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Economic report: Mercosur

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The 1990s witnessed an increase in the development of organizations promoting international free trade and creating areas of trade cooperation between various countries. It is in this context that Mercosur, a like minded organization was founded in 1991 by Argentina, Brazil, Paraguay and Uruguay.The ultimate goal of this consolidation is a common market governed by a common commercial policy and allowing free movement of goods and resources among member countries. Mercosur, which derives its name from Mercado Comun del Sur (Southern Common Market) is headquartered in Montevideo, and has a population of 240 million.

The increasing significance of such international organizations, and the recent emergence of Mercosur as the third biggest trading bloc in the world , propelled us to examine the workings of this trading bloc.

How does Mercosur identify the comparative advantages of member countries?
To answer this, we will analyze the different characteristics of Mercosur, then, we will focus our reflection on the Community trade in this market, then we will expand our study to the domain of global trade.

Comprising Argentina, Paraguay, Uruguay and Brazil, the Southern Common Market represents a total population of 190 million Individuals, within a total surface area larger than that of the European continent. Brazil has territorial space of 8.5 million square kilometers and 155 million Inhabitants; Argentina, the second largest Mercosur nation, 2.8 million square kilometers. Paraguay, with 406 thousand square kilometers and a population of 4.6 million, has been particularly noted for its growing economy. Of the Mercosur members, Uruguay has the smallest population, calculated to be around 3.1 million within a territory measuring 177,000 square kilometers.

In 1986, Brazil and Argentina signed twelve commercial protocols. A couple of years later, they signed a Treaty for Integration, Cooperation and Development. Following the accession of Paraguay and Uruguay, a new treaty was signed by all member countries on March 26, 1991 in Asuncion, Paraguay, providing for the creation of a common market.
The Mercosur has many objectives:
- Free transit of goods and services between the member states
- Fixing of a common external tariff (CET)
- Coordination of macroeconomics and policies of member states relating to many sectors including foreign trade, agriculture, industries
- Gain more power at the international level.

The Mercosur countries are located in South America. With over 12 million square kilometers, Mercosur is shared between two large countries, Brazil and Argentina, and smaller countries, Uruguay and Paraguay. All member countries are bordered by the South Atlantic except Paraguay, the only landlocked member. These countries cover an area larger than the European continent and represent over two-thirds of the population of South America as outlined in the table below:

However, we must not lose sight that there are many internal contrasts in Mercosur. The best example of this contrast is that of the Brazilian coast with a concentration of major economic centers as opposed to the remaining regions which have been isolated regarding development of trade. The great geographic disparity and climate of Mercosur promotes the abundance and diversity of resources.

Tags: Economic report of the Mercosur, Free trading zone, Common external tariff

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