MERCOSUR:AN INTEGRATION TO

PROCESS

March 16, 2017

Ignacio Bartesaghi, PhD

Contents of presentation

• Mercosur background and legal framework.

• Central objectives of Mercosur.

• The present and challenges.

• Similitaries with ASEAN.

• 1985 – Foz do Iguaçu Declaration

• 1986 – Argentina-Brazil Integration & Economic Cooperation Programme (“PICAB”).

Uruguay was already part of the Trade Expansion Protocol (Brazil) and CAUCE (Argentina)

Background

Legal framework

• Asuncion Treaty (1991).

• Ouro Preto Protocol (1994).

• Ushuaia Protocol (1998).

• Olivos Protocol (2002).

• Constitutive Protocol of the Mercosur Parliament (2006).

Asuncion Treaty

• The origin of Mercosur.

• Definition of the bloc’s objectives.

• Definition of Trade Liberalization Programme forthe transition period (Annexes).

• Definition of transitional bodies.

Ouro Preto Protocol (1994)

• Conveys legal entity status to Mercosur.

• Defines institutional structure.

• Adoption of instruments from the typical tradepolicy of Customs unions.

Ushuaia Protocol

• Relates to democratic commitment withinMERCOSUR.

• Consists of two protocols: Ushuaia I, and UshuaiaII.

• Includes participation of Chile and Bolivia.

Olivos Protocol

• Substitutes the Brasilia Protocol.

• Defines the Mercosur Controversy SettlementSystem.

• Creates the Permanent Review Tribunal (“TPR”).

Process

26/3/1991 Asuncion

Treaty

DEC 1994

Ouro Preto Protocol

1999 – Start of

negotiations with EU

Devaluation of Real.

2002 –

Olivos Protocol

Argentina –Uruguay

Crisis

2006 Constitutive Protocol of

ParlaSur

2010 –Negotiations are resumed with the EU

2012 –Paraguay is suspended Inclusion

of Venezuela

2016 –Venezuela

is suspended

FTZ CU

Agreements were subscribed with Chile, Bolivia, Peru, Colombia, Venezuela, Ecuador.

Agreements were subscribed with Cuba, India, Israel, SACU, Egypt and Palestine

Transition

Consolidation

FOCEM

Objectives

Constitution of a Common Market:

Free circulation of goods, services and factors of

production.

Common external tariff and common commercial

policy.

Coordination of sectorial and macro-economic

policies.

Harmonized legislations.

Decision making

• 3 bodies with decision-making powers:

Common Market Council.

Common Market Group.

Mercosur Trade Commission.

• Consensus with the presence of all members.

Decisions within Mercosur

64%10%

11%

15%

Institucional y política

FOCEM

Económica y comercial

Agenda externa

0

5

10

15

20

25

FOCEM Institucional Política y social Económica y comercial

Agenda externa

2013 2014 2015

Mercosur politicization process in the last years. We

are now in a new context.

Source: personal compilation based on data from Mercosur Secretariat.

• Trade Agenda: current trade agenda andrecently-approved decisions.

• Political Agenda: adhesion of new members.Implications and challenges.

• Production Agenda: actions carried forward inthe framework of productive integration.

Mercosur Agenda: general aspects (I)

Mercosur Agenda: general aspects (II)

• Social Agenda: inclusion of social dimension.Institutional and regulatory advances in line withthe social agenda.

• Institutional Aspects: institutional advances inMercosur’s new agenda. Creation of permanentinstances.

• New actors: civil society, sub-national actors,political parties.

Trade Agenda

• Measures aimed at defining and perfecting theCustoms union.

• 1994: approval of common external tariff (Dec.22/94).

• At present, there are exceptions to Customs unionand to the free trade area.

• 2015: intention to define a consolidationprogramme for the Customs union (Dec. 56/10).

• Ouro Preto Protocol conveys legal entity status

for negotiating agreements with extra-zone

countries or groups of countries.

• Decision N° 32/00 – Reasserts commitment of

joint negotiations for trade agreements.

• There are exceptions: Uruguay – Mexico FTA,

Uruguay-U.S.A. TIFA.

External Agenda

• Agreements within the LAIA framework.

• Agreements with extra-regional countries: India (2004), Israel(2007), South African Customs Union– SACU (2009), Egypt(2010), Palestine (2011).

• Framework agreements: South Africa, Marrakech, Pakistan,Jordan, Turkey, Syria, Gulf Cooperation Council (GCC), Korea(MoU), Russia (MoU), Singapore (MoU), Tunisia, Lebanon(MoU).

• Agreements under negotiations: European Union.

Agreements negotiated by Mercosur

Chile and Bolivia

CAN and Peru

Cuba

India (Limited)

Israel

SACU (Limited)

Egypt

Palestine

No agreements in place with developed world powers like the U.S.A.,

the EU, or Asian powers.

Pacific Alliance.

Trade Agreements

Integration models

Source: De María, N. Pereira, M. (2016). “Estrategias de inserción internacional del MERCOSUR y la ASEAN”.

Potentials

• Diversification of trade opportunities:

– Exports of added-value food to the ASEAN.

– La ASEAN as supplier of low, medium, and high technologyindustrial goods.

– Opportunities in productive complementation for someindustrial sectors.

– Participation in global value chains.

• Services.

• Investments (infrastructure).

• Exchange of best practices.

Mercosur new context

• New goverments in Argentina and Brazil.

• Implications of the suspension of Venezuela fromMercosur.

• The incorporation of Bolivia to Mercosur.

• The external agenda: negotiations with theEuropean Unión.

Conclusions

• Original objectives were not attained.

• There are strengths in the political and socialareas, but weaknesses in the economic andtrade areas.

• New context and some uncertainties aboutthe future.

MERCOSUR:AN INTEGRATION TO

PROCESS

March 16, 2017

Ignacio Bartesaghi, PhD