Presentation on Mercusor

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Information about Presentation on Mercusor

Published on March 13, 2014

Author: unitedworldmba



Presentation on Mercusor


HISTORY • Mercosur was established in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. • Mercosur originated in 1985, when Presidents Raúl Alfonsín of Argentina and José Sarney of Brazil signed the Argentina-Brazil Integration and Economics Cooperation Program or PICE. • Mercosur is composed of 5 sovereign member states: Argentina; Brazil; Paraguay; Uruguay; and Venezuela. Bolivia became an acceding member on 7 December 2012.

INTRODUCTION • Mercosur, the "Common Market of the South," is an economic and political agreement among Argentina, Brazil, Paraguay (which is currently suspended), and Uruguay to promote the free movement of goods, services and people among member states. • Mercosur's primary interest has been eliminating obstacles to regional trade, such as high tariffs and income inequalities. • The Mercosur trade bloc's purpose, as stated in the 1991 Treaty of Asunción, is to allow for free trade between member states, with the ultimate goal of full South American economic integration. • The population of Mercosur's full membership totaled more than 260 million people in 2011; including Venezuela, it has a collective GDP of $2.9 trillion and is the world's fourth-largest trading bloc after the European Union (EU), North American Free Trade Agreement (NAFTA), and the Association of South East Asian Nations (ASEAN).

OBJECTIVES • The free transit of produced goods, services and factors among the member states. • Fixing of a common external tariff (CET) and adopting of a common trade policy with regard to nonmember states or groups of states, and the coordination of positions in regional and international commercial and economic meetings. • Coordination of macroeconomic and sectoral policies of member states relating to foreign trade, agriculture, industry, taxes, monetary system, exchange and capital, services, customs, transport and communications, and any others they may agree on, in order to ensure free competition between member states.

OBJECTIVES • The commitment by the member states to make the necessary adjustments to their laws in pertinent areas to allow for the strengthening of the integration process. • The common market will allow the free movement of manpower and capital across the member nations, and depends the grating of equal rights and duties to all member countries. • Member states to implement the trade liberalization at different speeds, during the transition period the rights and obligations of each party should be discussed.

ORGANIZATIONAL INSTITUTIONS Mercosur’s founding documents set up three decision-making bodies for Mercosur: the Common Market Council, the Common Market Group, and the Trade Commission. • The Common Market Council is Mercosur’s highest decision-making body. It conducts Mercosur policy and assesses compliance with the bloc’s regulations. • The Common Market Group is controlled by members’ ministries of foreign affairs, economy, and Central Banks’ presidents. The group coordinates macroeconomic policy between the members and negotiates trade with non- member countries. • The Trade Commission deals with everyday trade matters between constituent countries. Five members from each country meet monthly.

TYPE OF PRODUCTS EXPORTED • The Mercosur custom union was established in 1991. Since then Bolivi and Chile have become associated members (1996). The Mercosur is an important agrifood producer and a net exporting region. Valued at around 47 billion US$ in 2004 and around 90 billion US$ in 2009. • The principle agricultural products include soyabean, sunflower, rice, wheat, maize, pork chicken, beef, fish, milk products, honey, fruits, citrus (juices). • Principle export dimensions are EU, NAFTA, Russia, Saudi Arabia, China, Japan and intra Mercosur trade.

TRADING OF DIFFERENT GOODS • Table 4 – EU-Mercosur trade liberalization scenario Addtional quota quantities (tons) • Argentina Brasil Uruguay Paraguay • Corn 105645 288276 932 5137 • Wheat 76472 20829 1305 1394 • Rice 1444 16248 2095 214 • Cheese 4469 5324 207 0 • Butter 756 1052 193 0 • Skim milk powder 2451 0 799 0 • Whole milk powder 1207 1925 118 0 • Beef 34739 6203 7816 1241 • Poultry 4606 32369 246 279 • Pork 333 5393 33 241

PERFORMANCE A) Trade Table 1: Total and Intra-Regional Trade5 (In Value US6 $) 1990 1995 2003 • Mercosur Total Exports 46,425 70,401 106,000 • % Growth - 0.3 34.1 33.6 • Extra-Mercosur Exports 42,302 56,018 88,602 • % Growth -1.2 24.5 36.8 • Intra-Mercosur Exports 4,123 14,394 17,398 • % Growth 10.8 71.4 17.3 • Intra/Total 8.9 20.4 16.4 • Mercosur Total Imports 27,326 75,311 69,000 • % Growth 12.3 63.7 -9.1 • Extra-Mercosur Imports 23,204 61,218 51,602 • % Growth 13.1 62.1 -18.6 • Intra-Mercosur Imports 4,122 14,394 17,398 • % Growth 8 71.4 17.3 • Intra/Total 15.1 18.7 25.2

PERFORMANCE • A brief description of the boom in Latin America's reciprocal trade during the nineties will enable us to define South America's importance, particularly MERCOSUR's position within this process, as seen in earlier table. Between 1990 and 1995, total exports of Mercosur countries increased by 34%. During the same period, imports into these countries increased by 64%.

MERCOSUR’S EFFECTS ON TARIFF RATES AND TRADE VOLUME • The removal of tariff barriers between Mercosur countries following the 1991 treaty, coupled with the more general trade liberalization undertaken by these same countries in 1988-91, sharply reduced the countries’ average tariff rates





HOW DOES MERCOSUR AFFECT OTHER REGIONAL GROUPS? • Because Mercosur's charter does not allow its member nations to have FTAs with non-member nations, Mercosur members are not permitted to be part of the Andean Community of Nations (CAN), a smaller trade bloc that includes Bolivia, Colombia, Ecuador, and Peru. When Venezuela signed the Protocol of Adhesion, it was required to resign from CAN, as Bolivia will have to do if it is admitted. Bolivia, however, has said it will not leave CAN. CAN and Mercosur leaders signed an agreement to form a third organization, UNASUR, in May 2008. UNASUR is meant to encompass trade, security, and political issues, much like the European Union. UNASUR has held meetings on regional defense issues, including a controversial planned U.S. military expansion into Colombia (AP). Some analysts believe that UNASUR could eventually replace Mercosur. • Mercosur played a key role in the failure of the Free Trade Agreement of the Americas (FTAA). Spearheaded by the United States, the FTAA was intended to unite Latin America and North America in one broad trade accord. Mercosur members and then-autonomous Venezuela rejected the agreement at the Summit of the Americas in November 2005 over concerns it would lead to increased inequality in the region (Guardian). Proponents of the FTAA have not been able to make progress in forging that deal since.

HOW HAS MERCOSUR STIMULATED COOPERATION AMONG ITS MEMBERS? • Agreements among Mercosur members range from debt relief (Brazil and Argentina renegotiated Paraguay's debt) to trade deals. Argentina and Venezuela, for example, signed a host of bilateral agreements in the energy, industrial, agriculture, and health sectors in January 2009. It is declared that Venezuela is ready to supply Argentina with oil and later liquefied gas for the next 100 years. • The most controversial project is the Bank of the South, a monetary fund and lending organization established in September 2009 by Argentina, Brazil, Paraguay, Uruguay, Ecuador, Bolivia, and Venezuela with an initial capital of $20 billion. The intention of the bank is to allow member countries to fund projects and investments without World Bank or International Monetary Fund involvement. They consider the bank as an important initiative toward South America's financial independence.

OBSTACLES • Perhaps one of the main difficulties is the harmonization of economic policies. The traditional stabilization policies, via fiscal and monetary adjustments and those via price controls, so common in Latin America, create an obstacle to meet the goals of integration. • The Common External Tariff, another important factor characterizing the Common Market, in view of the enormous difficulties that its adoption conveys. • Regarding agroindustrial policies, the Mercosur countries must meet some natural comparative advantages and put an end to the unfair practices in agricultural trade. • It is, thus, necessary that member countries achieve tax system harmonization, in order to make taxation as neutral as possible over the costs of production. • Transportation is another question of great importance

ACHIEVEMENTS • Mercosur has helped its members to lock in domestic reforms, and contributed to tripling intra-regional trade in less than a decade. • Internationally, the regional association has given its members a degree of visibility that they would not have gained otherwise. • Increased visibility is politically and strategically relevant in and of itself, but it also contributed to massive foreign investment in the 1990s, a decade of vast capital availability. • Mercosur has turned an area of low mutual confidence and historical rivalries into an area where inter-state violence has been ruled out, international cooperation has become the norm and high-tension controversies have ceased to exist.

ACHIEVEMENTS contd… • Economically, Mercosur also attained initially good results. Intra-regional trade tripled in the seven years following the signature of the Treaty of Asuncion. • The increase resulted from trade creation rather than diversion, since extra-regional trade also augmented.

FAILURES • Mercociudades lack real power and are not directly accessible to individual citizens. • Representation is also weak or non-existent: the Mercosur parliamentary body represents national parliaments not citizens and it lacks effective competences. • The Mercosur flag and its associated symbols are not widely used, remaining limited to the diplomatic arena. • Unlike the EU, which put the so-called four freedoms at the heart of economic integration, ‘MERCOSUR has not gone beyond goods’ trade liberalisation.

FAILURES contd… • The chosen integration technology has also proved to be either insufficient or inefficient. Since all decision- making, dispute-settlement and implementation capacities are in the hands of the member countries, Mercosur operates through diplomatic rather than juridical procedures. • As regards the international dimension, Mercosur has failed to enlarge its membership. • Mercosur’s institutional deficits are probably the most visible but not always the best understood. • There are two main deficiencies in the legal structure: normative inconsistency and an internalisation gap.


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