With over two decades of existence, the Common Market of the South (MERCOSUR) is the most comprehensive initiative of regional integration implemented in Latin America.
MERCOSUR members (Brazil, Argentina, Paraguay, and Uruguay - founding members, and Venezuela, which completed its accession process in the middle of 2012) encompasses approximately 72% of the territory of South America (12.8 million km2, equivalent to three times the area of the European Union); 70% of the South American population (275 million inhabitants) and 77% of South America’s GDP in 2012 (US$ 3.18 trillion from a total of US$ 4.13 trillion, according to World Bank data).
In December 2012, with the signing of the Protocol of Accession of the Plurinational State of Bolivia to MERCOSUR, the accession process as a member State has started.
Chile, Peru, Colombia, and Ecuador are Associate members of MERCOSUR, in addition to Guiana and Suriname, which acquired this status in July 2013. All South American countries are linked to MERCOSUR, either as member State or Associate member.
If taken as a whole, MERCOSUR would be the fifth largest economy in the world, with a GDP of US$ 3.32 trillion. MERCOSUR is the leading receiver of foreign direct investment (FDI) in the region. The bloc received 47.6% of all the FDI flow directed to South America, Central America and Mexico in 2012 (UNCTAD data). The bloc constitutes a privileged space for investments, through purchase, share control, and association of companies from member States. The expansion of the economic integration agenda, in the last decade, has contributed to a significant increase of direct investments assigned by member States to other parties of the bloc.
MERCOSUR was founded in 1991 through the Asunción Treaty. Celebrated in 1994, the Ouro Preto Protocol is another key agreement for the bloc, as it defines MERCOSUR’s institutional structure, establishing the attributions and the decision-making system of its main bodies. The Ouro Preto Protocol attributed international legal personality to MERCOSUR.
The bloc can be characterized as a customs union in the process of consolidation, with common market features, with the elimination of obstacles to the circulation of factors of production, as well as the adoption of a common tariff policy regarding third countries, through a Common External Tariff (CET).
In a little more than twenty years, MERCOSUR has proved to be a great success in economic-commercial terms. Intra-bloc trade was multiplied by more than ten times, jumping from US$ 5.1 billion (1991) to US$ 58.2 billion (2012). In the same period, world trade grew only five times. Brazil's trade with MERCOSUR was multiplied by close to ten times – while with the rest of the world it increased eight times. Intra-bloc trade accounts for about 15% of MERCOSUR’s global trade amount, and tariffs were almost completely reduced for trade among the bloc members.
At first glance, it may seem that the initiative has commercial / trade objectives, but MERCOSUR is much more than that. Since its origins, MERCOSUR has been based on a political and strategic integration project in which the trade aspect is added to other spheres of equal or higher importance.
MERCOSUR’s origin is in the process of rapprochement between Brazil and Argentina, which began in the 1980’s and was reinforced with the re-democratization in both countries. Since its inception, the bloc has been marked by the symbolism of nations that have joined together around principles and objectives such as democracy and economic development – elements that have since come to characterize the bloc. Today, the democratic clause and the understanding that the economic development shall be accompanied by better living conditions of the populations are consolidated within MERCOSUR.
The treatment of asymmetries among the member countries receives special attention. The establishment of the Structural Convergence Fund for MERCOSUR (FOCEM), in 2005 aimed at financing programs to improve the infrastructure in the region, to develop the competitiveness, social cohesion, and institutional strengthening of the regional integration process. In operation since 2007, FOCEM counts on a portfolio of more than forty projects, worth around US$ 1.4 billion – of which about US$ 1 billion are funded by non-reimbursable FOCEM resources. The fund has contributed to initiatives in areas such as housing, transportation, incentives to small businesses, biosecurity, technological training, and sanitation infrastructure – mainly in the smaller economies of the bloc – in addition to financing projects that benefit border cities and communities, including in Brazil.
MERCOSUR is vital for the industrial activity of the member States. In 2012, 92% of Brazilian exports to MERCOSUR were composed of manufactured and semi manufactured goods. One of the sectors that most benefited from MERCOSUR is the automotive industry, for the bloc made it possible for Brazil and Argentina to integrate their automobile productive chains. Brazil and Argentina together are the third biggest global market for automobiles (after China and the United States). In 2013, 47% of the Argentine automobile production was exported to Brazil. The Brazilian market was the destination of 85% of Argentine exports of vehicles last year. Exports to Argentina represented, in 2013, 16% of the Brazilian production of automobiles and 80% of the vehicles exports from Brazil.
In brief, MERCOSUR is not limited to its economic and commercial dimension, comprising also of common initiatives from infrastructure to telecommunications; from science and technology to education; from family farming to the environment; from border cooperation to the fight against transnational crimes; from gender policies to the full promotion of human rights. This is what makes MERCOSUR one of the broadest integration projects in the world.
In MERCOSUR, there resides the concern of making a common project of social and economic development from the integration, which aims at having a direct impact on people's lives. Together with its ten neighbors, Brazil is committed to South America's engagement in a process of economic growth, social development, and democracy.