Mercosur

Suppose you're running a lemonade stand outside your house. Things are going...okay. You're making just enough money to break even. You soon find out that your next-door neighbor also has plans to run a lemonade stand. You don't always get along, but you realize that if you pool your money, you can share a stand—and maybe even earn more money together than you ever could separately.

This scenario is the fundamental force driving Mercosur, a neoliberal common market trade bloc located primarily in South America. Mercosur, created in 1991, has allowed its member states to compete in the global marketplace in ways they could otherwise not have done on their own. Let's take a look at Mercosur's purpose, its member countries, and the advantages and disadvantages behind such a union.

Mercosur Definition in Geography

To leverage and enhance their ability to compete economically on a global scale, several South American countries forged a trade bloc called Mercosur.

"Mercosur" is actually an acronym of sorts; it is an abbreviation of the Spanish name for the trade bloc, Mercado Común del Sur, which means "Common Market of the South." However, Spanish is not the only official language used by Mercosur member states. In Portuguese, the trade bloc is called Mercado Comum do Sul (Mercasol), and in Guarani, the trade bloc is called Ñemby Ñemuha.

Mercosur is, in many respects, similar to other regional trade blocs like the European Union (EU) and the United States–Mexico–Canada Agreement (USMCA, which replaced NAFTA). Like USMCA, Mercosur is first and foremost an economic association, although member states do not have a universal currency.

However, Mercosur is much more than a mere trade agreement. In many respects, Mercosur is more akin to a formal union of nations like the EU or the African Union. Mercosur enables its member states to act as one, united economy on the world stage (unlike USMCA) and offers significant advantages to citizens of Mercosur member states.

Mercosur Treaty

Mercosur was not the first attempt at a neoliberal trade agreement in South America. An immediate forebearer of Mercosur, for example, was the Buenos Aires Act of 1990, which was meant to integrate the economies of Argentina and Brazil. The Buenos Aires Act was supplanted by the Treaty of Asunción around a year later.

The Treaty of Asunción

The Buenos Aires Act was only meant for Brazil and Argentina. The Buenos Aires Act was dropped because Paraguay and Uruguay had shown interest in the concept of economic integration. On March 26, 1991, the four nations created a trade bloc through the signing of the Treaty of Asunción, named after the capital of Paraguay.

Fig. 1 - The official flag of Mercosur

For all intents and purposes, the Treaty of Asunción is the Mercosur Treaty. The treaty established a common, or shared, market between the four South American countries that eliminated tariffs and allowed for free trade.

In 1994, the Treaty of Asunción was amended and clarified by the Protocol of Ouro Preto. The protocol clarified some aspects of the economic integration process.

Mercosur's Purpose

According to Mercosur itself, Mercosur's purpose is to combine associated national economies into a shared economy that can effectively compete internationally.

In other words, the economies of countries like Argentina and Brazil are stronger together than they are apart. The purpose of Mercosur is to enable its members to have greater economic influence as a collective than they would individually.

For example, in 2021, Argentina on its own had the 26th largest economy in the world (in terms of total gross domestic product). By comparison, Mercosur as a whole has the fifth largest economy in the world, and Mercosur may continue growing. Notably, Mercosur has been pursuing a free trade agreement with the European Union.

However, much of Mercosur's premise revolves around national or internal development. What is the point of joining forces if the group itself is a mess? Therefore, Mercosur has three main goals:

1. boosting international trade
2. encouraging internal economic development
3. maintaining internal human rights and democracy

As we've mentioned, Mercosur promotes internal economic development by allowing free trade between members and offering exclusive rights to Mercosur citizens—more on that a bit later.

Mercosur Countries

There are four tiers of membership within Mercosur: member states, associated states, observer states, and suspended states.

We've mentioned the original four—Brazil, Argentina, Paraguay, and Uruguay. These are considered permanent member states. Member states have voting representation in the Mercosur Parliament, which makes decisions for Mercosur as a whole.

Associated states are not quite full member states, but do enjoy free trade agreements with Mercosur member states. Associated states can hold seats in the Mercosur Parliament, but cannot vote. Associated states include Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname.

Observer states have a much more limited ability to participate in Mercosur. Observer states include Mexico and New Zealand.

Venezuela is the only suspended state. In 2012, Venezuela was granted full membership into Mercosur and brought with it a huge supply of fossil fuel reserves. However, Venezuela was indefinitely suspended in 2016 due to accusations of human rights violations and anti-democratic practices. The suspension was reaffirmed in 2017. Despite being nominally suspended, Venezuela still maintains free trade and free movement with the member states.

Fig. 2 - Member states are in dark green; associated states are in light green; observer states are in blue; suspended states are in red

You've probably noticed a few trends with regard to the Mercosur states:

• The majority of states are located in the Southern Hemisphere
• The majority of states are located in South America
• The majority of states have a shared Latin American heritage

There are exceptions to each of these trends. For example, Mexico, Venezuela, Guyana, and Suriname are located either mostly or entirely in the northern hemisphere. Neither Mexico nor New Zealand are located in South America. Additionally, Suriname, Guyana, and New Zealand are not usually considered Latin American because they do not have extensive historical relationships with either the Spanish Empire or the Portuguese Empire.

Advantages and Disadvantages of Mercosur

As we mentioned before, Mercosur is the fifth-largest economy in the world. There is a significant economic advantage for the member states who combine their economies to compete together on the global stage. As individual countries, they do not have as much worldwide impact. As Mercosur, they can attract monetary attention.

Fig. 3 - The Mercosur headquarters in Montevideo

But perhaps the most significant advantages of Mercosur are internal rather than external. Mercosur citizenship functions similarly to EU citizenship, although Mercosur citizenship is more limited. Any citizen of a Mercosur member state is also a Mercosur citizen. Mercosur citizens have freedom of movement between Mercosur states, meaning a citizen of Paraguay, for example, does not need a visa or passport to travel to Brazil (though citizens do need some proof of citizenship). Additionally, Mercosur citizens can be employed in any Mercosur state and it is relatively easy for Mercosur citizens to be granted permanent residency in any Mercosur state.

One of the biggest disadvantages of Mercosur is the political and economic disparities between member nations. What happens in one country can affect the other countries. Economically, Brazil and Argentina are "carrying the team," so to speak; they bring more money to the table than Paraguay and Uruguay. Additionally, political instability can make the entire operation fragile. In 2012, Paraguay was temporarily suspended in response to the controversial expulsion of President Fernando Lugo. Venezuela remains suspended.