Mercosur

Definition

Mercosur, or the Southern Common Market, is a regional trade bloc in South America established in 1991 to promote free trade and economic integration among its member countries, which include Argentina, Brazil, Paraguay, and Uruguay. By reducing tariffs and fostering cooperation, Mercosur aims to enhance the economic growth and competitiveness of its member states while also facilitating smoother trade relations with other regions.

5 Must Know Facts For Your Next Test

1. Mercosur was officially founded by the Treaty of Asunción in 1991, initially including Argentina, Brazil, Paraguay, and Uruguay.
2. Venezuela was a full member but has been suspended since 2016 due to political issues, while Bolivia is in the process of becoming a full member.
3. Mercosur aims not only at promoting trade but also at coordinating macroeconomic policies and fostering political dialogue among member states.
4. The trade bloc has established a customs union, meaning that member countries apply a common external tariff on imports from non-member countries.
5. Mercosur has been involved in negotiating trade agreements with various countries and regions outside South America to further enhance economic ties globally.

Review Questions

• How does Mercosur facilitate trade among its member countries?
  • Mercosur facilitates trade among its member countries by reducing tariffs and other trade barriers, creating a customs union where a common external tariff is applied to non-member countries. This allows for smoother import and export processes between member states. Additionally, Mercosur promotes cooperation in various economic sectors, enhancing overall regional competitiveness and economic growth.
• Discuss the impact of Mercosur on the economic policies of its member countries.
  • Mercosur significantly influences the economic policies of its member countries by encouraging them to adopt coordinated macroeconomic strategies. This collaboration helps ensure stability and predictability in the region's economic environment. Furthermore, the commitment to free trade within Mercosur motivates member states to prioritize policies that promote economic growth and attract foreign investment.
• Evaluate the challenges faced by Mercosur in achieving its goals of regional integration and free trade.
  • Mercosur faces several challenges in achieving its goals of regional integration and free trade, including political instability within member countries and differing economic policies that hinder cooperation. Additionally, the suspension of Venezuela's membership highlights issues related to governance and adherence to democratic principles. Moreover, negotiations with external trading partners can be complicated by diverse interests among member nations, making it difficult to reach consensus on trade agreements that benefit all members equally.

Related terms

Trade Bloc: A group of countries that have signed a trade agreement to reduce or eliminate trade barriers among themselves.

Free Trade Agreement (FTA): An agreement between countries to reduce or eliminate tariffs and other barriers to trade on goods and services.

Economic Integration:

The process by which countries reduce trade barriers and increase economic cooperation to create a larger economic market.