Exactly 30 years ago, the presidents of Brazil, Argentina, Paraguay and Uruguay signed the founding agreement for the Common Market of the South - "Mercosur" in Asuncion, the capital of Paraguay.
South America was completely different then.
Those countries had decades of brutal military junta behind them and, despite their geographical proximity, were not very connected. That changed quickly.
In the XNUMXs, a successful economic community emerged on the Atlantic coast of the South American continent.
Trade between the countries increased fivefold.
Investments also increased, primarily from the auto industry, which developed cross-border production chains.
"Mercosur" as an economic area has overcome crises surprisingly well.
In the 1997s, partners repeatedly helped each other in times of need. In XNUMX, the presidents of those countries together prevented a military coup in Paraguay.
"The Elephant, the Mouse and the Ants"
However, that community was flawed from the start.
The nominal gross domestic product of 1,835 trillion dollars and 270 million people are impressive figures, according to which Mercosur belongs to the six largest economic communities in the world.
However, three-quarters of the economic output falls on the largest economy - Brazil.
Guillermo Valles, who negotiated the agreement on behalf of Uruguay three decades ago, says that "Mercosur" is "an agreement between an elephant, a mouse and two ants".
Those differences led to the fact that "Mercosur" never became a community modeled on the European Union, as it was originally intended.
Brazil, as well as Argentina, refused to transfer national competences to the supranational level, so generally applicable rules could not be established.
There is neither a common court nor a parliament.
There is not even an agreement on the avoidance of double taxation, let alone a harmonized economic policy.
The lack of enthusiasm for integration is also connected with the loss of attractiveness of the European Union as a model.
The Union's foreign policy is, in the eyes of South Americans, a protectionist policy that prevents the import of agricultural products into its territory.
Now it is showing again. After twenty years of negotiations, Mercosur and the EU signed an agreement on foreign trade in 2019.
Despite major Latin American concessions, it is unlikely that the EU will ratify the agreement because of Brazil's policies towards the Amazon rainforest and the human environment.
More politics than economy
The political shift to the left brought vibrancy to the continent in the new millennium.
Brazilian social democrat Luis Ignacio Lula da Silva wanted to turn his economically increasingly strong country into a regional power, and "Mercosur" was supposed to become an instrument for that.
Next to him, a whole series of Latin American leftists were in power. "Mercosur" also opened for Venezuela and Bolivia, which are unable to integrate. Lula wanted to compensate for the lack of deepening of the community by expanding it.
At the beginning of the economic crisis ten years ago, countries turned to their national interests.
Firms that express their intention to join "Merkosur" are stealing from each other with ever-increasing subsidies.
Argentina, for example, overnight introduces some trade barriers and foreign exchange restrictions.
When right-wing populist Jair Bolsonaro took the helm in Brazil, and center-left politician Alberto Fernandez in Argentina, a diplomatic ice age reigned in Mercosur.
The heads of state have not met once in two years.
Since there are no common institutions, the community is guided by the political will of the countries' governments, so its absence directly harms Mercosur.
Maybe just free trade zones?
It is not clear how everything will unfold. Brazil, Uruguay and Paraguay want to drop customs duties.
Uruguay, and soon perhaps Paraguay, intend to conclude a treaty with China, and Brazil would prefer to conclude a treaty with the United States of America.
Argentina wants to protect its industry and is not interested in additional free trade agreements.
The Inter-American Development Bank (IDB) sees two realistic options for Mercosur.
One implies acknowledging the failure of the current model and maintaining the free trade zone.
Another solution would be to deepen the integration with a new program to strengthen the customs union, which is currently not realistic.
However, the collapse of "Mercosur" is not in sight either. Rubens Barboza, the former Brazilian ambassador in Washington, says: "Despite doubts and challenges, no government is ready to question the existence of "Mercosur" and pay a political price for it."
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