Introduction
The integration process in South America saw great progressive advancements especially at the end of the Second World War: The South American region was awakening the need for a common market for their industries. Treaties of political and economic integration in individual nations started emerging by the Second half of the 20th century. Integration assumed a more concrete form when Mercosur was formed. Mercosur reclaimed South America’s integration, economically and politically.
The consequences of early South American wars –such as the Triple Alliance War or more commonly known as the Paraguayan War from 1864 to 1870– and later wars –such as the Chaco War from 1932 to 1835 (Andrew, 2005) were instability and rivalry within the region, and this also created an acute need of an alliance to save the region’s international economic and political interests, which had weakened significantly as a result of the wars and lack of cooperation among the states. This realization led to the formation of several unions and the signing of multilateral trade agreements, such as the Latin America Integration Association (ALADI) and Latin American Free Trade Association (ALALC), which failed in integrating South America (Laursen, 2009).
Mercosur –Southern Common Market or Mercado Comun del Sur in Spanish– was the main union formed. It is a South American regional trade union, initially subscribed to by four South American countries namely Brazil, Argentina, Paraguay, and Uruguay. The bloc was formed in 1991, when these four states signed the New Treaty of Asuncion on March 26, 1991, in Asuncion, Paraguay: the legal document which laid the foundation of Mercosur (Pena & Rozemberg, 2005). Associate member states of the bloc were Chile, Peru, Ecuador, Colombia, and Bolivia, but in July 2004, the four original founder states voted for Venezuela and Mexico to also join the bloc as associate members (Mexico Joins Mercosur, 2004).
Agenda of Mercosur
Initially, the main agenda of Mercosur was to develop South America both economically and politically through a common market. According to Pena & Rozemberg (2005), the union endeavored to facilitate free transit of goods and services produced between the member states, while eliminating the custom rights as well as lifting tariff restrictions imposed on transit goods. Adoption of a common trade policy between the member states and the non-member states was on the agenda of the union: the bloc was to address the macroeconomic policies of the member states.
In political terms, Mercosur’s agenda is to promote integration and cooperation among the member states, at both regional and global levels (Albuquerque, n.d). Since member states have different political interests and perceptions, the efforts for consolidation of the bloc’s political cooperation had stagnated shortly after its formation in the 1990s. Mercosur’s political re-launch agenda— adopted in June 2000, significantly helped to influence its member’s political initiatives in devising a new agenda. The new agenda addressed changes such as agreeing on reaching consensus –either through plurality or majority votes– on political and economic issues. Harmonization and adoption of common regional policies was a change to be implicated in the new agenda (Pedro, 2004).
Lessons learned from EU and NAFTA
Strong institutions such as the EU –European Union– have an example to offer to develop ones such as Mercosur. However, social, political, and economic conditions in South America –both at the state and regional levels– greatly differ from those in Europe. These conditions present obstacles to Mercosur as an institution: Throughout its history has suffered integration problems, which translates into the failure of its member states in fostering cooperation and unity. On its part, the EU’s conditions have been quite different than those prevailing in Mercosur, in the sense that larger security issues and the need to prevent future catastrophic conflicts, as well as the need of maintaining a strong market to counterbalance the US predominance in the world market –as well as recently China’s influence– bring Europeans closer together than their counterparts in South America (Laursen, 2009).
Additionally, institutional foundations are another factor to take into account: While Mercosur is a weak intergovernmental organization with poor institutions; the EU is increasingly becoming supranational, and some of its institutions already are. For instance, the European Court of Justice and the European Parliament are evidence of supranational institutions, and their decision-making runs through a quality majority vote by ministers from different governments (Laursen, 2009). According to Laursen (2009), Mercosur is increasingly adopting stronger leadership, and this is helping to strengthen its institutions. The EU leadership has been geared towards securing credible commitments of its member states, through pooling the states together, while delegating its sovereignty to the states. All this has been made effective through sound institutional leadership.
As noted by Paulson, (2005), Mercosur is still in its middle stage of development as a trading bloc. At this stage, a trading bloc is yet to advance and sophisticate its strategic orientation, specifically with regards to managerial practices. The stage is quite complicated and characterized by many conflicting issues in terms of the customs union, combined prospecting of the member states as well as defending its orientation. The success of EU and NAFTA ranked among the leading trading blocs globally, serve again as another example to Mercosur. The bloc can emulate the classic strategic orientations of the two trading blocs, particularly in the managerial sectors (Paulson, 2005). In addition, Mercosur has also recently incorporated into its agenda the fostering of cultural exchange among its member states (i.e. incorporation of the Portuguese language as a requirement in High Schools throughout Argentina, Paraguay, and Uruguay). Through the bloc, governmental policies have worked across the borders to facilitate interchange and also trade.
Challenges faced by Mercosur
Brazil and Argentina predominantly take greater influence in the interests of the bloc, due to their geographical size, as well as the sizes of their economies. The historical rivalry and mutual distrust between Argentina and Brazil is a major pullback and a challenge to the progressive advancements of the bloc. The two states are always in the competition of their strong and ever-growing influence, both politically and economically, while undermining the interests of their co-partners, Paraguay and Uruguay. Both Brazil and Argentina actively lobbied for the inclusion of associate member states such as Bolivia and Venezuela, primarily for their own interests (Coffey, 1998).
Paraguay and Uruguay have never welcomed the idea of including associate members such as Bolivia and Venezuela in the union. The former two states feel overlooked by the group’s larger economies. This has been a threatening factor to the future survival of Mercosur. For instance, diplomatic relations between Bolivia and Paraguay are still recovering since Bolivia’s defeat in the Chaco war, which took place slightly over 70 years ago. This adds to the challenges Mercosur faces when it comes to attempts of Argentina and Brazil to include Bolivia into the union. The Uruguayan president particularly was dissatisfied with this inclusion and lamented that asymmetries in the union would widen (Christensen, 2007).
The two smaller original members were critics of Brazil and Argentina for not paying enough attention to assuring a balanced development, but emphasizing more on their self-interests. According to Christensen (2007), Lula’s government political policies received much criticism in Paraguay and Uruguay for supporting Argentine’s egotistical nationalist trade policy, which looked down upon Mercosur’s agenda.
Bolivia and Venezuela have forcefully pursued similar egotistical nationalist trade policies. This is with regard to the nationalization of energy resources under populists Presidents Bolivian Evo Morales and Venezuelan Hugo Chavez, even without considering the apparent effect they could have on their neighbor Brazil. Analysts of Brazil argued that such policies would jeopardize the progress of Mercosur. The nationalization processes have also heightened Paraguay and Uruguay’s resistance to the inclusion of the two states in the union (Christensen, 2007).
Impact of Mercosur in the Global Market
Mercosur ranks fourth among the largest economic blocs globally, hence having a significant impact on the global economy. By 1999, Mercosur had become the largest importer of direct foreign investment among newly industrialized and industrializing regional entities. The EU and Mercosur entered into free trade negotiations in 2005, over-sensitive global economic issues such as agricultural subsidies. A COHA report of 2006 indicates that Mercosur has been on the way to pursuing global influence through its relationship with the EU (Lauren & Katie, 2006).
Mercosur has significantly raised its trade standards in the global market, through the implementation of the bloc’s initiative of eliminating trade barriers among its members. This has triggered its member’s collective influence in bargaining for their rights in the global market. The bloc has also impacted positively on the competitiveness of its member products in the global market, and the ability to link with other leading trade blocs such as the EU and NAFTA in marketing those products (Simonsen, 1998).
The future of Mercosur
Mercosur’s future seems prosperous, from the perspective of many scholars and politicians from the region. Venezuelan President Hugo Chavez and Bolivian Evo Morales who attended the COHA summit in 2006 maintained that Mercosur was the solution to the current political and economic problems in South America, and all proposed the integration of Mercosur with the Andean community. Though the union had dwindled in progress prior to the 21st century, the ‘Relaunch’ of Mercosur has significantly shed some light on its developmental agenda. The significant rise of the Paraguay and Uruguay economies was a further shining light on the future of the bloc. Mercosur’s rise was reaffirmed by the Brazilian president in his speech during the summit, that “Mercosur is not a metaphysical entity, a platonic ideal, but a process…” (Mercosur Economic Summit Report, 2000. p.10). The consolidation of the member states as well as the current support of Paraguay and Uruguay from their larger co-partners, Brazil and Argentina promises a possibility of growth of the bloc as well as individual member’s growth economically and politically (Mercosur Economic Summit Report, 2000).
However, the current public opinion of citizens of Mercosur’s member state is overwhelmingly negative. The former vice president of Argentina Carlos Alvarez during his public speech maintained that Mercosur has lost its political and social dimension, and its political parties no longer discuss the crucial issue. It is an empty architecture and received a non-supportive opinion from the public. He continued arguing that even Paraguay and Uruguay don’t fight for greater participation in the organization (Mercosur an empty architecture, 2009). His assertations were reaffirmed by MercoPress news agency on June 12th, 2009, that the continued conflicts in Mercosur, are greatly eroding public expectations from the organization. The general public in the region is questioning the benefits the organization can deliver to the public. Public opinion has significantly lost its enchantment with the organization (MercoPress, 2009).
Conclusion
The integration of South America seems to be on a forward move, in spite of the occasional setbacks and conflicts in some areas. It is evident that Mercosur has reclaimed South America’s integration, socially, economically, and politically. The trading bloc has experienced a significant expansion, notwithstanding the recent developmental crisis and other challenges. Even though some of the bloc’s initiatives and policies have lacked strategy, coherence has been observed in different initiatives such as in the relaunch of new agenda, all geared towards closing the political and economic gaps among the South American nations, particularly the members of Mercosur.
The future of Mercosur seems to be brighter, especially from the comments of the state’s leaders, particularly in the last COHA summit. In the summit, the leaders have been optimistic and have spoken on improving their internal relations, and even expanding their connections with more alike partners in terms of opinions, such as the Andean community. The integration is also concerned with merging the bloc politically, in addition to the economic development, an indication of the more lasting and mature alliance, Mercosur. Despite the continuous conflicts obstructing the organization’s way to success and negative perception from the public, Mercosur is in the green light as a trading bloc in the South American region.
Works Cited
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