduro. Coming back to the MERCOSUR, not only the admittance of Venezuela represented the first exception of the principles of democracy, which are the basis of the agreement, but indeed Chávez worked against the principle of free trade, believing instead that it should have brought the agreement towards new socialist principles. Since 2012 none of the decisions made had been enforced from Venezuela, jeopardizing the efficiency of both the old and the new propositions.

Since Venezuela had joined MERCOSUR, this agreement has been focused more on political and social than economic issues. We still do not know which role would have this area in the future. However there could be support from the EU. In the first years of the agreement, MERCOSUR and EU have tried to collaborate, but since 1999 the collaborations has been interrupted and left in standby. Nowadays there could be the possibility of new collaboration between the two unions, in particular from the Uruguayan President Vazquez and the Brazilian President Dilma Rousseff, which are hoping to get a proposal of dialogue from the EU. If this works out, there will be not only economic consequences for both the Unions, but also MERCOSUR could have a new “lifeblood” for a future modernization. Venezuela seems not so enthusiastic about the idea, but for now it hasn’t big influence and cannot sink the project.

The need of renewal is evident if considered that the goals proposed by the member countries in the ’90 are not yet reached – one for all there is no common tariffs nor policies towards thirds States. Such difficulties are also due to the extreme big differences among the member countries: it is difficult to have same policies when the inflation of one country is 6,7% (Uruguay, 2010) and of another is 27% (Venezuela, 2010). The same spokesmen of this agreement admit that if the principles are effectively implemented, it is due to the willing of the states that are only pursuing their own interests and not due to the willing of pursuing common interests or goals. Moreover, as the Uruguayan Ministry of the Foreign Affairs Rodolfo Nin Novoa said, nowadays MERCOSUR joins just 1% of the main trade made from countries that have chosen a free trade. Anyway, some changes will be needed. In the next future, MERCOSUR should evolve to reach some concrete results and to aim joining new trades.

SOURCES:

The economist
Mercopress.com
Buenosairessherald.com