Mercosur: Present and Future
Xiao Li
Brenau University
02/20/2012

Mercosur: Present and Future Background Mercosur, known as the Common Market of the South, was founded by Paraguay, Uruguay, Brazil and Argentina under the Treaty of Asuncion signed in March 1991, which was amended and updated by the 1994 Treaty of Ouro Preto, it took effect on January 1, 1995 and formalised a customs union (Connolly, 1999). Mercosur’s headquarter is in Montevideo, Uruguay . Several other countries were admitted as associate members including Chile, Bolivia, Colombia and Peru. Venezuela is currently in the process of integrating into the bloc and it will become a full member once all members’ parliaments ratify its accession (Bosworth, 2011). Since it was established, Mercosur has made remarkable achievements. It is now South America’s leading economic integration organization and the world's fourth largest integrated market after the European Union, North American Free Trade Agreement and the Association of South East Asian Nations. Moreover, the scope of cooperation is expanding to other areas, particularly the political and diplomatic fields. Objectives Mercosur’s main objectives include: through the effective use of resources, coordination of macroeconomic policies, to strengthen the economic complementation and promote economic development, thereby improving people's living conditions, and promoting regional economic integration process. Specifically, it aims at promoting free trade and bringing about the fluid movement of capital, goods and services among its members, and achieving a common external tariff as well.
Problems
The consolidation of Mercosur has contributed to regional integration in Latin America. It has enhanced trade and economic development, improved the international status of the member states and promoted their international status (Klonsky & Hanson, 2009). Despite these achievements, there are problems and challenges facing the bloc, and it is still too early to say Mercosur has been successful. The integration process is very slow, and major constraints are as follows. First, there are many differences among the member states. Since member states and associate countries of Mercosur are all developing countries in different levels of economic development, there are contradictions and frictions among them. Since it was established in 1995, conflicts and disputes within Mercosur have continued without interruption, which has a direct impact on the overall objectives of Mercosur and hinders the integration process. Besides, severe market competition and self-interest also make it difficult for them to harmonize macroeconomic policies (Valente, 2011). The lack of a more formal mechanism for settling disputes and seeking balanced development in free trade is a problem that confronts the leaders of the Mercosur countries. Second, differentiation within Mercosur has become increasingly evident and coordination on macroeconomic policies needs to be strengthened. In recent years, the economic crisis in Latin America and other factors causes some member states to seek solutions to get rid of the crisis on their own. For example, in order to get rid of the over-reliance on the Mercosur, Uruguay decided to hold free trade negotiations with the United States alone hoping to find a bigger export markets in the United States to revive its economy. Argentina is also tempted to negotiate bilateral agreement with the US. The lack of coordination on macroeconomic policies makes it difficult for the bloc to be an organic whole. Third, Mercosur has been criticized for becoming increasingly politicised. In the past few years, the unstable political and economic situations in member states cause that a number of agreements have not been implemented, the integration process is stagnant. Mercosur’s development prospects are unclear. Prospects First, prior to the establishment of the Free Trade Area of the Americas (FTAA), Mercosur will be further strengthened. For example, Brazil, the leading country of Mercosur, can enhance its political and economic influence in South America through Mercosur, as well as seeking a greater say in international affairs and striving for a more important international position. Besides, the pace of negotiations between Mercosur and Europe, Asia is likely to accelerate (Wang, 1998). Second, the United States is actively promoting FTAA. If it was ultimately established, Mercosur’s international status would be weakened to a large extent. So how to deal with the great change in South America brought by FTAA is the key to the future development of Mercosur.

References
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Latin America: Chile/US FTA talks weaken Mercosur. (2001). Oxford Analytica Daily Brief Service.
Wang, P. (1998). Development and challenges of the Southern Common Market. Latin American Studies.
Wang, X. (1999). Status, results and prospects of the Latin American integration. Latin American Studies.
Bosworth, J. (2011, December 22). If Venezuela joins the Mercosur economic bloc, will it follow the rules?. Retrieved from http://www.csmonitor.com/World/Americas/Latin-America-Monitor/2011/1222/If-Venezuela-joins-the-Mercosur-economic-bloc-will-it-follow-the-rules
Klonsky, J., & Hanson, S. (2009, August 20). Mercosur: South America's fractious trade bloc. Retrieved from http://www.cfr.org/trade/mercosur-south-americas-fractious-trade-bloc/p12762
Valente, M. (2011, December 19). Mercosur trade bloc – integration or protectionism?. Retrieved from http://ipsnews.net/news.asp?idnews=106258