MERCOSUR

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Composition, objectives, and institutional structure

Founded in 1991, the Southern Common Market (MERCOSUR) is the most comprehensive initiative of regional integration implemented in Latin America, arising in the context of redemocratization and rapprochement among the countries of the region at the end of the 1980s. The founding members of MERCOSUR are Brazil, Argentina, Paraguay, and Uruguay, signatories to the Treaty of Asunción.

Venezuela joined MERCOSUR in 2012, but it has been suspended since December 2016 for non-compliance with its Accession Protocol. In August 2017, the Democratic Clause of the Ushuaia Protocol, according to which participation in the bloc is conditioned upon the respect for democracy, was applied to Venezuela.

All other South American countries are related to MERCOSUR as Associate States. Bolivia, moreover, has the status of an Associate  State in the process of accession.

The Treaty of Asunción, the foundational instrument of MERCOSUR, established a model of deep integration, with the central objectives of shaping a common market – with free internal circulation of goods, services, and productive factors; the adoption of a common trade policy; and the standardization of sectorial policies.

Intra-zone free trade was implemented through the tariff reduction program provided for by the Treaty of Asunción, which reduced the import tax rate for the range of goods to zero. For the sugar and automobile industries, there are mandates for the establishment of common regimes aimed to comply with MERCOSUR rules. The common external tariff of the bloc is organized in 11 tariff levels, with rates ranging from 0% to 20%, obeying the general principle of tariff escalation: inputs have lower rates, and products of higher complexity, higher rates.

The 1994 Ouro Preto Protocol established MERCOSUR’s basic institutional structure and legal personality under international law. The Protocol also enshrined the rule of consensus in the decision-making process, listed the sources of law of MERCOSUR, and instituted the principle of simultaneous validity of the rules adopted. The three MERCOSUR decision-making bodies are: the Common Market Council (CMC), the highest body, responsible for the political conduct of the integration process; the Common Market Group (GMC), the executive body of the Bloc; and the MERCOSUR Trade Commission (CCM), a technical body that ensures the application of the instruments of the common commercial policy.

In the course of the integration process, and largely due to the success of economic-commercial integration, the MERCOSUR agenda has gradually expanded to include political, social, and citizenship issues. The two milestones in the social and civic areas of MERCOSUR are, respectively, the Strategic Plan for Social Action (2011) and the Plan for Conforming a MERCOSUR Citizenship Statute (2010).

The MERCOSUR political agenda covers a wide spectrum of government policies addressed by different bodies of the Bloc, which include ministerial meetings, specialized meetings, forums and working groups. The States Parties and Associate States promote cooperation, consultations, or coordination in virtually all governmental spheres, which has enabled the construction of an invaluable heritage of understanding and integration for the region in areas including justice, security, culture, education, immigration, residency, social security, education, and science and technology.

An important development in the bloc’s political institution came with the MERCOSUR Parliament (PARLASUR), which started its activities in 2007, in the city of Montevideo, where its headquarters is located. To fulfill its function of representing the peoples of MERCOSUR, the body can issue recommendations to the bloc's decision-making bodies and statements on any matters of public interest – those recommendations and statements are non-binding. PARLASUR meets at least once a month in ordinary sessions, in which each Member of Parliament has the right to speak and vote. Additional information can be found on the website www.parlamentomercosur.org.

MERCOSUR is a fundamental instrument for the promotion of cooperation, development, peace, and stability in South America. It is the main instrument that Brazil counts on to comply with the provisions of Article 4, sole paragraph, of the Federal Constitution, according to which "the Federative Republic of Brazil will seek the economic, political, social, and cultural integration of the peoples of Latin America, aiming at the formation of a Latin American community of nations".

Basic information

The founding members (Brazil, Argentina, Paraguay, and Uruguay) encompass approximately 67% of the territory of South America (11.9 million km², equivalent to almost three times the area of the European Union); 62.2% of the South American population (265,7 million inhabitants, i.e., 3.5% of the world population); and 69,2% of South America’s GDP in 2019 ($ 2.38 trillion from a total of $ 3.43 trillion, according to the International Monetary Fund). MERCOSUR represents the 8th largest world GDP ($ 2.38 trillion in 2019).

Trade within MERCOSUR  has multiplied seven times since the bloc’s creation, from $ 4.5 billion in 1991 to $ 33.5 billion in 2019 (taking into account only trade between founding partners).

MERCOSUR is the main recipient of foreign investments on the continent. According to the latest data available at UNCTAD, MERCOSUR received in 2019 45,3% of foreign direct investments in Latin America and the Caribbean, and 67,3% of foreign direct investments in South America. There was also an increase in the percentage participation of the bloc as a destination for foreign investments in the world: in the pre-crisis years (2005-2007), MERCOSUR received 2% of world investment; in 2015, it received 4.4%; and, in 2019, 4.8%. The expansion of the economic integration agenda has also contributed to boost direct investments among members of the bloc.

MERCOSUR today

MERCOSUR has undergone in the last few years a modernization process marked by more dynamic negotiations of trade agreements with third parties and by economic and commercial strengthening of the bloc. The aim is to rescue the original vocation of MERCOSUR for opening up and integrating with the world. The bloc’s broad agenda includes working to deliver concrete results with a direct impact on the lives of citizens. Measures are also being taken to rationalize the functioning of MERCOSUR, reducing spending and bureaucracy.

The objective of advancing external trade negotiations is to access more export markets and to import high-technology contents at lower costs that serve as input for national producers and exporters, and that meet the demands of consumers. This is intended to increase the bloc's participation in regional and global production chains, and to attract investment.

On the domestic front, exercises are underway to review the main instruments of common commercial policy – the Common External Tariff and the MERCOSUR Rules of Origin – with the aim of increasing levels of productivity and competitiveness. State Parties also seek to strengthen free trade within the bloc, e.g., by means of the recent conclusion of trade facilitation agreements, and the mutual recognition of geographical indications of origin.

The external agenda has contributed to the dynamism of the internal agenda, as evidenced by the recent reactivation of two important negotiations on the automotive and sugar sectors, which had been paralyzed for 15 and 19 years, respectively.

In addition, efforts have been made to modernize the bloc's organizational structures, with budgetary rationalization, the reduction of redundant instances, and better-designed criteria for assessing the productivity of its forums.

Brazil supports and has been an active promoter of that MERCOSUR modernization agenda. It advocates a MERCOSUR firmly committed to democratic values ​​and aimed at generating tangible gains for citizens. It advocates a bloc attached to free trade and that serves as a platform for the competitive insertion of countries in the regional and global markets. The Brazilian government recognizes in MERCOSUR a complement to the ongoing efforts to increase the competitiveness and openness of the Brazilian economy.

Among the many recent advances of MERCOSUR, the following stand out:

> External Agenda

– launching of negotiations of free trade agreements with Canada, South Korea and Singapore (2018);

– conclusion of negotiations of the MERCOSUR-European Union Association Agreement (2019);

 – conclusion of negotiations of the Free Trade Agreement between MERCOSUR and the European Free Trade Association (2019);

– resumption of negotiations on a free trade agreement with Lebanon (2019);

– conclusion of exploratory dialogue with Vietnam (2020);

> Economic and Commercial Agenda

– approval of the Cooperation and Investment Facilitation Protocol, which increases legal certainty and improves the environment for attracting new investments in the region (2017);

– conclusion of the MERCOSUR Public Procurement Protocol agreement, which creates business opportunities for our companies, expands the universe of suppliers of our public bodies and reduces costs for the government (2017);

– positive discussion of the vast majority of barriers to intra-block trade (2017);

– modernization in the treatment of regulatory issues, with the approval of the Agreement of Good Practices and Regulatory Coherence (2018);

– signing of the MERCOSUR Trade Facilitation Agreement (2019);

– signing of the Agreement on the Mutual Protection of the MERCOSUR States Parties’ Geographical Indications of Origin (2019);

– approval of a general framework for trade facilitation initiatives in MERCOSUR regarding technical regulations (2019);

– conclusion of negotiations on the MERCOSUR e-commerce agreement (2020);

> Institutional Agenda

– efforts to strengthen the MERCOSUR Structural Convergence Fund (FOCEM), as demonstrated by the signing of a framework agreement between FOCEM and FONPLATA (2018);

– adoption of the MERCOSUR Budget, which unifies the budgets of MERCOSUR bodies (MERCOSUR Secretariat, Secretariat of the Permanent Review Tribunal, MERCOSUR Social Institute, and MERCOSUR Institute for Public Policies on Human Rights);

- cutting of bureaucracy, by reducing the number of forums by about 20%;

– promotion of efficiency in the use of taxpayers' resources, with a 34% reduction in the budgets of MERCOSUR bodies since 2019;

– modernization of working methods with the growth in the use of videoconferencing still in 2019, as well as with the adoption of digital signature for approving MERCOSUR documents;

> Citizenship Agenda

– signing of the Agreement on the Revalidation of Higher Education Titles or Diplomas at the Undergraduate Level in MERCOSUR (2018);

– signing of the Framework Agreement for the Sharing of Assets Seized from Transnational Organized Crime in MERCOSUR (2018);

– ratification of an amendment to the Protocol on Mutual Legal Assistance in Criminal Matters – São Luís Protocol (2018);

– approval of the work program for the MERCOSUR digital agenda (2018);

– signing of the Agreement on the Elimination of International Roaming Tariffs to End Users of Mobile Telephone Services in MERCOSUR (2019);

– signing of the Consular Cooperation Mechanism Agreement (2019);

– signing of the Agreement on Binding Cross-Border Regions, which aims to promote greater integration of border communities to improve the quality of life of their populations in the fields of circulation of people and vehicles, work, education, and health (2019);

– signing of the Operational Agreement for the Implementation of Migration Information Exchange Mechanisms (2019);

– signing of the Police Cooperation Agreement Applicable to Border Spaces, which contributes to close police cooperation (2019);

– signing of the Agreement on Reciprocal Recognition of MERCOSUR Digital Signature Certificates (2019);

– creation of an "Ad Hoc" Group to negotiate the draft Agreement on the Fight Against Corruption in the field of Foreign Trade and International Investments (2020).