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.

Mercosur Mercosur

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    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 a South American trade bloc that establishes free trade amongst member nations and can allow the member nations to act as a single entity for international trade.

    "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.

    Within the AP Human Geography framework, Mercosur is part of a new, emerging economic geography that revolves around increasing global trade. Check out our explanation on Economic Geography for more information!

    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.

    Mercosur, Mercosur Treaty, Mercosur Flag, StudySmarterFig. 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.

    A tariff is a tax imposed on items that are imported from or exported to other countries. Free trade eliminates tariffs.

    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 is an example of neoliberal economics, which primarily revolves around expanding marketplace opportunities and reducing trade barriers. Neoliberalism has become very important to the world economy over the past few decades—you might want to remember that tidbit for your AP Human Geography exam!

    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.

    Since its creation, [Mercosur]'s main objective has been to promote a common space that generates business and investment opportunities through the competitive integration of national economies into the international market.1

    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.

    Member StatesAssociated StatesObserver StatesSuspended States
    BrazilChileMexicoVenezuela
    ArgentinaBoliviaNew Zealand
    ParaguayColombia
    UruguayEcuador
    Guyana
    Peru
    Suriname

    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.

    Many of the associated states of Mercosur are full members of a separate trade bloc, the Andean Community. Although the Andean Community is a customs union, rather than a full common market, the disparate economic affiliations make it difficult for countries like Bolivia, Colombia, Peru, and Ecuador to fully integrate into Mercosur. However, all of the permanent member states of Mercosur are also associated states of the Andean Community.

    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.

    Mercosur, Mercosur Countries, Mercosur map, StudySmarterFig. 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.

    Mercosur, Mercosur headquarters, StudySmarterFig. 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.

    Mercosur - Key takeaways

    • Mercosur is a trade bloc and common market. Mercosur is a portmanteau of Mercado Común del Sur, which means "Common Market of the South."
    • Mercosur was established in 1991 through the Treaty of Asunción.
    • The purpose of Mercosur is to enable smaller economies to join together and increase their global economic leverage.
    • There are currently four member countries: Brazil, Argentina, Paraguay, and Uruguay. Venezuela is also a member, but is currently suspended. There are a further seven associated states and two observer states.
    • Mercosur offers member nations a significantly greater global economic presence than the individual nations have been capable of achieving on their own. Additionally, Mercosur citizens enjoy benefits such as freedom of movement. However, political and economic instability in Mercosur member states can make Mercosur itself unstable.

    References

    1. En pocas palabras. MERCOSUR. (2020, May 27). Retrieved from mercosur.int/quienes-somos/en-pocas-palabras/
    2. Fig. 2: Mercosur map (https://commons.wikimedia.org/wiki/File:MERCOSUR_Ortographic_Map_2020_with_Observer_States.png) by VevekVek (https://commons.wikimedia.org/wiki/Special:Contributions/VevekVek) licensed by CC BY-SA 4.0 (https://creativecommons.org/licenses/by-sa/4.0/deed.en)
    3. Fig. 3: Mercosur headquarters (https://commons.wikimedia.org/wiki/File:Sede_del_Mercosur_-_Montevideo,_Uruguay.jpg) by Inga (https://commons.wikimedia.org/wiki/User:Igna) licensed by CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0/deed.en)
    Frequently Asked Questions about Mercosur

    What is the meaning of the acronym "Mercosur"? 

    "Mercosur" is an abbreviation of the Spanish name for the trade bloc, Mercado Común del Sur, which means "Common Market of the South." 

    What are the benefits of Mercosur? 

    Mercosur enables member nations to combine to compete more effectively globally than they would be able to do individually. Citizens of Mercosur enjoy free movement within the member states, as well as fast-tracked employment and residency. 

    What are the three goals of the Mercosur? 

    Mercosur boosts international trade, encourages internal economic development, and supports human rights and democracy.

    How does Mercosur affect international trade? 

    Because Mercosur has access to numerous natural resources, it can serve as an attractive trading partner to other nations or trade blocs. Mercosur has the fifth largest economy in the world and is intent on growing. 

    Does Mercosur have freedom of movement? 

    Mercosur citizens have freedom of movement. Mercosur citizens do not need passports or visas to travel to other Mercosur member states, although they do require some proof of citizenship. 

    Test your knowledge with multiple choice flashcards

    Which of the following languages are official languages of Mercosur member states? Select all that apply.

    Which treaty or agreement officially established Mercosur? 

    Which nation was suspended from Mercosur in 2016 over concerns about human rights? 

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