Mercosur - Changing Course?


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Case Details:

Case Code : BENV002
Case Length : 19 Pages
Period : 1991-2005
Pub Date : 2006
Teaching Note :Not Available
Organization : -
Industry : -
Countries : Latin America

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Background

Efforts to integrate the Latin American economies had been made on and off since the beginning of the 1960s. The Latin American Free Trade Association (ALALC) was created, in 1960, by Argentina, Brazil, Chile, Mexico, Paraguay, Peru and Uruguay (later Bolivia, Colombia, Ecuador and Venezuela joined as well).

It had the ambitious aim of creating a common market in Latin America. In 1980, ALALC was replaced by and reorganized into the Latin American Integration Association (ALADI) with the objective of creating favorable conditions for the establishment of a common market.

As ALALC could not make much multilateral progress in the 20 years of its existence, it was decided to replace it with ALADI, which facilitated bilateral agreements and joint actions between countries to foster closer economic ties...

Creation of Mercosur: The Initial Years

As Brazil and Argentina were progressing on the path toward a common market with closer economic and political cooperation, Uruguay and Paraguay, their smaller neighbors also joined in. Thus, with the signing of the Treaty of Asuncion, in Paraguay, on March 26, 1991, Mercosur was formed.

The creation of Mercosur was a significant step for these countries. It coincided with US President George H. W. Bush's proposal known as the Enterprise for the Americas Initiative (EAI) in 1990...

Mercosur: An Incomplete Customs Union

Although Mercosur achieved remarkable progress in the first four years, there were several aspects of the FTA that were left unfinished. Several rules made at Mercosur to move towards integration remained on paper and were not incorporated into the national laws of the member states. After 1995, Brazil and Argentina in particular, showed increasing reluctance to work towards dismantling the remaining tariff and other non-tariff barriers and harmonizing macro economic policies, and instead resorted to rhetoric regarding the virtues of strengthening Mercosur. Integration was no longer a driving force among the major partners as a priority in their economic agenda. As a result the process of regional integration took a back seat...

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