Introduction
Mercosur is an integration association of four States (Argentina, Brazil, Paraguay and Uruguay) with a population of more than 260 million people interested both in the inflow of investments and in gaining access to high-tech products (Almeida, 2018). It is the leading trading bloc of South America. Known as the Common Market of the South, it aims to ensure the free movement of goods, capital, services and people between Member States.
The Treaty of Asunción, under which Mercosur was created, was signed on March 26, 1991 by Argentina, Brazil, Paraguay and Uruguay, and entered into force on November 29, 1991 (Almeida, 2018). By 2010, the participating countries approved the Common Customs Code, which became the final stage of the creation of the Mercosur Customs Union (Caichiolo, 2019). Venezuela joined the four founding countries of Mercosur as a full member in 2012, but its membership was indefinitely suspended at the end of 2016 (Caichiolo, 2019).
As a follow-up to the Treaty of Asunción, on December 17, 1994, the Protocol of Ourupretu was signed, confirming the creation of a free trade zone and proclaiming the task of its subsequent transformation into a customs union until 2000 (Almeida, 2018). 85% of mutual foreign trade turnover will be completely exempt from any tariff and non-tariff restrictions on the vast majority of goods (Caichiolo, 2019). However, the exception is trade in weapons and military equipment, radioactive materials, precious metals, and objects of national cultural heritage.
After the signing of Treaty of Asunción in 1991, the rapid growth of intraregional trade began in the Mercosur countries (Caichiolo, 2019). It is, without a doubt, the most dynamic and fast-growing element of the Mercosur integration process. The trade policy established within the framework of the agreement has a favorable effect on the member countries of the South American bloc both economically and politically.
Political Effects
The sociocultural foundation of Mercosur includes a wide range of ideas and values. One of the key foundations forming the theoretical basis of the project was the idea of a transit civilization. It was especially popular in the first half of the 1990s (Chodor, 2021). According to the plans of the Mercosur participants, the transit civilization was supposed to connect the regions of the West and the East in Latin America. Such a connection meant the creation of modern transport corridors in South America. In addition, some transport routes were planned to be extended to North America. Such routes were supposed to form a stable territorial core of the project. Also, they were seen by the participating countries as a tool for ousting alternative civilizational political projects from the region.
The discussion of the specific parameters of this conceptual idea of a transit civilization led to a clash of interests between the main participants of the project. In particular, the discussions of the mid-1990s showed that there is no unity within the project on the issue related to the directions of construction of transport corridors of transit civilization (Arlettaz, 2021). Namely, the political elites of Brazil and Argentina supported projects for the development of transport corridors to the west of Latin America. In turn, the elites of Paraguay and Uruguay showed a more restrained attitude towards the western vector of transport routes (Júnior & Scott, 2020). As a result, no consensus was found; the implementation of a number of infrastructure projects has been called into question.
Despite the integration initiatives of the core state, Mercosur did not receive adequate support from other project participants, during 2014-2017 this organization transformed into a center to which other regional political projects experienced a certain civilizational attraction (Chodor, 2021). In particular, Mercosur has become a reference point for smaller-scale political projects at the regional and domestic levels. Along with economic and socio-cultural issues, regional security issues began to be included in its agenda: the fight against crime, the fight against the spread of terrorist ideas, control over illegal migration, issues of prevention and settlement of border conflicts (Júnior & Scott, 2020). Consideration and attempts to resolve such problems supported the status of Mercosur as an influential civilizational political project at the regional level.
In the period 2015-2017, the largest consolidation of the Mercosur member countries in the entire history of the existence of a civilizational political project was noted (Meissner, 2018). The growing influence of the project in the Western Hemisphere and in the world attracted other countries to unite. The core state of the project – Brazil, against the background of the rapid decline in the authority and influence of Venezuela, was perceived by Latin American countries as a defender of the interests of all developing countries.
This interception of the values of justice defended by Venezuela allowed the leaders of Brazil to construct a special format of interaction between Mercosur and its most powerful competitor – The North American Free Trade Agreement (NAFTA). Namely, most of the Mercosur member countries refused to establish special relations with this organization, choosing a different path. They preferred the global interaction of Mercosur with NAFTA to two-way communications (Júnior & Scott, 2020). A certain concern of a number of Latin American countries associated with the expansion of Mercosur ‘s civilizational influence (fears of losing economic and then political sovereignty) turned out to be stronger than fears of losing in direct bilateral relations with a more serious player (the United States and NAFTA).
Thus, in 2015-2017 the core state of Mercosur managed to increase the level of community of the project without incorporating new values into its socio-cultural foundation (Meissner, 2018). However, in order to maintain the integration trend in the long term, new values and meanings were needed that could restart the already formed institutional foundations of Mercosur’s work. They have become the values of globalization associated with the more active inclusion of Mercosur institutions in world economic and social structures. So, since 2017, Mercosur, as a civilizational political project, has been actively positioning itself in the global dimension (Meissner, 2018).
Active negotiations were held on possible mechanisms of cooperation with the BRICS, the South African Customs Union, the European Union, and directly with Russia, China, and India. Relations with the states included in the Asia-Pacific Economic Cooperation (APEC) structures intensified (Arlettaz, 2021). In this context, it should be noted that Brazil and its supporters (Argentina, Uruguay) persistently promoted the idea of further expansion of the project participants both in Latin America and abroad.
In turn, the political elites of Venezuela and a number of other states (for example, Bolivia) advocated the preservation of the regional status of the project. The political leaders of these states believed that the transformation of the project from a regional civilizational to a global universal (Júnior & Scott, 2020). Which in turn will lead to the final disappearance of the values that make up its socio-cultural foundation and contribute to the political unity of the countries of the South American bloc at the moment.
Economic Effects
In fact, it was only in 2011, when the twentieth anniversary of its founding was celebrated, that Mercosur was able to overcome institutional barriers between participants (Basnet & Scott, 2017). The organization also surmounted a series of acute economic crises that have engulfed Latin America in the last decade, in order to become one of the key players in the world market and form its strategic position in the global economic context. Firstly, Mercosur recovered faster than other regional associations from the effects of the global financial crisis and became the most attractive region for foreign direct investment and financial flows.
Right now, Argentina and Brazil – the two largest economies in Mercosur – are showing simultaneous growth. This is a rare coincidence, if we recall the Brazilian crisis of the late 1990s and the Argentine crisis of the early 2000s (Viola & Lima, 2017). Finally, new prospects for the inflow of foreign direct investment into the region are opening up due to the growth of the Chinese economy and other emerging markets. It is expected that by 2060, when, according to experts, the need for agricultural goods and food will double, Mercosur will become a world leader in this sector of the economy (Rahman et al., 2020). If the trend continues, Mercosur should become a cartel like OPEC, only in the export of agricultural products.
The main result of Mercosur’s twenty-year existence can be called an almost twofold increase in its share in international trade – from 1.2% in 2000 to 1.9% in 2015 (Koengkan et al., 2018). There are still many systemic problems that have not yet been solved. They are connected with the fact that Mercosur has not realized its full integration potential. For example, the share of Mercosur member countries decreased from 6% in 1950 to 1.3% in 1995 in the international market (Basnet & Scott, 2017). Therefore, the most important thing has been achieved in 30 years – to stop the pernicious process of losing positions (Koengkan et al., 2018).
As for intra-regional trade, its indicators grew faster than those of Mercosur ‘s foreign trade due to the impact of the economic crisis that began in 2008 (Rahman et al., 2020). Considering this trend, it is necessary to take into account the differences in the levels of economic development of Mercosur countries, primarily the small size of Uruguay’s economy and the economic backwardness of Paraguay (Rahman et al., 2020). These are not only differences in population, territory, GDP, but also, ultimately, in the share of each country engaged in foreign and mutual trade.
In this case, the development of regional integration did not have a significant impact on the shares of participating countries in foreign trade. In 1995, Brazil accounted for 50% of trade turnover, which fully corresponded to its role as a regional leader (Viola & Lima, 2017). Argentina was in the second position with almost 45%, Uruguay was in the third with 8%, and Paraguay closed the list with only 4% (Basnet & Scott, 2017).
As of 2010, this ratio remained virtually unchanged: Brazil’s exports account for 50% of Mercosur ‘s external exports, while Argentina accounts for 43% (Cherif & Scott, 2018). The only difference is that Paraguay moved to third place with 5%, and Uruguay – to fourth with a slight margin (Cherif & Scott, 2018). The share of each country in the volume of Mercosur exports as a whole also depends on the degree of liberalization and openness of the national economy to diversify the export commodity nomenclature.
However, the integration process has made significant structural changes in the mutual trade of the participating countries. At the moment, Mercosur ‘s small economies – Uruguay and Paraguay – are more integrated into regional trade than Brazil and Argentina. In 1995 the exports of Argentina and Brazil to the Mercosur countries amounted to 40 and 15%, then in 2010, it decreased to 30 and 12%, respectively (Koval & Andrianova, 2020). At the same time, 50% of Paraguayan and 30% of Uruguayan exports accounted for mutual trade (Koval & Andrianova, 2020).
The decline in the importance of intraregional trade for Argentina and Brazil is also explained by the unprecedented rise in commodity price. This is due to the fact that Uruguay and Paraguay do not import the types of raw materials that Argentina and Brazil traditionally supply to foreign markets (Cherif & Scott, 2018). Therefore, there is an inversely proportional dependence of the growth of Mercosur’s foreign trade turnover on a decrease in the volume of mutual trade.
Mercosur has a high degree of mutual integration, expressed in the ratio of exports within the bloc and external exports. This trend distinguishes it from other regional economic associations in Latin America, including the Andean Community and the Central American Common Market (Rahman et al., 2020). However, in both cases, unlike Mercosur, the share of mutual trade in total exports increased by 2015 or remained at the same level of the early 1990s (Basnet & Scott, 2017). An increase in the share of trade within Mercosur is something that the participating countries should strive for, as this can significantly accelerate the integration process.
The participating countries of Mercosur are distinguished by sufficient economic potential, which will allow them to become not only an economic bloc consolidating all other Latin American countries in the next decade. They also have the potential to become one of the world’s economic and geopolitical leaders. Therefore, the participating countries should not miss the current moment when the Mercosur economy is on the rise for further development.
Conclusion
By combining the largest layer of regional economic relations, Mercosur has demonstrated significant flexibility and adaptability of the integration model. The Association presented a very categorical approach to the problem of regional development, assuming the development of a single regional market as a key stimulus for economic growth. At the same time, the main priority of the formation of a single market was compliance with the principle of competition as a factor in the efficient allocation of regional resources. The agreement separately indicated the awareness of the participating countries of the global political trend of consolidation of large international economic spaces.
In addition, the task of effectively including countries in the international value chain was formulated. Thus, the political principle of external openness was fixed. Mercosur ‘s experience allows us to conclude that it is the monetary and financial turmoil of countries, external monetary and financial instability that expand the requirements for deepening regional economic integration. It can be considered as a way to reduce external economic and financial risks and increase the political stability of the region.
Recently, due to the global crisis, the countries of the Union have been striving to strengthen unity and take joint actions against external shocks. For this reason, there is a decline in economic and political differences between the participants. Thus, Mercosur has acquired a very significant importance for its member countries. Within its framework, ties and interests have been created on the basis of mutual trade and investments worth billions of dollars, which strengthens the political and economic ties between the countries of the southern bloc.
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