Mercosur

Definition

Mercosur, or the Southern Common Market, is a regional trade bloc in South America founded in 1991 to promote free trade and economic integration among its member countries. It includes Argentina, Brazil, Paraguay, and Uruguay as full members, with Venezuela's membership currently suspended. Mercosur aims to facilitate the movement of goods, services, and factors of production between member nations while fostering political dialogue and cooperation.

5 Must Know Facts For Your Next Test

1. Mercosur was established by the Treaty of Asunción in 1991 and later strengthened by the Protocol of Ouro Preto in 1994.
2. The main objective of Mercosur is to enhance economic growth through the reduction of trade barriers and the promotion of regional cooperation.
3. The bloc has expanded its influence through various agreements with other countries and regions, aiming to create a broader network of economic ties.
4. Paraguay's full membership was temporarily suspended in 2012 due to political issues, highlighting the political dimension of Mercosur.
5. In recent years, Mercosur has faced challenges including economic crises in member countries and debates over its future direction and relevance.

Review Questions

• What are the primary goals of Mercosur and how do they facilitate economic integration among member countries?
  • The primary goals of Mercosur include promoting free trade, reducing tariffs, and fostering economic integration among its member countries. By eliminating trade barriers, Mercosur facilitates easier access to markets for goods and services within the bloc. This integration encourages investment flows and enhances cooperation on various economic policies, ultimately aiming for a more unified regional economy that can compete globally.
• Compare Mercosur with a customs union and explain how it operates differently in terms of trade policies.
  • Mercosur functions as both a free trade area and a customs union, but it distinguishes itself with certain complexities. While it promotes free trade among member nations like a typical free trade area, it also sets common external tariffs for imports from non-member countries, which is characteristic of customs unions. This dual function allows Mercosur to protect its internal markets while fostering deeper economic ties among its members.
• Evaluate the challenges facing Mercosur today and discuss potential strategies to enhance its effectiveness in regional integration.
  • Mercosur faces several challenges, including economic instability within member countries, differing national interests, and political tensions. To enhance its effectiveness, Mercosur could focus on strengthening internal cohesion through more consistent economic policies, addressing member disparities, and establishing clearer protocols for political dialogue. Additionally, expanding partnerships with non-member countries could diversify its economic base and bolster its relevance on the global stage.

Related terms

Free Trade Area:

A region where a group of countries agrees to reduce or eliminate trade barriers such as tariffs and quotas among themselves.

Customs Union: A type of trade bloc that not only allows free trade among its members but also establishes a common external tariff against non-member countries.

Trade Agreements: Contracts between countries to establish the terms of trade and the economic relationship, often including tariffs and quotas.