Composition, objectives and institutional structure
Founded in 1991, the Southern Common Market (MERCOSUR) is the most comprehensive initiative of regional integration implemented in Latin America, arising in the context of redemocratization and rapprochement among the countries of the region at the end of the 1980s. The founding members of MERCOSUR are Brazil, Argentina, Paraguay and Uruguay, signatories to the Treaty of Asunción.
Venezuela joined MERCOSUR in 2012, but has been suspended since December 2016 for non-compliance with its Accession Protocol. In August 2017, the Democratic Clause of the Ushuaia Protocol was applied to Venezuela.
All other South American countries are related to MERCOSUR as Associated States. Bolivia, moreover, has the status of an Associated State in the process of accession.
The Treaty of Asunción, the foundational instrument of MERCOSUR, established a model of deep integration, with the central objectives of shaping a common market – with free internal circulation of goods, services and productive factors – the adoption of a Common External Tariff (TEC) in trade with third countries and the adoption of a common trade policy.
Intra-zone free trade was implemented through the tariff reduction program provided for by the Treaty of Asunción, which reduced the import tax rate for the range of goods to zero. For the sugar and automobile sectors, there are mandates for the establishment of common regimes, whose aim is the compliance with MERCOSUR rules. The Customs Union, established by the CET, is organized in 11 tariff levels, whose rates vary from 0% to 20%, obeying the general principle of tariff escalation: inputs have lower rates and products of higher complexity, higher rates.
The Ouro Preto Protocol, signed in 1994, established the basic institutional structure and gave MERCOSUR legal personality under international law. The Protocol also enshrined the rule of consensus in the decision-making process, listed the legal sources of MERCOSUR and instituted the principle of simultaneous validity of the rules adopted. The three MERCOSUR decision-making bodies are: the Common Market Council (CMC), the highest body responsible for the political conduct of the integration process; the Common Market Group (GMC), the executive body of the Bloc; and the MERCOSUR Trade Commission (CCM), a technical body that ensures the application of the instruments of the common commercial policy.
In the course of the integration process, and largely due to the success of economic-commercial integration, the MERCOSUR agenda has been gradually expanded to include political, social and citizenship issues. The two milestones in the social and civic area of MERCOSUR are, respectively, the Strategic Plan for Social Action (2011) and the Plan for Conforming a MERCOSUR Citizenship Statute (2010).
The MERCOSUR political agenda covers a wide spectrum of government policies addressed by different bodies of the Bloc, which include ministerial meetings, specialized meetings, forums and working groups. The States Parties and Associated States promote cooperation, consultations or coordination in virtually all governmental spheres, which has enabled the construction of an invaluable heritage of understanding and integration for the region.
MERCOSUR is today a fundamental instrument for promoting cooperation, development, peace and stability in South America.
The founding members (Brazil, Argentina, Paraguay, and Uruguay) encompass approximately 67% of the territory of South America (11.9 million km2, equivalent to almost three times the area of the European Union); 62.2% of the South American population (262.2 million inhabitants, that is, 3.5% of the world population) and 75.1% of South America’s GDP in 2017 ($ 2.78 trillion of a total of $ 3.7 trillion, according to data from the International Monetary Fund). MERCOSUR represents the 5th largest world GDP ($ 2.78 billion in 2017, ahead of the United Kingdom, $ 2.62 billion, and India, $ 2.61 billion).
Trade within the bloc has multiplied nine times since the creation of MERCOSUR, from $ 4.5 billion in 1991 to $ 40.4 billion in 2017 (taking into account only trade between founding partners). In the last five years, the average trade has been $ 40.8 billion (data also referring to trade between the founding partners).
MERCOSUR is the main recipient of foreign investment on the continent. According to the latest data available at UNCTAD, MERCOSUR received 47% (2015) and 46% (2016) of foreign direct investments in Latin America and the Caribbean, and 65% (2015 and 2016) of South America. There was also an increase in the percentage participation of the bloc as a destination for foreign investments in the world: in the pre-crisis years (2005-2007), MERCOSUR received 2% of world investment; in 2015, it received 4.4%; and, in 2016, 3.7%. The expansion of the economic integration agenda has also contributed to a significant increase in direct investments made by the States Parties to the other members of the bloc.
MERCOSUR is undergoing a process of economic, commercial and institutional strengthening. The States Parties consolidated a pragmatic integration model, focused on concrete results in the short term. The current aim of MERCOSUR integration is the search for economic prosperity with democracy, political stability and respect for human rights and fundamental freedoms.
The results of this new moment in MERCOSUR have already begun to show. Among the many recent advances, the following stand out:
- approval of the Cooperation and Investment Facilitation Protocol, which increases legal certainty and improves the environment for attracting new investments in the region (2017);
- conclusion of the MERCOSUR Public Procurement Protocol agreement, which creates business opportunities for our companies, expands the universe of suppliers of our public bodies and reduces costs for the government (2017);
- positive discussion of the vast majority of barriers to intra-block trade (2017);
- modernization in the treatment of regulatory issues, with the reform of the procedures for drafting and revising technical regulations, which will allow them to be updated in the light of more recent international references, and with the resumption of dynamism in the regulatory technical bodies (2017);
- efforts to strengthen the MERCOSUR Structural Convergence Fund (FOCEM), as demonstrated by the signing of a framework agreement between FOCEM and FONPLATA (2018); and
- the approval of the work program for the MERCOSUR digital agenda, which will bring us closer to the forefront of international discussions with repercussions in areas such as digital government, cybersecurity and electronic commerce (2018).