In 2016, the Southern Common Market (Mercosur) celebrates its 25th anniversary amid uncertainty and criticism in Brazil and speculations about its extinction. Among the main alleged reasons for such a pessimistic view is, firstly, the bloc’s ineffectiveness in promoting closer economic ties between the countries; secondly, the persisting losses to Brazil; and, finally, the structural constraints when conducting negotiations with other countries or blocs.
Although criticism of Mercosur is pertinent, it is noteworthy to stress that integration should be more broadly viewed and issues beyond trade should also be considered. Although highly relevant, trade is not the only object of regional integration, which also involves security, culture and education. Moreover, the bloc has progressed at different paces in each sector, similarly to other regional integration mechanisms, including the European Union (EU).
Regarding the first criticism, the bloc is said to have failed in promoting economic integration among its member countries and the recent drop in intra-bloc trade, at least in relative terms, has been highlighted. The main reason seems to be the protectionist attitude of the Government of Argentina. In fact, both for Brazil and the State of Rio Grande do Sul, the Mercosur countries have significantly reduced their share in recent years due to the exceptional performance of exports to China.
However, stating that Mercosur has been ineffective or has lost its relevance is not totally true, especially when the historical data are expanded. Despite sharing borders which extend for more than 1,200km, Brazil and Argentina, until the 1990s, lacked relevant and lasting economic cooperation. For decades, Brazil’s main trade partners were the United States and West Germany. Moreover, the dynamics of bilateral relations between Brazil and Argentina has always been marked by ephemeral cooperation initiatives and the persistence of a rivalry logic.
The figure below shows that bilateral trade between Brazil and Argentina reached historic levels after the creation of Mercosur in 1991. In addition, a rise in trade can also be traced back to the early 1960s, which was subsequently discontinued. The creation of the Latin American Free Trade Association (LAFTA), a tripartite initiative between Brazil, Argentina and Mexico, explains that inflection. However, as governments lacked interest in maintaining the project, regional trade turned back to previous standards, which can be a warning to the proposers of the dissolution of Mercosur.
Mercosur was a path for the consolidation of multi-sectoral efforts of rapprochement between Brazil and Argentina initiated by the end of the Brazilian civil-military dictatorship. Actually, moments of greater optimism can be outlined, such as in the early 1990s, during the formalization of the bloc, as well as other critical phases, such as the devaluation of the real (the Brazilian currency) in 1999, which deeply disappointed the other Mercosur members, and shortly after that, when Argentina experienced a severe economic and social crisis. The recent stagnation in terms of value of trade flows certainly causes apprehension, but it is worth observing that the imposition of import quotas on Brazilian products by the Government of Argentina is a measure of trade protection in accordance with the rules of the World Trade Organization (WTO) in case a sudden surge in imports harms a given sector of the economy or its balance of payments, if proved the causal nexuses between them.
Beyond the trade issue, an institutional framework has been gradually established for implementing cooperation projects in several issues such as policy, education, culture, security, among others. In addition, the institution of the democracy clause by means of the Ushuaia Protocol (1998), and more recently the creation of the Mercosur Parliament, denotes the political commitment of governments to the democratic values and institutions, bringing together citizens in a more effective fashion. Although the deadline for parliamentary elections by direct vote has been extended to 2020, in Paraguay two elections have already been held (2008 and 2012).
Regarding the issue of costs, “mercopessimists” assert that Brazil is the most affected nation in the bloc. However, it should be noted that in many of the cases of formation of regional coalitions, the most powerful nations (in economic, political or military terms) are the proponents of regional integration initiatives, such as in the Franco-German condominium in the EU, Russia in the Eurasian Union, the United States in the North American Free Trade Agreement (NAFTA) and China in the negotiations of the Comprehensive Economic Partnership for East Asia. In all these cases, larger nations have granted some tangible or immediate advantages to smaller partners so as to increase the attractiveness of the bloc. For example, in the European Community and in Mercosur, the headquarters of the integration mechanisms lay outside the territory of the major nations: Brussels (Belgium) and Montevideo (Uruguay), respectively, attend to this function.
The benefits or concessions directed to smaller countries in any process of economic integration is usually explained by the fact that the economies of these countries, in many cases, lack the degree of competitiveness of the enterprises of the larger ones, which typically operate on a much larger scale and can explore opportunities faster than their counterparts. Another argument advanced by Uruguayan and Paraguayan politicians and negotiators is that their countries are more prone to trade diversion after the imposition of a common external tariff. According to this view, smaller countries tend to be more damaged, because their economies are normally more dependent on foreign trade than those of the bigger ones.
Adhering as minority partners, the more fragile nations in economic, demographic or territorial terms need to rely on tangible and immediate benefits to bring to bear their participation in the regional integration project. In the case of Mercosur, it is observed that the main political gains could only be obtained by Brazil, the only one that can rise to a global player status. If the integration process is proven to be successful, the Brazilian companies would be the most favored ones, Brazil would be a global power and in a better position to own a permanent seat at the United Nations Security Council. Therefore, it is expected that the actor with higher stakes in Mercosur should bear a greater part of its costs, in order to mitigate regional disparities and promote intra-bloc economic growth. It is not reasonable to imagine that Uruguayans, Paraguayans, Venezuelans and Argentines would desire to take part in a group led by Brazilians without obtaining material advantages in return.
A third set of criticism argues that Mercosur has hampered negotiations of trade agreements with other countries or blocs because of alleged low willingness of some of its members to strengthen relations with other countries. From this perspective, Brazil should abandon its regional commitments and alone conduct negotiations with the European Union and the United States. However, in this case, a complex yet common dilemma in international politics can be pointed out. Actually, it is possible to admit that any agreement between Brazil and the European Union may be more comprehensive in terms of content, but it is also likely that its terms will be more unequal than those of an agreement between blocs. The bargaining power tends to be higher when its actors prefer acting together to negotiating separately, but it is also likely that the final agreement will exhibit a more limited thematic scope.
This way, the 25 years of existence of Mercosur should be evaluated concurrently from both political and economic perspectives, considering their synergies. Analyzing its dimensions separately means viewing it as the individualized strategies adopted by each of its members in a zero-sum game. Although the economic dimension of Mercosur has been used as a gauge of its success due to how easy it is to measure the volumes and values of its trade flows, it is imperative to highlight that any economic agreement is preceded by some sort of political understanding to mitigate the differences inherent in the integration process. For this reason, the political dimension of integration in Mercosur plays an important role. As its institutions are consolidated as integration and conflict resolution forums in the different areas of their respective governments, opportunities are created both to reduce costs and to increase the gains from the integration between its member countries.
