ECONOMIC INTEGRATION: MERCOSUR
Mercosur is actually the culmination and institutionalisation of the bilateral integration process between Argentina and Brazil, which already started in the late seventies.
The renewed democratisation processes in Argentina and Brazil in the mid eighties enhanced the degree of shared interests and led to a closer alignment. Both countries signed a formal program for economic and political cooperation Program for Integration and Economic Cooperation (PICE) in 1986. The PICE involved negotiations of sectoral agreements, such as capital goods, technological cooperation, food and the iron, steel, nuclear and auto industries. In 1988 the integration process was given a boost by the signature of the Treaty on Integration, Cooperation and Development. The aim of this treaty was to establish a common market within ten years. However, the integration process stagnated in the following years due to less favourable economic conditions. By the end of the eighties both countries had to face a deep economic crisis and political instability, which impeded further integration. The new administrations in both countries revived the integration process by signing the Buenos Aires Act in 1990, which aimed at establishing a common market by the end of 1994. The main focus was on programmes for unilateral trade liberalization and structural adjustments. Soon after, Uruguay and Paraguay followed suit and requested to be incorporated into the Buenos Aires Act.
A year later, the ministers of foreign affairs of Argentina, Brazil, Paraguay and Uruguay signed the Treaty of Asuncion, which called for the creation of a common market by December 1994. This accord forms the base of Mercosur.
Furthermore, the treaty gave way to a gradual elimination of import tariffs, which was supposed to end in December 1994. However, Paraguay and Uruguay were given an extra year to reduce their barriers.
In December 1994 Argentina, Brazil, Paraguay, and Uruguay signed the Protocol of Ouro Preto, implementing the Southern Common Market, known as Mercosur. Chile and Bolivia became associate members of Mercosur in 1996, which meant a serious progress not only for the expansion of the Mercosur market but as well for the broadening of the regional integration.
The Mercosur institutional structure is intergovernmental and consists of Common Market Council, composed of ministers of foreign affairs and economy, and a Common Market Group, the executive body. Decisions are made by consensus. In 1994, the Joint Parliamentary Commission and the Advisory Forum on Economic and Social Matters were set up. The decision-making authority remains with the member states, in particular the presidents and foreign and economic ministers represented in the Common Market Council.
Mercosur aims at a gradual elimination of all tariffs on goods originating in and traded among the member states and the formation of a common external tariff. During the transition period, from 1991 till end 1994, tariffs were reduced automatically, with a sharp initial cut and periodic reductions until eventually all tariffs were eliminated. Mercosur is still far from being a true common market, but the members have managed to achieve a customs union, and they will continue negotiations aimed at full common market status by 2006. As a common market, Mercosur will be required to do more than reduce and harmonize tariffs. It must as well coordinate the economic, legislative, environmental, infrastructure and technology policies of the various member countries.
Mercosur is more than just an economic integration arrangement, it provides the members with a forum to discuss common foreign and security policies, such as, drug trafficking, environmental issues, nuclear cooperation and military operations.
Different Forms of Economic Integration:
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