Mercosur Essay

Table of contents

Acronyms and Abbreviations

List of Figures

List of Tables

1. Introduction

2. Underlying Theoretical Concepts
2.1 Internationalisation and Globalisation
2.2 Regional Economic Integration

3. Introduction to MERCOSUR
3.1 Founding
3.2 Objectives
3.3 Structure

4. Developments
4.1 Trade
4.1.1 Internal Trade
4.1.2 External Trade
4.2 Economics
4.2.1 GDP Evolution
4.2.2 Monetary Developments
4.3 Democracy

5. Conclusion

Reference list

Acronyms and Abbreviations

illustration not visible in this excerpt

List of Figures

Figure 1: World Merchandise Trade and Trade in Commercial Services between 2005 and 2015

Figure 2: Foreign Direct Investment - Net Inflows in USD

Figure 3: Evolution of Regional Trade Agreements in the World between 1948 and 2016

Figure 4: Types of Regional Integration Agreements

Figure 5: Evolution of MERCOSUR Trade from 1991 to 2014 in Billion USD

Figure 6: MERCOSUR Internal Trade between 1990 and 1999 in Million USD

Figure 7: Internal Trade of MERCOSUR - Exports to Member States as a Percentage of Total Exports between 1990 and 2010

Figure 8: Exports from and Imports to MERCOSUR between 1991 and 1997

Figure 9: GDP of MERCOSUR Member States between 1990 and 2015

Figure 10: GDP per Capita of MERCOSUR Member States between 1990 and 2015

Figure 11: Annual GDP Growth Rates of MERCOSUR Member States between 1990 and 2015

Figure 12: Distribution of FOCEM Funds

List of Tables

Table 1: Trade Liberalisation Programme - Tariff Reductions

Table 2: Five Phases of MERCOSUR between 1991 and 2016

Table 3: Internal Trade of Selected Regional Integration Agreements

Table 4: Comparison of GDP, GDP/Capita and Annual GDP Growth in

MERCOSUR Countries

1. Introduction

In the era of globalisation, international markets have continued to grow in importance. Many regional economic integration agreements have been negotiated and created to improve competitiveness in global trade. One of these regional agreements is the ‘Mercado Común del Sur’ (MERCOSUR), in English ‘Common Market of the Southern Cone’, which was founded by Argentina, Brazil, Paraguay and Uruguay in 1991. Its creation was expected to mark an economic transition of the region as “the conditions for economic expansion were viewed as highly favourable” (ASEAN Studies Centre, 2009, p. 10).

2016 marks the 25th anniversary of MERCOSUR and the regional trade agreement has grown to a significant size over the past years. It is the largest integration agreement in Latin America and the Caribbean, the fourth largest in the world and the fifth biggest economy in the world (MERCOSUR, 2017b). It encompasses around 260 million citizens and had a combined GDP of more than 2.8 trillion USD in 2015 (Campbell, 2015).

The following extended term paper will analyse MERCOSUR and examine whether it can be regarded as a successful example of regional integration. To do so, the paper will review the objectives set in the founding treaty, the Treaty of Asunción, and analyse whether they have been fully met. At a glance, the objectives of MERCOSUR were to “eliminate trade barriers, establish a common external tariff, coordinate macroeconomic policies and develop the harmonization of laws” (Arieti, 2006, p. 764). To fulfil these objectives, the development of MERCOSUR was supposed to go through three gradual stages: the first goal was to create a free trade area, this was to be followed by a customs union, and the third and final aim was the creation of a common market. These stages will be analysed to conclude if they have been reached. At the same time, the main achievements and challenges of MERCOSUR’s integration experience will be presented.

The limited scope of this term paper does not allow for an analysis of every aspect in great detail. Due to this, the main focus after the theoretical section will be on the area of trade and on the earlier stages of the agreement, as this is most important to establish the success of MERCOSUR as a regional trade agreement and thus highly relevant to find an answer to the research question.

The term paper is structured in five sections. In the first part, the relevant underlying theoretical concepts of internationalisation and globalisation will be explained, followed by the theory of regional economic integration and its different types. The next section gives an introduction of MERCOSUR and its foundation, objectives and structure will be reviewed to gain a better understanding of this integration agreement. The following chapter will analyse the most important developments of MERCOSUR in the period between the inception in 1991 and 2016, along with the challenges and problems the agreement had to face over the years. To do so, firstly trade developments with regards to both the intra-regional and extra-regional trade will be identified. Secondly, under the section economics, the GDP evolution and important monetary developments will be examined. This is rounded up by significant socio-political developments on the subject of democracy. In the final section, the conclusion will be presented.

2. Underlying Theoretical Concepts

2.1 Internationalisation and Globalisation

“Pursuing protectionism is just like locking one's self in a dark room: wind and rain might be kept outside but so are light and air” (Jinping, 2017 cited in Dean, 2017). Although this quote is very recent, it can be applied perfectly to the past as it illustrates the motives behind the emergence of internationalism and globalisation. Regarding the last 25 years, it can be noted that both of these two phenomena have developed to a great extent and have served as a prerequisite for the process of regional economic integration and ultimately for the establishment of MERCOSUR.

In the following, internationalisation and globalisation will be defined and introduced to show the difference between these highly important yet frequently confused terms.

Internationalisation can generally be defined as the increasing importance of “flows of exchanges of raw materials, semi-finished and finished products and services, money, ideas and people between two or more nation-states” (Boyer and Drache, 2005, p. 63). The origin of the emergence of internationalisation can be traced back to the rise of colonialism and mercantilism, from the 16th to the 18th century, as people started trading goods across country borders. Since the term internationalisation derives from the word international, which means between nations, the “basic unit remains the nation” (Daly, 1999). This means that national products are manufactured through the cooperation of national capital and national labour, using mostly national resources. The products are then traded in international markets, where they compete with other nations’ produce. This definition complies with Ricardo’s classical 19th century comparative cost advantage theory (Daly, 1999). He argued that “any enduring two-way flow of goods between countries must reflect international differences in the structure of costs and prices” (Dictionary of the Social Sciences, 2002). This means that one nation can produce commodities cheaper than another and therefore has a comparative advantage. It will then export these products to the other nation and in return import products that are cheaper to produce in this other nation. The principle of Ricardo’s theory is that protectionism is obstructive as trade will be beneficial as a result of international dissimilarities in the production costs because countries “will specialise in the production of those commodities where its advantage is greatest” (Dictionary of the Social Sciences, 2002).

The best way to measure and observe the nature and the degree of internationalisation is to utilise instruments such as trade statistics and statistics of population movement. An example for this can be seen in Figure 1 which depicts the growing world trade between 2005 and 2014, with a decline in 2015 and during the financial crisis in 2009.

Figure 1: World Merchandise Trade and Trade in Commercial Services between 2005 and 2015

illustration not visible in this excerpt

(Source: WTO, 2016)

While the process of internationalisation can be regarded as mostly completed because almost all nations in the world participate in cross-border trading, globalisation is an ongoing process and a result of internationalisation. Globalisation, also referred to as international economic integration, can be defined as the association or “integration of many formerly national economies into one global economy” (Daly, 1999). In contrast to internationalism, the relevant unit is no longer the nation but an alliance of former nations. This phenomenon is a consequence of free trade as well as free flows of capital and people between countries. Ricardo’s argument of the comparative cost advantage, which was explained above in the context of internationalisation, is therefore no longer applicable to the concept of globalisation. His theory was based on the assumption that capital and labour are immobile and remain within one nation, which is not the case anymore in today’s globally integrated world (Daly, 1999).

The emergence of globalisation can be regarded as the result of internationalisation and as a resumption of the integration period between the 1850s and the First World War. The prevalent increase in global integration can in many ways be seen as a logical next step, which effectively leads to the erasure of borders between nations and ultimately to the erosion of the nation-state (Daly, 1999). One of the most significant characteristics of globalisation is the fact that activities and events taking place in one location have far-reaching consequences for “individuals and communities in quite distant parts of the globe” (Boyer and Drache, 2005, p. 64). This growing interdependence between multiple economies creates new challenges and threats but at the same time new opportunities and benefits for policymakers and countries. One very obvious threat, for instance, is the increasing competition companies are facing which may lead to the closure of a number of firms. Another central challenge is the uneven distribution of the societal benefits of globalisation. This means that “some groups may initially gain a great deal, while others may benefit only gradually or suffer setbacks” (IMF, 1997, p. 45). In their World Economic Outlook, the IMF (1997) further expresses concerns about the decreasing demand for low-skilled workers in developed economies which leads to a widening of the wage gap between low-skilled and high-skilled labour as well as to a rise in unemployment of low-skilled workers.

In spite of these challenges and threats globalisation confers a number of significant opportunities and benefits for participating countries, such as the rise of both productivity and average living standards as a result of “greater international division of labor and a more efficient allocation of savings” (IMF, 1997, p. 45). While consumers benefit from access to a broader range of foreign services and goods at lower cost than the national equivalents, the country as a whole also has the opportunity to mobilise larger volumes of financial savings. Altogether, the benefits and advantages of globalisation are often compared to those of specialisation (IMF, 1997).

There are two prominent measures used to evaluate the degree of globalisation of a country: foreign direct investment (FDI) and the ratio of trade to output. Foreign direct investment has steadily increased over the past years and can be defined as an investment made by an investor from one nation to an enterprise operating in another nation (OECD, 2008). The following chart gives an example, showing net FDI inflows in the world.

Figure 2: Foreign Direct Investment - Net Inflows in USD

illustration not visible in this excerpt

(Source: Worldbank, 2017a)

The ratio of trade to output, also known as trade as a percentage of GDP, is calculated summarising exports and imports of an economy and dividing this sum by the economy’s gross domestic product (GDP). However, this measure is prone to understate the extent of integration in advanced economies as it does not consider services, most of which are not tradable but make up for a significant share of output (IMF, 1997). To improve these measures, and therefore the extent of international economic integration, and to overcome the above mentioned challenges of globalisation, single nations come together and form associations, making them stronger. The different types of these associations will be explained in the following section.

2.2 Regional Economic Integration

Regional economic integration can be seen as a logical result of globalisation and the growth of regional integration schemes has been a major development over the past few years. In the Encyclopaedia Britannica, regional economic integration is defined as “institutional arrangements designed to facilitate the free flow of goods and services and to coordinate foreign economic policies between countries in the same geographic region” (Moon, 2014). The origin of regional integration initiatives can be traced back to the 19th century, when the first customs unions were established in Germany. Since then, regional integration arrangements (RIA) worldwide have grown in number as well as increased in size (De Lombaerde, 2006). Today, almost all countries are members of at least one RIA and approximately two thirds of the world trade take place within these agreements (Schiff and Winters, 2003). The prerequisite for entering such a regional agreement is the country’s membership in the World Trade Organisation (WTO). The latter sets the rules for global trade between multiple countries and is responsible for ensuring smooth, predictable and free flows of trade (WTO Secretariat, 2016). The WTO also has to be notified about participations in and foundations of any RIAs. As a result, the evolution of regional trade agreements can easily be tracked and is illustrated in the following figure.

Figure 3: Evolution of Regional Trade Agreements in the World between 1948 and 2016

illustration not visible in this excerpt

(Source: WTO Secretariat, 2016)

During the whole time period between 1948 and 2016, the cumulative number of both regional integration agreements in force and inactive RIAs has grown steadily, with two exceptions in 2004 and 2007.

In general, all regional agreements have the shared objective of reducing trade barriers between member countries but there is an overall distinction between two general dimensions: market integration and policy integration. The five different types of agreements depicted in Figure 4 below can all be attributed to one of these two dimensions. The dimension of market integration contains the first three types: free trade area, customs union and common market. It is based on the positive welfare effect of the free movement of products and on the optimum allocation of labour and capital as a result of free movement of production factors. Almost all integration agreements start with the dimension of market integration because it “can proceed without much demand on institutions and policy making [though the process of] taking away […] barriers” (Molle, 2006, p. 9). The dimension of policy integration contains the last two stages: economic union and supranational union. Its goal is creating a common policy framework to establish “equal conditions for the functioning of the integrated parts of the economy” (Molle, 2006, p. 10). This common policy requires common institutions with strong competences.

Before explaining Figure 4 in detail, it is important to state that the stages of the different forms in this figure are sequential from the top to the bottom, which means, for instance, a customs union cannot be established without creating a free trade area first. Furthermore, the distance between the stages is not equal or comparable but increases from the top to the bottom.

Figure 4: Types of Regional Integration Agreements

illustration not visible in this excerpt

(Adapted from: De Lombaerde, 2006, p. 164)

The first stage of international regional integration is a free trade area (FTA). Its most important characteristic is the elimination of tariffs on internal trade between member states, although this tariff removal is often only extended to certain products and services. External customs tariffs are applied individually by each country. An example of an active free trade area is the North American Free Trade Agreement (NAFTA). This is followed by the second stage, the customs union (CU). At this stage, the eradication of internal tariffs is completed without any exceptions concerning product categories. In addition to this, all participating countries adopt a common external tariff (CET) comprising “uniform import tariffs and common restrictions to outside countries” (De Lombaerde, 2006, p. 165). The implementation of the CET implies a certain level of joint decision-making and, therefore, the creation of common institutions to regulate trade, avoid trade deflection, and control the redistribution of tariff revenue.

The third stage of regional integration, and the last one to be attributed to the dimension of market integration, is the common market (CM). Its key attribute is the free movement of production factors - labour and capital - in addition to the free movement of goods and services. This necessitates a considerably greater degree of both economic and political cooperation between member states than the previous two stages, despite remaining different national regulations. This cooperation is reflected in “the harmonisation of policies in health and safety, social security and education” (De Lombaerde, 2006, p. 165). Regarding trade with the external market there are common external regulations for products and production factors (Molle, 2006).

The fourth stage, the economic union (EU), can be attributed to the overall dimension of policy integration. This stage differentiates itself from the three stages of market integration due to its harmonisation of monetary and fiscal policies, for instance a common taxation within the union, which requires a higher and more complex level of supranational cooperation and organisation. This is reflected in the development of supranational institutions with binding decision-making power over all member states. Nonetheless, the individual nations maintain separate identities. An example for an economic union are “the European Union countries participating in the European Monetary Union” (De Lombaerde, 2006, p. 165).

The supranational union (SU) makes up the fifth and final stage of the regional integration agreements. The integration of economic and political policy is complete and national sovereignty of the member states is abandoned and replaced with a common government. The United States of America or the unification of West and East Germany serve as examples of supranational unions (De Lombaerde, 2006).


(Pix from UFSC,Welber Barral recebe medalha da Ordem de Rio Branco do presidente Lula nesta quinta, May 6, 2009)

Welber Barral is the former Brazilian Secretary of Foreign Trade (2007-2011) under President Lula da Silva, has recently written about the future of MERCOSUR, the Common Market of the Southern Cone. He has recently written an essay about the future of MERCOSUR that si worth careful consideration.  Welber Barral,  El Mercosur y la predicción maya, La Nación (Argentina) , Jan. 2, 2013.  MERCOSUR serves as a model of the potential and the potential irrelevance of regional trade organizations in this century. Anachronism, basis of strong regional political-economic integration, instrument to amplify state interests, these are the critical questions for this century.

(Pix from MERCOSUR, La Jeringa, Aug. 10, 2012)

Mr. Barral starts with the suggestion that as it enters into its third decade of operation, now would be a good time to think about the form that this organization ought to take as it matures. ("Al completar 21 años, es tiempo de pensar qué podrá ser el Mercosur en su madurez." Ibid).  He reminds us that MERCOSUR has been a study in fantasy, hard reality and cyclical crises that do not necessarily suggest either continuity, a coherent set of institutional objectives or culture--except perhaps in the minds of academics.  

 "De hecho, llama la atención la evolución errática de la integración regional. En sus diversas fases, el Mercosur ha tenido metas imposibles en Asunción, choque de realidad en Ouro Preto, crecimiento en los 90, apocalipsis en 2000, retrocesos e imprevisibilidad después de 2008." (Ibid. ("In fact, it calls attention to the strikingly erratic evolutionof regional integration.In its variousphases, Mercosur was given impossible goalsin Asuncion,suffered a reality shockinOuroPreto,benefited from growthin the 90s,met apocalypsein 2000,and faces unpredictabledeclinesafter 2008.") 

It appears to have served more as an idea (and ideas are important in Latin America) and as a chess piece in complex political strategies both among the MERCOSUR members, and between them and powerful outsiders, notably the United States (and especially in its now failed efforts to dictate a Free Trade Area of the Americas (Área de Libre Comercio de las Américas (ALCA))). For a useful discussion see Fernando Lorenzo and Marcel Vaillant, "Exploring the Link Between Decentralization and Democratic Governance, in MERCOSUR and the Creation of the Free Trade Area of the Americas 1-28 (Fernando Lorenzo and Marcel Vaillany, ed., (Washington, D.C:: Woodrow Wilson International Center for Scholars, 2005).

Where does that eave MERCOSUR today? For optimists, Mr. Barral suggests, MERSUR remains a political project justifiable by its successes in reducing the potential for regional conflict, especially between Brazil and Argentina. Moreover, it might be viewed as a means of accentuating and making more relevant the economies of MERCOSUR's minor players, especially Paraguay and Uruguay. That, Mr. Barral muses, is what people thought possible in 1991. "Para los optimistas, el Mercosur sigue como un proyecto político justificable ya que fue el mecanismo responsable de reducir el potencial de conflicto regional, sobretodo entre la Argentina y Brasil. Además, la integración regional podría ser el camino para acrecentar la relevancia de las economías menores de Paraguay y Uruguay. O, al menos, era lo que imaginábamos en 1991." Welber Barral, El Mercosur y la predicción maya, La Nación, supra).

But the reality is that integration hasn't brought much integration. And indeed, the last twenty years has highlighted the most impossible task of harmonizing Argentine and Brazilian trade cultures, much less of bringing sustained and coherent trade cultures among the most powerful members of the MERCOSUR group. ("La verdad es que más allá de las dificultades innatas a las democracias presidenciales y su recalcitrante concesión de competencias, nunca se logró en el Mercosur un consenso sobre el proyecto de desarrollo regional. Mientras la Argentina cayó en los espejismos ultraliberales de los 90, Brasil mantuvo una torpe intervención en los mercados. Cuando Brasil hizo intentos de liberalización comercial, la Argentina volvió a discursos precepalinos de industrialización por coerción." Ibid ("The truth is that beyond the difficulties innate in presidential democracies and their reluctance to cede authority, Mercosur was unable to achieve consensus on the project of regional development. While in the 1990s Argentina listened to the siren song of ultraliberal policy, Brazil maintained a clumsy interventionist policy in markets. When Brazil attempted trade liberalization, Argentina reverted to talk of coerced industrialization.").

Mr. Barral looks at this organization, now in its "twenties" and sees its fundamental weakness--the failure of consensus about its project. ("Un proyecto de desarrollo de integración demanda, antes que nada, de ese consenso sobre intervención, velocidad de liberalización y consolidación institucional. " Ibid. ("An integrative development project demands above all, consensus over intervention policy, the speed of liberalization and institutional consolidation. )). But, Mr. Barral notes, MERCOSUR was above theory, focusing instead on the emotionally charged and uncharted (and perhaps satisfying) paths of constant improvisation. ("En el Mercosur no llegamos a pensar en esa teoría ya que siempre estuvimos involucrados en los emocionantes caminos desconocidos de la improvisación constante. ")

But what Mr. Barral describes as MERCOSUR's weakness, may in fact be its greatest strength within the context of the realities of Latin American politics. Mr. Barral is absolutely right in his judgment, if one is to take MERCOSUR literally and formally. It is an organization that appears formally structured to serve as a nexus point for the consolidation of national policy at a supra national level--e pluribus unum--at least with respect to trade and eventually perhaps economic policy. The model, everyone's model since the 1980s, being the European Union. The product of this model, and the eventual role of organization like MERCOSUR, was to serve as a supra-national and consolidating administrative unit where matters that affect the community of its members could be resolved, and thus resolved, applied uniformly by national legislatures, throughout the MERCOSUR zone. But Mr. Barral is even more correct to point out that this dream, woven into the formal organization, and especially the rhetoric, of MERCOSUR, was unrealistic from the start.  


It might be more useful to measure MERCOSUR's success from a functional perspective, one grounded in the premise that MERCOSUR's real purpose was to meant to serve as an instrument of national policies, rather than as an institutional mechanism for integration.  It's fundamental organizational structures, grounded in a jealously guarded inter-governmentalism, ensured that MERCOSUR would serve state interests rather than develop its own organized and coherent transnational (or regional) interest.  It remains an association of states, rather than an instrument of integration, and its utility is best measured by its ability to serve as a vehicle for expressing, in an organized way, state interests, within a small group of states who share a common desire to sort their relations among themselves. More importantly, MERCOSUR is at its best when it serves as a vehicle to unite MERCOSUR states against common outside competitors-- traditionally the United States, but now increasingly China. In these aims and characteristics it shares a lot with that other politically useful regional trade association--ALBA. See, Backer, Larry Catá and Molina, Augusto, Cuba and the Construction of Alternative Global Trade Systems: ALBA and Free Trade in the Americas (May 20, 2009). University of Pennsylvania Journal of International Economic Law, Vol. 31, No. 3, 2010. It might be useful to gauge the success of MERCOSUR assessed against these more modest, or at least different, objectives.

Indeed, Mr. Barral notes that MERCOSUR appears to be making little effort (that is the MERCOSUR states appear to have little appetite) to use the organization to achieve greater integration rather than as a forum where the traditional games of border barriers is played. ("En los últimos años, el proyecto de integración se volvió todavía más lejano frente a barreras injustificables y a las retaliaciones generadas en consecuencia." Welber Barral, El Mercosur y la predicción maya, La Nación, supra). What should be troubling is that these border barrier games are being played against evolving systems fo globalization and sytriong networks of bi-lateral trade and investment regimes, that may make regulatory organizations like MERCOSUR obsolete, or at least inefficient actors to project state interests in a world clogged with public and private regulatory and market players. Throwing in new powerful hybrid entities, sovereign wealth funds for example, and the role and utility of limited purpose organizations like MERCOSUR becomes more difficult to justify (except perhaps, as I suggested above) from a functional and specific objective perspective. Backer, Larry Catá, Sovereign Investing and Markets-Based Transnational Legislative Power: The Norwegian Sovereign Wealth Fund in Global Markets (November 18, 2012). Consortium for Peace & Ethics, No. 2012-11/11.

But suppose, for a moment, that MERCOSUR is worth saving and reforming so that it might meet its loftiest goals, as expressed in 1991. To that end Mr. Barral proposes sensible goals. The most imortant goal is to develop a comprehensive and binding set fo rules to create a coherent and regionally effect set of policies and rules in forms that suggest the forms of the integrative project of the E.U. ("No es necesario ser un estadista para comprender que la integración regional solamente existirá si hay previsibilidad de reglas. De hecho, la inversión -que genera escala de producción, un mercado consumidor integrado, marcas regionales y logística competitiva- huye de la imprevisibilidad y de la posibilidad de costos de transacción no programados, cómo son las licencias, declaraciones, burocracia y coimas." Welber Barral, El Mercosur y la predicción maya, La Nación, supra).  ("One need not be a statistician to understand that regional integration can only exist if there is predictability of rules. In fact, investment-generating economies of scale in production, integrated consumer markets, regional brands and competitive logistics-avoids the unpredictability and the possibility of unanticipated transaction costs, in the form of state licenses, forms and declarations, bureaucracy and bribes."). MERCOSUR provides a mechanism for simplifying the movement of factors of production, from transport to investment. ("Así, el justificativo económico para el Mercosur es volver a simplificar el tránsito de factores productivos, desde el transporte hasta la inversión. Hay sectores con excelentes perspectivas, como petróleo y gas, en los cuales los acuerdos empresariales están pendientes de menor burocracia y reglas más transparentes de compras públicas en los países de la región." Ibid).

This brings Mr. Barral to the heart of his argument, and to the expression of the quite real fear of the protectionist consequences that may follow abandoning the hortatory (if impossible) initial objectives of MERCOSUR (in the form of economic integration and the elimination of trade barriers).

Ojalá tengamos en 2013 adquisiciones e inversión green field que involucren a empresas y capitales de la región. Para eso, parece cada vez más claro que la estrategia de limitar las ventas a la producción doméstica -una tendencia peligrosamente presente en los discursos políticos- no potencia la escala de producción regional. En consecuencia, el proteccionismo que intenta justificarse teniendo la reindustrialización como objetivo, sólo logra en la práctica alejar la inversión. (Ibid.) ("Hopefully we will have in 2013 acquisitions and green field investments involving companies and capital in the region. T that end, it seems increasingly clear that the strategy of limiting sales to domestic production, a trend dangerously present in current political discourse-will not enhance the economies of scale of regional production. Accordingly, protectionism that seeks to justify itself within the rhetoric of re-industrialization reindustrialization as its objective will in achieve in practice only the alienation of investment.")
Coupled with unease is frustration.  Brazilian investors have ceded the field to the politicians and bureaucrats.  Mr. Barral explains that for these individuals and organizations, MERCOSUR will be worth investment only when it achieves it potential, but of course it cannot achieve its potential without the investment of these stakeholders. For the moment, though, MERCOSUR is viewed, and perhaps realistically, as an institution through which political influence is used to obtain economic favors grounded in gaming borders that are as porous as the particular eocnomic environment permits. 
Hablando con inversores brasileños es frecuente escuchar el argumento de que invertir en el Mercosur sólo es realista cuando existen cadenas productivas y economías de escala. Sin estos factores, la producción a largo plazo no es sostenible, y ocurrirá simplemente para aprovechar un grado exagerado de protección (y, por ende, de precios). (Ibid., (Talking toBrazilian investors one oftenhearsthe argument thatinvestingin Mercosurisonlyrealistic whenthere exists production chains andeconomiesof scale.Without thesefactors,long-term productionis not sustainable,andjusthappento getan exaggerated degreeof protection (andthereforeprice).))

Mr. Barral concedes that these problems exist. More importantly, he also concedes that the institutional logics and cultures that have brought MERCOSUR to its present condition will be unlikely to be changed in significant ways by instrumental interventions absent substantial changes in the cultures of the most powerful members of the trade organization. ("Aunque estos problemas existan, el final del Mercosur es tan probable como la supuesta predicción maya del fin del mundo. El Mercosur seguirá su curso y nos corresponde buscar alternativas para que su consolidación sea más rápida." Ibid. ("Although these problems exist, the end of theMercosuris as likely to occur as asthe Mayan predictionof the end of the world. Mercosurwill run its courseand it behooves ustoseek alternativesfasterconsolidation.").  But that ought not to prevent people from trying.  Here there is a role for the non-state sector, and the organization of mass cultural demand for the benefits of a revamped form of regional trade organization,  The more such organizations remain the province of technocrats, veiled in the language of macro-economics and state practice, the harder it will be to generate the sort of mass political demands that, at base, are the fundamental lubricant for the changes Mr. Barral would see for a more effective



(Emilio Cárdenas, El Mercosur transformado en arma política,  Vecinos en conflicto, July 6, 2012)


Mr. Barral currently serves as the Chairman of the Brazil Industries Coalition (BIC), an independent organization established in 2000 to represent the Brazilian private sector in Washington, and a senior consultant with Barral M Jorge & Associates, a consulting firm in international trade and government relations, with offices in Brasilia and São Paulo. In addition, he is a Professor of International Trade at the Brazilian diplomatic academy for the Instituto Rio Branco.

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