Mercosul

The Common Market of the South (Mercosul in Portuguese, Mercosur in Spanish) is an economic, political and social integration project created by Argentina, Brazil, Paraguay and Uruguay.

In terms of economic integration the bloc already functions as a customs union, though in accordance with the Asunción Treaty of 1991 its ultimate objective is to become a common market.

The four members of Mercosul have a total population of around 240 million and a combined GDP of more than one trillion dollars.

POPULATION, GDP and GDP per capita
COUNTRY	POPULATION (in millions)	GDP at constant market prices (in US$bn 2005)	GDP PER CAPITA (in US$ 1999)
Argentina	38.592	313.783	8,130.8
Brazil	187.597	670.421	3,573.7
Paraguay	6.216	8.057	1,296.2
Uruguay	3.455	21.020	6,083.9
MERCOSUL	235.86	1,013.281	4,296.1

Source: Economic Commission for Latin America and the Caribbean (ECLAC)

Recent trade developments in Mercosul

Brazil's total trade (imports plus exports) with the other members has increased substantially in the last couple of years, rising from US$15.3bn in 2004 to US$18.8bn in 2005, then US$22.9bn in 2006. Total trade in the first four monaths of 2007 was more than US$8bn, which suggests the end-of-year figure will constitute another notable increase.

Brazil's trade with its Mercosul partners forms a significant proportion of its total foreign trade. In 2006, exports to Mercosul countries accounted for 10.15% of total exports, while the figure for imports was 9.82%. Only the European Union is a more significant trading partner with regard to both exports (22.53%) and imports (22.12%). The United States is the source of a higher proportion of imports (16.08%), but purchases a lower proportion of Brazil’s exports than the other Mercosul countries.

Associate members

In addition to its member states Mercosul has five associate members: Bolivia, Chile, Colombia, Ecuador and Peru. These countries are able to participate as invited guests in Mercosul meetings but do not have the right to vote.

The existence of associate members derives from the commitment on the part of Mercosul to deepening the regional integration process, and its recognition of the importance of developing and intensifying relations with members of the Latin American Integration Association (ALADI). Members of ALADI can become associate members of MERCOSUL on the condition that they sign free-trade agreements with the bloc. Countries wishing to become associate members must also adhere to the Ushuaia Protocol on the Democratic Commitment in Mercosul, Bolivia and Chile, and to the Presidential Declaration on the Democratic Commitment of Mercosul.

Fund for the Structural Convergence and Institutional Strengthening of Mercosul

The Fund for the Structural Convergence and Institutional Strengthening of Mercosul (Focem), in operation since 30 December 2006, aims to promote increased competitiveness on the part of the smaller economies and less developed regions, stimulate social cohesion, and strengthen physical integration by means of infrastructure projects.

The Focem is made up of annual, non-refundable contributions from the four memebr countries, totalling US$ 100 million. Brazil is the biggest contributor, having provided 70% of the funds. The two smallest economies in Mercosul are the principal beneficiaries: Paraguay has received 48% of total Focem funds and Uruguay 32%. The remaining 20% has been allocated to projects in Brazil and Argentina.

In the first six months of 2007 the four members of Mercosul approved fifteen Focem projects, with a total value of more than US$ 90 million. Six of the projects were presented by Paraguay, six by Uruguay, two by the Mercosul Secretariat, and one ('Mercosul Free of Foot and Mouth Disease') was a shared project. The projects are in the areas of housing, transport, incentives to microbusinesses, biotechnology, technological capacity-building, institutional aspects of Mercosul, and sanitation.

By financing projedcts in the less developed regions of the bloc, the Focem could be considered the princial instrument for reducing asymmetries and strengthening the integration process.

The Mercosul Parliament

By facilitating the internalisation of aproved norms in the framework of Mercosul, and contributing to the preservation of institutional order and the protection of human rights in the region, the Mercosul Parliament helps reinforce the political-institutional dimesion of the integration process. It is anticipated that the parliament will closely follow the integration process, producing judgements, recommendations and reports with regard to the norms being drawn up and the international negotiations in which Mercosul participates.

The state parties decided that until December 2010 the Mercosul Parliament should be made up of eighteen members of parliament from each countrry. Thereafter, in accordance with specific criteria to be decided upon by each individual member state, the members of the Mercosul Parliament will be directly elected by secret ballot in a system of universal suffrage.

On 14 December 2006 the opening of the Mercosul Parliament took place in Brasilia. The first working session took place on 7 May 2007 in Motevideo, the seat of the parliament. The parliament meets for one session per month.

Adhesion of Venezuela

In Caracas on 4 July 2006, Venezuela and the state parties of Mercosul signed the Protocol for the Adhesion of the Bolivarian Republic of Venezuela to Mercosul. The adhesion of a new member is a landmark in the process of deepening South American integration. With the entry of Venezuela, Mercosul has a total population of more than 250 million, an area of 12.7 million square kilometres, GDP of mora than a trillion dollars (approximately 76% of the GDP of the whole of South America), and its foreign trade is worth more than US$300bn.

In its new configuration Mercosul becomes one of the world’s leading producers of food, energy and manufactured goods. This will contribute to achieving the goal of promoting integrated development, combating poverty and social exclusion, and providing a better standard of living for the populations of the members of Mercosul.

The increase in Mercosul-Venezuela trade flows will push forward the development of transport and communications infrastructure in the northern part of South America, and contribute to the deepening of economic, commercial and productive integration in the region.

Embassy of Brazil in London