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Introduction to MercosurThe creation of Mercosur, the Common Market of the South, an economic bloc in existence since January 1995, set up a Customs Union between Brazil, Argentina, Uruguay and Paraguay. The accord does not represent isolated diplomatic action but is the result of a long process of drawing together the member-countries. The creation of the Latin American Free Trade Association in 1960, to be superseded by the Latin America Association of Integration, in 1980, and the process of integration between Brazil and Argentina that began with the signing of the Accord for Argentine-Brazilian Integration in 1986, all constitute relevant antecedents for the block's implementation process.
Map of Mercosur member countries
The Treaty of Assunción, signed by Brazil, Ar gentina, Paraguay and Uruguay on March 26th, 1991 is the legal document that forms the basis of Mercosur. As a result of the legal documents provided for under the Treaty, around 95% of intra-Mercosur trade is currently being carried on free of tariff barriers, a position that should apply to all intra-regional trade by the year 2000. The Common Foreign Tariff is specified for practically all the Mercosur tariff area, with widespread implementation since January 1st, 1995. By 2006, with the termination of the period of ascending or descending convergence of the national tariffs that are still excluded, the Foreign Common Tariff will be used for all the tariff area. The present configuration of Mercosur is set down in its constitutional framework, the Ouro Preto Protocol, signed by the four countries in December, 1994. The Protocol recognizes the legal existence of the bloc under international law, ascribing it with the authority to negotiate, on its own behalf, agreements with third party countries, groups of countries and international organizations. Nowadays, verified the juridical compatibility of Mercosur with the Latin American Association of Integration and with GATT, the commercial success of integration and the fact of being a body that has legal status serve to ensure its position as an economic partner with relevance on the international plane. Mercosur today is an economic reality of continental dimensions. Comprising an area of slightly less than 12 million square kilometers, or more than four times the size of Europe, Mercosur represents a potential market of 200 million people and a joint GDP of more than US$ 1 trillion, which places it among the four largest economies of the world after NAFTA, the European Union and Japan. Mercosur is currently one of the major poles of attraction for investment in the world. There are many reasons for this success: Mercosur is the fourth economy and has the largest reserve of natural resources in the world. Its energy reserves, especially mineral and hydroelectric, are among the most important in the world. Its advanced communications network goes through a continuous renovation process. More than two million kilometers of roads connect our major cities and our people travel through more than six thousand airports. The future perspectives in the communications sector are extremely promising: Now that the major companies in the sector have become privatized, a much greater market can be exploited. Today Mercosur has one of the most important industrial sectors among the developing countries, larger in fact than many of the so-called "developed" countries. The economic performance of the subregion has shown that Mercosur today is one of the most dynamic economies in the world. Our average rate of growth for the 1991/98 period, roughly 3.5%, was considerably higher than the world average. Another factor added to these figures is stability. In the Mercosur of today, inflation is merely an unpleasant memory. Mercosur today is a global trader and, as such, is fully interested in maintaining broad and varied relations with the outside world. Its four member countries are constantly concerned about maintaining their position in global trade, without favoring one or another country, in order to ensure a broader scope to its role on the international scene. Its imports and exports are distributed in a balanced way among the diverse economies of the world. In this sense it is natural for Mercosur to practice and respect the principles of open regionalism since it was originally conceived precisely to increase the participation and improve the position of its four economies in the world market. On Mercosur's foreign agenda, which includes initiatives within the Latin American spheres, both hemispheric and extra-hemispheric, the following topics are top priority: a) the negotiation of free trade agreements between Mercosur and the other members of the Latin American Association of Integration; b) the implementation of the Inter-Regional Framework-Agreement for Economic and Trade Co-operation, signed in December 1995 between Mercosur and the European Union; c) the co-ordination of positions within the scope of negotiations aimed at the formation of the Hemispheric Free Trade Area. The commercial integration promoted by Mercosur also favors the achieving of objectives in other areas such as education, justice, culture, transport, energy, the environment and agriculture. Several agreements have been signed in this respect, ranging from the acknowledgement of university degrees and the revalidation of diplomas to, amongst others, the establishing of mutual assistance agreements in penal matters and the creation of a "cultural stamp" to promote co-operation, exchange and a greater ease in the handling of cultural goods by customs authorities. Origins of Mercosur: Treaty of Assunción The Treaty of Assunción, signed by Brazil, Argentina, Paraguay and Uruguay on March 26th, 1991 is the legal document that forms the basis of Mercosur. It is a framework agreement that does not create a common market but defines the objectives of the integration process and the mechanisms required to achieve them. The Treaty records the decision of the four countries to extend the bounds of their own national markets as a way of achieving better penetration within the international economic order, increasingly colored by globalization and regionalization. Its main objective is the structuring of a large economically integrated area, of which the first stage is the formation of a customs union, to be progressively consolidated until reaching more advanced stages of economic integration. For the constitution of Mercosur, the Treaty of Assunción envisaged the following steps: a) the carrying out of a trade liberalization program, with progressive tariff reductions, both linear and automatic, together with the removal of non-tariff restrictions or measures of a similar effect; b) the establishing of a Common Foreign Tariff, capable of promoting foreign competition from the State partners; c) the harmonization of macro-economic and sectoral policies, wherever appropriate. Mercosur: Trade Results In the past eight years, the Mercosur program of economic liberalization has provided a stimulus without precedents to trade within its zone. Regional trade among members of the bloc grew nearly 300% between 1991 and 1999, totaling US$ 18 million at the end of last year. In comparison, this same trade grew only 60% between 1980 and 1991. Trade exchange between Brazil and its partners has been developing continuously at an average rate of 20% during the past six years. The number of business partnerships in the four countries has increased considerably, as a natural outcome of this new regional prosperity. Joint ventures between Brazilian and Argentine companies in 1997 alone represented investments on the order of US$ 2 billion. This important internal growth has not meant a loss of trade with other countries. In recent years, despite the constant expansion of trade within the zone, Mercosur has maintained and in some cases even increased the volume of trade with other regions of the world. As of 1995, once the customs union was in fact established, the common external tariff on the diverse categories of products has been negotiated so that Mercosur does not create barriers which would transform it into an isolated bloc and act as a deterrent to the major objective of integration, which is to build an open regional bloc. Currently the common external tariff which varies from 0% to 20% has average levels of roughly 14%, making Mercosur among the freest economic spaces in the world. For more information on trade agreements or statistics, browse on:
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