Mercosur

Mercosur refers to a South American common integrated market that aims to promote economic development among its member countries by ensuring the unrestricted exchange of capital, people, goods, and services. It represents its members as a united entity on the global front for international trade.

This non-liberal trade bloc is also one of the world's third most renowned trade blocs. The current members of Mercosur include Brazil, Paraguay, Uruguay, Argentina, and Bolivia. Venezuela, which was once a member nation, was suspended in 2016. Mercosur is a common platform for these nations to create new trade and investment opportunities through international integration.

Mercosur is a non-liberal common market for the international economic integration of its member countries, including Brazil, Paraguay, Uruguay, Argentina, and Bolivia. It aims to eliminate trade barriers and ensure the free movement or exchange of capital, people, goods, and services across regional boundaries to bring trade, investments, and business opportunities for these countries.

The trade bloc has a primary decision-making authority called the Common Market Council, which coordinates the bloc's foreign and economic policies. It comprises the foreign and economic ministers of the members of Mercosur, and every decision is made with their mutual agreement. The council's presidency changes every 6 months, and all the full members get equal chances in alphabetical order. The other related bodies are as follows:

1. Common Market Group - manages macroeconomic policies;
2. Trade Commission; 
3. Parlasur - the advisory parliament; and
4. Structural Convergence Fund (FOCEM) - responsible for regional infrastructure projects like bridges, highways, and waterways, with GDP-based contributions from member countries.

Mercosur was established as a common market for South American countries, including Argentina, Brazil, Paraguay, and Uruguay, in 1991. Further, it was expanded in January 1995 and recognized as a formal customs union to ensure the free flow of capital, resources, people, goods, and services between its member states and their associates. Also, the official languages used in the summits are Portuguese and Spanish. However, Venezuela was added to the bloc in 2012; it was suspended in 2016 due to its involvement in anti-democratic practices and human rights violations. 

In 2021, Uruguay's decision to seek an independent trade agreement with China reflected an internal clash, as Mercosur's founding treaty didn't allow bilateral deals. After that, there were multiple disagreements and tension among the members. Further, in November 2023, Bolivia was welcomed as a new full member of the bloc.

Mercosur is the third most acknowledged trade bloc around the globe. It serves the following motives:

1. Free Trade: It was introduced to facilitate free trade between member nations by eliminating restrictions or barriers to moving goods, services, resources, and capital beyond these nations' regional boundaries.
2. Customs Union Formation: The bloc became a customs union in 1995, ensuring a common external tariff (CET) for importing goods and services from non-member nations and forming a standard trade policy for dealing with these non-members.
3. Economic Development: The bloc focused on increasing its members' business and investment prospects by reducing trade barriers and restrictions.
4. Strong Political Relations: It aimed to bring political stability among its members by enhancing cooperation and mutual understanding.
5. Common Market: Unity has power; therefore, the union emphasized creating a common market like the European Union while commencing all trades in shared currency instead of USD.

The members of Mercosur can be categorized into the following four different categories:

1. Member States: Four countries have been members of this trade bloc since its inception, including Brazil, Argentina, Uruguay, and Paraguay. Therefore, these are the permanent members of this common market and hold voting rights in the Mercosur Parliament for all kinds of decision-making. Bolivia joined the group as a full member in November 2023.
2. Suspended States: Venezuela, enriched with fossil fuel reserves, became a member in 2012. However, the state lost its recognition as one of the countries in Mercosur when it was suspended in 2016 for an indefinite period. The state was accused of engaging in anti-democratic practices and human rights violations.
3. Associated States: These nations enter into free trade agreements with the countries that are members of this common market. The associate states comprise Ecuador, Chile, Peru, Columbia, Suriname, Bolivia, and Guyana. These nations can be members of the Mercosur Parliament but without any voting representation.
4. Observer States: New Zealand and Mexico are termed the association's observer states since they have highly restrictive participation in this trade bloc.

The world-recognized trade bloc, Mercosur, has gone through various ups and downs in history. Although it has expanded the international trade avenue for its member nations, the political distress and clashes between the nations have affected its overall efficiency. Let us have a quick look at some examples of developments and happenings related to this common market:

Example #1

On July 07, 2024, the Mercosur trade bloc headed the meeting in Asunción, Paraguay, without Argentine President Javier Milei. He chose to participate in a right-wing rally in Brazil rather than attend the summit. Milei's absence and his suggestion to withdraw Argentina from Mercosur have given rise to a doubtful future of this trade bloc. Also, Paraguayan President Santiago Peña, who undertook all the summit preparations, has set modest expectations for the meeting.

Milei's nonappearance at the summit and his unfriendly relations with Brazilian President Luiz Inácio Lula da Silva clearly indicate the bloc's internal issues. Moreover, the upcoming presidential elections in Uruguay in October 2024 could also affect Mercosur's future. Meanwhile, Argentine Foreign Minister Diana Mondino has proposed considering a bilateral agreement if Mercosur cannot function collectively.

Source - https://apnews.com/article/mercosur-bolivia-argentina-lula-milei-paraguay-economy-9ff9dcd7a794de0b4cbea7d60e050302

Example #2

The EU and the Mercosur group are unitedly making efforts to finalize a long-awaited trade agreement by the end of 2024. If successfully executed, the deal would lead to a market expansion for 780 million people and could save over €4 billion of tariffs on European businesses annually. Indeed, the EU companies have ongoing investments worth €330 billion in these South American nations. However, the French oppose this agreement in lieu of environmental concerns. French President Emmanuel Macron has been worried about environmental damage and unfair competition for farmers, but only Austria came to support his stance; however, the deal cancellation requires support from the majority of the 27 EU governments. On the contrary, the agreement is welcomed by Germany, Spain, and other EU nations.

This deal was initially proposed in 2019, and it was committed to climate change according to the Paris Agreement. Meanwhile, EU Commission President Ursula von der Leyen is behind in the finalization of the deal during his upcoming visit to Brazil for the G20 summit in November 2024. Notably, the Mercosur members have criticized some EU environmental protectionist policies, like the law banning imports of goods from deforested land. Also, some European farmers have come in opposition, presuming hefty competition and new regulations after the deal's commencement. Further, Paraguayan President Santiago Peña and Argentine President Javier Milei have supported the agreement and have engaged their technical teams to resolve the related issues.

Source - https://www.ft.com/content/cae11511-f279-4466-9267-d978dfde6f6a

The Mercosur has undoubtedly provided a significant boost to the trade, commerce, and investments of its member states in the international market. However, it has also been criticized for several reasons. Let us have a brief overview of these pros and cons: