Mercosur

Definition

Mercosur, or the Southern Common Market, is a regional trade bloc in South America that aims to promote free trade and the fluid movement of goods, people, and currency among its member countries. Established in 1991, Mercosur was created to enhance economic cooperation and integration among its members, which include Argentina, Brazil, Paraguay, Uruguay, and Venezuela (currently suspended). It connects to broader economic strategies such as Import Substitution Industrialization, the Washington Consensus policies, and the evolution of regional trade agreements.

5 Must Know Facts For Your Next Test

1. Mercosur was founded by the Treaty of Asunción in 1991 and aimed to create a common market similar to the European Union.
2. The organization focuses on trade liberalization, allowing member countries to benefit from reduced tariffs and expanded market access.
3. Mercosur's structure includes a common external tariff (CET), which ensures uniform tariff levels on goods imported from non-member countries.
4. In recent years, Mercosur has faced challenges due to political shifts within member states and differing economic policies that have affected regional cooperation.
5. Despite challenges, Mercosur has initiated trade agreements with various countries and regions, including the European Union, to strengthen economic ties.

Review Questions

• How does Mercosur relate to the concept of Import Substitution Industrialization in South America?
  • Mercosur was established as a way to foster regional trade and economic integration among South American countries. While Import Substitution Industrialization emphasizes developing local industries to reduce foreign dependency, Mercosur complements this by providing a larger market for these local products. This approach allows member countries to maintain some level of protection for their domestic industries while also promoting regional cooperation and trade among members.
• What impact did the Washington Consensus have on Mercosur's formation and development?
  • The Washington Consensus greatly influenced the economic policies of many Latin American countries during the 1990s, promoting neoliberal reforms focused on free markets, privatization, and deregulation. As Mercosur was founded during this period, it aligned with these principles by advocating for trade liberalization and reducing barriers among member states. However, the emphasis on rapid liberalization also raised concerns about inequality and economic vulnerability in the region, leading some countries within Mercosur to reconsider strict adherence to these policies.
• Evaluate the significance of Mercosur in enhancing regional integration compared to other trade blocs globally.
  • Mercosur represents a critical attempt at regional integration in South America by fostering economic cooperation among its member countries. Unlike many global trade blocs that prioritize large economies or advanced nations, Mercosur focuses on developing economies with similar challenges. Its significance lies not just in trade liberalization but also in political collaboration and cultural exchange among member nations. However, internal disagreements and varying political ideologies have sometimes hindered its effectiveness compared to other successful blocs like the European Union, highlighting the complex dynamics of regional integration efforts.

Related terms

Import Substitution Industrialization:

An economic policy aimed at reducing dependency on foreign imports by promoting local production and industry development.

Washington Consensus:

A set of economic policy prescriptions aimed at promoting free-market reforms and macroeconomic stability in developing countries.

Free Trade Agreement: A pact between two or more countries to reduce or eliminate trade barriers, such as tariffs and import quotas.