Pacific Alliance

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Chapter 8 ECONOMIC INTEGRATION

QUESTION 7: After a promising start, MERCOSUR, the major Latin American trade agreement, has faltered and made little progress since 2000. What problems are hurting MERCOSUR? What can be done to solve these problems?  There are several reasons why Mercosur can be considered an unsuccesful trade agreement: 1. Member countries are not yet politically mature to commit to long term agreements that can be respected by the the future rulers of each country. Instead, it’s usually seen that political candidates adjust their plans to gain new voters according to the circumstances of the moment, not keeping focused on the long term. Being realistic, there is not much that can be done to change this situation. There is a little hope that country members can some time in the future take example of their neighbouring Chile, where the political parties after the dictatorial times of Pinochet (his government included), committed to pull the country out of undervelopment and have remained firm to that ideology regardless of the political beliefs of each party in power. Keep in mind that Chile is not a full member of Mercosur, just an associate one. 2. Economic difficulties some members have experienced in different moments since Mercosur was created, which has led to embrace local reforms that not always are consistent with the trade agreement; for example, by changing the “common” external tariff to protect a national industry, as has done Kirchner government in Argentina, by eliminating the automatic licensing system for importing hundreds of products. This topic is related to the previous one, since the only way to being succesful in such complex international agreement is by keeping focused on the long term, not the short one, which, by the way, will have always a political cost. 3. Currency volatility, which has a very similar effect than the preceding paragraph. -------------------------------------------------

Mercosur proposed the...
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