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Mercosur

Page history last edited by Brian D Butler 13 years, 7 months ago

 

 

 

 

 

 

Mercosur 

 

Mercosur:  the original founding members were Brazil, Argentina, Uruguay and Paraguay.  The majority of the traded goods in the block occurs between Brazil and Argentina.  The associate members include Chile and all of the “Andean pact” countries.  Recently, Venezuela made the decision to become a full member, and is under approval from the Brazilian congress, which will likely approve, in spite of concerns about the “democracy” element (one of the requirements of Mercosur is that you must be a full Democracy, and that includes “freedom of the press”, for which Venezuela is questionable).  In spite of these concerns Venezuela will likely be admitted as a full time member as well.  Mexico is listed on Wikipedia as an “advisor”.

 

 

 

Mercosur is not a real “common market”, as the name implies.  In fact it behaves more as a customs union in which there is “free trade” among its members.  It goes a bit further than the NAFTA deal however, which is just a “free trade” agreement, in that MERCOSUR also includes a common unified external tariff (averaging around 16%) on all external imports.  The deal is that full time members agree to this common external tariff, but “associates” get all of the benefits of free trade with Mercosur members, but they do not maintain the same external tariff. For this reason, Chile chose not to become a full time member, or else they would need to raise their external tariff (which average about 6% today….and are hopefully going to come down in the future).  Venezuela, by joining, will need to get their external tariffs in line with Brazil and the rest of Mercosur.

 

 

 

Mercosur has a reciprocal agreement iwht the Andean countries, whereby the entire “Andean Community”  becomes “associate” members of Mercosur, and members of Mercosur have reciprocal access to Andean nations markets.  See more discussion below….

 

 

 

The impact for business is that you can locate your operations in any one of the Mercosur countries and export to the others duty free. For this reason, you are seeing companies such as “Red Wing” boots (a US company that the professor highlighted) that used to do production in Colombia…that moved production to Brazil, and now export back to Colombia..taking advantage of the industrial base in Brazil, the larger internal market and efficiencies…and using the exports to generate more income, and to service the other markets.

 

Table of Contents


 

 

 

Mercosul - common import tariff

 

The Camex (Câmara de Comércio Exterior - Exterior Chamber of Commerce) inside announced the reduction of the tax of importation for 328 machines and equipment and of four good of computer science and telecommunications of the rule of former-tariff. The former-tariff one is a norm that allows the reduction of costs for purchase of some products that are not produced in Brazil. In the case of the machines, the average reduction of the TEC (Tarifa Externa Comum do MercosulCommon External Tariff of the Mercosul) is of 14% for 2%. For the other goods, it is of 20% for 2%.

 

 

Autos:

 

Earlier 2008 Argentina and Brazil agreed on a car manufacturing deal which manages bilateral trade for the sector until 2013, when theoretically the market will begin to the gradually opened.

 

 

Increased TEC in response to the credit crisis:

11/17/08:  Mercosur to increase the TEC for wines, peaches, milk, textiles, leather products, wooden furniture, among others

 

"This is not protectionism. It is to defend our production. All the countries of the world are taking care of of its sensible, vulnerable industries at this moment (of international financial crisis) ".

 

sounds like protectionism to me!

 

Argentina was most concerned about the increase in imports from Brazil particularly in such sectors as metal-mechanics, auto parts and other manufactured goods.  Argentine manufacturers particularly sensitive to any loss of market or and jobs.

 

Brazil on the other hand expressed dismay at the Argentine government extended implementation of the non automatic licences regime for textiles and television sets.

 

sources:

 

 

 

 

 

Good news for china:

 

In 11/2008...Mercosur announces end of double tariff

 

" Members of the Common Market of the South (Mercosur) have agreed to end a double tariff mechanism in order to facilitate the flow of goods within the bloc, a Brazilian official said Monday.  The double tariff will end in January, Regis Arslanian, the Brazilian representative to Mercosur, told reporters.  A tariff currently must be paid on all products entering Mercosur and must be paid again if the goods are transferred to other countries within the bloc."

 

 

Map of countries

 

 

 

Mercosur or Mercosul (Spanish: Mercado Común del Sur, Portuguese: Mercado Comum do Sul). wikipedia: Mercosur

 

 

 

Location of Mercosul
Members • Associate members • Observer

 

██ Member States (Argentina, Brazil, Paraguay, Uruguay and Venezuela).

██ Associate States (Bolivia, Chile, Colombia, Ecuador and Peru).

██ Observer State (Mexico).

 

 

Venezuela signed a membership agreement on 17 June 2006, but before becoming a full member its entry has to be ratified by the Paraguayan and the Brazilian parliaments.

 

 

Role and Potential

 

Some South Americans see Mercosur as giving the capability to combine resources to balance the activities of other global economic powers, especially the NAFTA and the European Union. The organization could also potentially pre-empt the Free Trade Area of the Americas (FTAA); however, over half of the current Mercosur member countries rejected the FTAA proposal at the IV Cumbre de las Américas (IV Summit of the Americas) in Argentina in 2005. 

 

In December 2004 it signed a cooperation agreement with the Andean Community trade bloc (CAN) and they published a joint letter of intention for a future negotiations towards integrating all of South America. The prospect of increased political integration within the organization, as per the European Union and advocated by some, is still uncertain.

 

On 30 December 2005 Colombian president Álvaro Uribe signed a law that ratifies an FTA with Mercosur and gives Colombian products preferential access to a market of 230 million people. Colombian entrepreneurs will also be able to import materials and capital goods from Mercosur at lower costs due to reduced tariffs resulting from the agreement.  The agreement's asymmetry clauses favor Colombia because it allows the gradual and progressive reduction of tariffs and likewise gives Colombia the opportunity to gradually reform its production system to adapt it to the requirements of the future negotiations within the scheme of Mercosur and the Union of South American Nations.

 

External Agreements

 

On December 18, 2007, Mercosur signed a free trade agreement with Israel in Uruguay. [5][6]

 

 

 

 

Future?

 

Development of the Union of South American Nations seems to suggest that the countries of South America are not opposed to regional integration but merely wary of the United States-backed FTAA.  And, since all the Andean Community countries are also associate members of Mercosur, and have free trade privileges within that, the future seems to be that they will all merge and form the CSN or at least a trade pact amongst themselves.

 

In fact because associate member status within Mercosur comes with the free trade benefits for anything manufactured in any of these countries, in effect there already is a sort of de facto south american trade community - it's just that the Andean nations have their own external tariff rates which differ from the common external tariff full Mercosur countries share.

 

 

 

 

 

Members

The following countries are full members, in the process of becoming full members, associate members or observers.[9]

 

 

Full Members

  • Flag of Argentina Argentina
  • Flag of Brazil Brazil
  • Flag of Paraguay Paraguay
  • Flag of Uruguay Uruguay

 

Becoming Full Members

  • Flag of Venezuela Venezuela

 

Associate Members

  • Flag of Bolivia Bolivia
  • Flag of Chile Chile
  • Flag of Colombia Colombia
  • Flag of Ecuador Ecuador
  • Flag of Peru Peru

 

Observers

  • Flag of Mexico Mexico

 

 

 

 

In Conclusion:

 

Reason to join Mercosur?

 

The theory goes that trade and the integration with the global economy play a prominent role in spurring economic growth.  In particular, the theory is that exports are key to spurring economic growth.  Mercosur was supposed to be good for a number of reasons.  First of all, it would encourage members to be more open, and to be less protective of their national industries. 

 

Results?

 

After a significant increase in intra-regional trade in the 1991-97 period, there was a decline after Brazil, then Argentina went into recession (crisis).  But, since then, there has been a re-surgance of trade.  

 

The growth rate of the Brazilian exports to Argentina and of Argentine exports to Brazil are closely related with the destination country’s growth rate. The correlation coefficient between Brazilian exports to Argentina and Argentina’s growth is 0.8 while the correlation between Argentine exports to Brazil and Brazil’s growth is 0.7.  The problem is that the probability that the two countries grow simultaneously has been only 0.6 since MERCOSUR was created. This probability is around 0.8 in the case of the Asian countries (Calderon and Fuentes, 2006). 

 

 

 

 

 

 

 

No longer to use the USD in transactions?

 

 

BUENOS AIRES, March 15 (Xinhua) -- Argentina and Brazil are to scrap bilateral commercial transactions in U.S. dollars and start using their own currencies from August, an official in charge of currency settlement at the Argentine Central Bank said here Saturday.

 

The new payment system is aimed at reducing costs in commercial transactions and would benefit small and medium-sized enterprises, the official said.

 

 

Under the new system, there will be a unified exchange rate between the real and peso, the so-called reference rate, which will be applied by Brazilian and Argentine central banks at the end of each day.

Brazilian President Luiz Inacio Lula da Silva reached an agreement to establish a new payment system with his Argentine counterpart Cristina Fernandez de Kirchner during his visit to Argentina in February.

 

 

Technical preparations are underway for the new system, which the two countries will adopt in several steps due to the large amount of bilateral trade.

 

 

Brazil is Argentina's largest trading partner, while Argentina is Brazil's second-biggest trading partner after the United States.

 

 

Bilateral trade stood at around 23.6 billion U.S. dollars last year

 

http://news.xinhuanet.com/english/2008-03/16/content_7800121.htm

 

 

 

 

 

 

See Also

 

our kookyplan page on regional trading blocks

 

 

North America

 

Latin America

  • Mercosur
  • Andean Community:   Venezuela joined the Andean pact in 1973, with the promise of reducing trade and investment barriers for regional partners, but increasing barriers for outside countries, and effectively isolating the group from the rest of the world.   This fit in nicely with the theory of "dependency", and the desire to be independent from outside influence.   The Andean Pact included Venezuela, Colombia, Ecuador, Peru and Bolivia.    (But, Venezuela dropped out in retaliation when Peru signed a free trade agreement with the USA)
  • Union of South American Nations (União de Nações Sul-Americanas, Spanish: Unión de Naciones Suramericanas, and abbreviated as Unasur and Unasul)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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