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1,600 | <s>[INST] Full text: THINK back 20 years, and the [/INST] southern part of South America was both an economic backwater and an armed camp. </s> |
1,601 | <s>[INST] Its countries were ruled by military dictatorships, eyeing each other [/INST] with suspicion and hostility, even threats of war, across borders sealed against all but a trickle of trade. </s> |
1,602 | <s>[INST] Think back just seven years, and the dictatorships had given way to [/INST] civilian democracies, but (Chile apart) the region's economies remained wedded to beggar-thy-neighbour protectionism, and were prostrated by inflation, instability and debt. </s> |
1,603 | <s>[INST] Barring accidents, by 200 an integrated, growing and relatively open market of at least 24om people, with [/INST] an output of well over $i trillion, will stretch from the Brazilian north-east to Chile's Pacific coast, over what can be called (taking some geographical liberty with Brazil) South America's southern cone. </s> |
1,604 | <s>[INST] At its heart, Brazil and Argentina, which between them account for more than half of [/INST] Latin America's GDP, should have a common foreigntrade policy and, for all but a handful of products, a common external tariff, with increasingly convergent, and market-friendly, macroeconomic policies. </s> |
1,605 | <s>[INST] United with them in a customs [/INST] union will be their small neighbours Paraguay and Uruguay. </s> |
1,606 | <s>[INST] And most, maybe all, of the rest [/INST] of South America will be linked to this core by free-trade agreements. </s> |
1,607 | <s>[INST] As investors, both local and foreign, exploit the potential for growth, scale and specialisation offered [/INST] by this new market, this southern cone will be emerging as an agribusiness and mining superpower, with a diversified and modernised manufacturing industry fuelled by cheap and abundant energy. </s> |
1,608 | <s>[INST] It will have forced its way back on to the world economic and business map, after an absence of two generations, and [/INST] be preparing, led by a once self-doubting but already confident Brazil, to take its place, with the rest of Latin America, the Caribbean, Canada and the United States, in a freetrade area, starting around zoos, that will embrace the entire western hemisphere. </s> |
1,609 | <s>[INST] The big push came from the formation of the [/INST] southern common market, Mercosur (in Spanish; Mercosul in Portuguese), by Argentina, Brazil, Paraguay and Uruguay in 1991. </s> |
1,610 | <s>[INST] True, some of the change [/INST] began, and would have gone on, anyway. </s> |
1,611 | <s>[INST] Latin American economies could not stay stuck for [/INST] ever in the age of state industry, state inter vention and isolated markets. </s> |
1,612 | <s>[INST] And Mercosur is only one in a web of international agreements-31 of them, [/INST] by the count of ECLAc, the United Nations Economic Commission for Latin America and the Caribbean-signed since 199o to liberalise trade within the region. </s> |
1,613 | <s>[INST] Meanwhile, older but moribund sub-regional groups, [/INST] such as the Andean Group soon to be "Community"-are reviving. </s> |
1,614 | <s>[INST] Yet Manuel Marin, the European commissioner who handles [/INST] relations with the region, is right to call Mercosur the "hard kernel" of its integration. </s> |
1,615 | <s>[INST] This is the world's fourth-largest integrated market, [/INST] after NAFTA (the North American free-trade area), the European Union and Japan. </s> |
1,616 | <s>[INST] Intra-Mercosur trade has soared; combined GDP, despite ups and downs, has grown by [/INST] an annual average of 3.5% since 199o; and at $5,ooo its income per head is 3o% above that of Latin America as a whole. </s> |
1,617 | <s>[INST] Above all, Mercosur is seen [/INST] throughout the region as the leader in the field. </s> |
1,618 | <s>[INST] It is still not yet a full free-trade area, let alone a customs union, [/INST] applying a common external tariff; its "common market" tag expresses only an aspiration-toward free movement not just of goods but of services, capital and labour-not fact. </s> |
1,619 | <s>[INST] Even so, this is the world's most ambitious [/INST] scheme of regional integration since the birth of the European Economic Community in 1957. </s> |
1,620 | <s>[INST] Mercosur offers a framework and a timetable (and [/INST] a snappy brandname that has become an attractive visiting-card in the rest of the world). </s> |
1,621 | <s>[INST] And it has won political commitment: despite some backsliding and [/INST] a few tense moments, its members, by and large, have stuck to their undertakings and kept the process moving. </s> |
1,622 | <s>[INST] It is too early to [/INST] say with confidence that Mercosur is irreversible. </s> |
1,623 | <s>[INST] Much can yet go wrong: Latin America's history has seen many [/INST] visionary schemes for integration that foundered on local rivalries, economic turbulence, outside meddling or their own flawed economic assumptions. </s> |
1,624 | <s>[INST] The first is that Mercosur is the creation of democratic governments; it [/INST] can fairly be seen not as a short-term expedient but as a long-term project for integration between the peoples they represent. </s> |
1,625 | <s>[INST] Second, it is based on a commitment to trade liberalisation, [/INST] and is being taken forward by governments pledged to broadly sound macroeconomic policies that have tamed inflation. </s> |
1,626 | <s>[INST] Earlier integration schemes, such as the Latin American free-trade association [/INST] of 196o, did increase trade among members, especially in manufactures, through the granting of selective bilateral preferences. </s> |
1,627 | <s>[INST] But their intention was only to widen [/INST] protected markets, in an ultimately doomed effort to make import-substitution work better. </s> |
1,628 | <s>[INST] In contrast, Mercosur's integration is predicated on [/INST] market opening and export-based growth; "open regionalism", as it is known. </s> |
1,629 | <s>[INST] The clearest single measure of Mercosur's [/INST] progress is the growth in trade that it has prompted. </s> |
1,630 | <s>[INST] From $4 billion in 199o, trade among [/INST] its four members more than tripled to $14.5 billion by 1995. </s> |
1,631 | <s>[INST] There is plenty of room for more: in 1995, intra-group trade [/INST] amounted to only 1.6% of Mercosur's GDP, compared with 4.5% for the nrA countries and 14% for the Eu. </s> |
1,632 | <s>[INST] Trade has flowered partly because the end of [/INST] inflation, followed by economic growth, produced consumer booms, first in Argentina and then in Brazil. </s> |
1,633 | <s>[INST] But another reason is that Mercosur has [/INST] lifted artificial barriers that had long restrained commerce between those two countries. </s> |
1,634 | <s>[INST] Between them, they account for 97% of Mercosur's [/INST] GDP, and they have at last recognised that they are natural trading partners. </s> |
1,635 | <s>[INST] The assumptions changed in Asuncion When in 1494 Queen Isabel of Castile and King Joao II of Portugal made [/INST] the Treaty of Tordesillas, fixing a boundary between their respective empires at a point 370 leagues west of the Cape Verde islands, they created what turned out to be one of history's less porous frontiers. </s> |
1,636 | <s>[INST] Though groups of marauders, and then settlers, pushed Brazil's frontier [/INST] further west into the Amazon, the Mato Grosso and to the river Uruguay, there it came to rest. </s> |
1,637 | <s>[INST] While exSpanish South America fractured into separate [/INST] countries after achieving independence in the early i9th century, Brazil remained united. </s> |
1,638 | <s>[INST] A struggle between Brazil and Argentina for control of the [/INST] territory north of the river Plate was settled when Uruguay emerged as a buffer state, after British mediation. </s> |
1,639 | <s>[INST] And Brazil, Argentina and Uruguay ganged up [/INST] in the 186os in a terrible war which humbled an expansionist Paraguay. </s> |
1,640 | <s>[INST] Thereafter, the two big neighbours paid [/INST] remarkably little attention to each other (except on the football field). </s> |
1,641 | <s>[INST] Argentina rose as an agricultural power, and then declined; [/INST] Brazil got on with the business of filling its huge territory with people and industry. </s> |
1,642 | <s>[INST] Until 1985, apart from a couple of border encounters, only [/INST] three Brazilian presidents had ever visited Argentina, and only two Argentine rulers had made the trip the other way. </s> |
1,643 | <s>[INST] Sporadic attempts to increase bilateral trade bore [/INST] only modest fruit, in the face of military and political mistrust. </s> |
1,644 | <s>[INST] That changed when civilian governments took charge [/INST] again-in Argentina in 1983, in Brazil in 1985-after long periods of military rule. </s> |
1,645 | <s>[INST] The two new presidents, Raul Alfonsin and Jose Sarney respectively, signed [/INST] agreements aimed first at strengthening democracy and reducing military tensions; by allowing mutual inspection of nuclear facilities, for example. </s> |
1,646 | <s>[INST] But they also tried to revive sick and still-protectionist economies [/INST] through selective bilateral trade preferences, in the form of sectoral agreements, while maintaining restrictions on imports from other countries. </s> |
1,647 | <s>[INST] The process then underwent a vital change: the election of Carlos Menem [/INST] in Argentina in 1989, and of Fernando Collor in Brazil in 199o, brought to power governments intent on trade opening and economic reform. </s> |
1,648 | <s>[INST] In place of notions of managed trade and industrial policy, when Mercosur was born in 1991, [/INST] under the Treaty of Asuncion (capital of Paraguay), it was as an instrument to achieve free trade among members and to seek the efficiencies needed for competition in the world economy. </s> |
1,649 | <s>[INST] The earlier agreements had [/INST] involved negotiating exceptions to general tariff protection. </s> |
1,650 | <s>[INST] The Mercosur treaty turned this process inside-out, requiring [/INST] automatic and progressive tariff cuts, and allowing protection only that was both selective and temporary. </s> |
1,651 | <s>[INST] The decision in 1994 to proceed to a [/INST] customs union involved a second debate as to how open Mercosur should be. </s> |
1,652 | <s>[INST] Argentina, like Uruguay and Paraguay, had low tariffs on capital [/INST] goods; one of its aims in opening its economy was to allow its firms cheap access to imported technology. </s> |
1,653 | <s>[INST] In the event, the agreed common external tariff (CET) [/INST] was a compromise: Argentina and the others agreed to raise tariffs, Brazil to bring them down. </s> |
1,654 | <s>[INST] Today, Mercosur's average trade-weighted external tariff is 14%-well below that [/INST] of any of its members (except Paraguay) in 199o, and broadly comparable to current Latin American norms. </s> |
1,655 | <s>[INST] A customs union should help to deepen Mercosur's internal [/INST] free-trade area: it obviates the need to determine the national origin of goods traded between members. </s> |
1,656 | <s>[INST] But, as free-traders object, Mercosur's external [/INST] tariffs vary widely from low to high, so distorting relative prices. </s> |
1,657 | <s>[INST] ChileLatin America's fastest-growing economy, and one that [/INST] liberalised trade earlier and more thoroughly than did others-offers a contrast. </s> |
1,658 | <s>[INST] Though Chile's external tariff of ii% is only slightly lower than [/INST] Mercosur's, it is applied uniformly to almost all imports (bar the rising number that come in tariff-free, under bilateral trade deals). </s> |
1,659 | <s>[INST] Still, the free-trade agreement that Mercosur reached [/INST] with Chile last June, though highly complex, underlines its relative openness. </s> |
1,660 | <s>[INST] Mercosur is close to a similar deal with Bolivia, and talks are due [/INST] with the Andean Group as such this month, to start setting a framework for individual deals with its other members (Colombia, Ecuador, Peru and Venezuela). </s> |
1,661 | <s>[INST] Trade, politics and diplomacy Some of the rise in trade within Mercosur represents a diversion [/INST] of trade from outside sources: fo instance, the sale of cars between Brazil and Argentina; or, more deliberately, Brazil's decision to buy oil from Argentina rather than Iraq. </s> |
1,662 | <s>[INST] But the rise in intra-group trade has gone [/INST] hand-in-hand with an accelerating rise in Mercosur's trade with the rest oi the world. </s> |
1,663 | <s>[INST] Economists agree that, overall, Mercosur has been [/INST] more trade-creating than trade-diverting, the test of whether regionalism is open or closed. </s> |
1,664 | <s>[INST] It has had other benefits too: without the growth in its [/INST] exports to Brazil, Argentina would have suffered even worse than it did from the knock-on impact of Mexico's 1994-95 currency collapse. </s> |
1,665 | <s>[INST] While Mercosur's exports to much of the rest of [/INST] the world are dominated by primary products, trade liberalisation has helped to create local markets for manufactures. </s> |
1,666 | <s>[INST] These (especially cars and car parts, chemicals and machinery) make up a sizeable part of [/INST] intra-group trade: almost half of Argentina's $5.6 billion of exports to Brazil last year, and almost 85% of the $4 billion of goods that Brazil sent in return. </s> |
1,667 | <s>[INST] Much of this is intra-industry trade, as similar firms, or branches [/INST] of the same firm, swap products or components, taking advantage of the specialisation made possible by a bigger market. </s> |
1,668 | <s>[INST] This process is helped along by the hefty [/INST] foreign investment that Mercosur countries are attracting, some from each other, but more from outside. </s> |
1,669 | <s>[INST] It totalled around $6 billion in both 1994 and 1995, and is likely to go [/INST] higher this year, as multinationals, especially in the car, chemical and food industries, upgrade existing plants, build new ones or enter a region that they used to ignore. </s> |
1,670 | <s>[INST] Democracy and military detente were a precondition [/INST] of success in the project, but have also benefited from it. </s> |
1,671 | <s>[INST] Brazil and Argentina have moved from [/INST] renouncing their incipient nuclear-weapons programmes to conducting joint military exercises. </s> |
1,672 | <s>[INST] Brazil's elderly aircraft-carrier (which lacks planes) has exercised [/INST] with the airmen of Argentina's navy (whose aircraft-carrier has been mothballed for several years). </s> |
1,673 | <s>[INST] For the first time, small units from the [/INST] two armies are due shortly to conduct a joint training exercise in peacekeeping. </s> |
1,674 | <s>[INST] But for Mercosur, Paraguay would this year almost [/INST] certainly have gone back to military rule, setting a dangerous precedent for Latin America. </s> |
1,675 | <s>[INST] When in April a rebellious general moved against President Juan Carlos [/INST] Wasmosy, Mercosur foreign ministers descended on Asuncion and demonstrated to the upstart that he would face diplomatic and economic isolation. </s> |
1,676 | <s>[INST] Mercosur's presidents promptly agreed that, as [/INST] in the Eu, democracy should be a formal condition of membership. </s> |
1,677 | <s>[INST] Revealingly, elements of Chile's right-wing opposition, close to General [/INST] Pinochet and the armed forces, cited this as a reason to oppose their country's deal with Mercosur. </s> |
1,678 | <s>[INST] Another indicator of Mercosur's effectiveness [/INST] is its diplomatic pulling power in the wider world. </s> |
1,679 | <s>[INST] Last December, it signed a framework agreement [/INST] with the EU, its largest single source of external trade and investment. </s> |
1,680 | <s>[INST] The deal is not all that some enthusiasts [/INST] in Mercosur hoped for, but it sets a tentative target of free trade by 2005. </s> |
1,681 | <s>[INST] It now looks increasingly likely that the [/INST] planned western-hemisphere free-trade area will involve an agreement between NAFrA and Mercosur. </s> |
1,682 | <s>[INST] And the Japanese, during a visit to the region [/INST] by their prime minister, Ryutaro Hashimoto, in August, expressed interest in starting a dialogue with Mercosur. </s> |
1,683 | <s>[INST] In sum, Mercosur has [/INST] got off to a surprisingly good start. </s> |
1,684 | <s>[INST] Yet this survey will argue that if it is [/INST] to continue to prosper, it faces tougher challenges than those it has surmounted so far. </s> |
1,685 | <s>[INST] The first is the maintenance of macroeconomic stability, open trading regimes and [/INST] economic growth in Brazil and in Argentina; for while Mercosur can contribute to all of these, it cannot flourish without them. </s> |
1,686 | <s>[INST] The second is to make an integrated market a reality by improving transport [/INST] links and customs procedures, standardising or demolishing a mountain of rules and regulations, and striking the right balance between the nation state and common-market institutions. </s> |
1,687 | <s>[INST] All of these issues are likely [/INST] to test its members' commitment to their common project. </s> |
1,688 | <s>[INST] ___ Document 188 of 400 A lopsided [/INST] union Author: Reid, Michael Publication info: The Economist 341.7987 (Oct 12, 1996): S9. </s> |
1,689 | <s>[INST] accountid=28034 Abstract: Brazil is Mercosur's dominant [/INST] power, yet much of Brazil does not much care. </s> |
1,690 | <s>[INST] One reason for Brazil's relative aloofness [/INST] from Mercosur is that it is a genuinely global trader. </s> |
1,691 | <s>[INST] Full text: NOBODY (except in France, [/INST] maybe) can doubt that Germany is the European Union's paramount member. </s> |
1,692 | <s>[INST] Brazil, by contrast, towers over [/INST] Mercosur, rather as the United States dominates NAFTA. </s> |
1,693 | <s>[INST] And though not all its citizens agreed, the United States had strong geopolitical [/INST] motives, as well as business ones, for drawing Mexico under its wing: it wanted more influence over a large and potentially unstable neighbour. </s> |
1,694 | <s>[INST] In contrast, Brazil and Argentina have never fought [/INST] a war, nor does either see the other as a source of instability. </s> |
1,695 | <s>[INST] That may make integration between them easier, [/INST] but, at first sight, it also makes the need for it less compelling. </s> |
1,696 | <s>[INST] Ask a reasonably well-informed inhabitant of Sao Paulo [/INST] what Mercosur means for Brazil, and he is likely to reply "not much". </s> |
1,697 | <s>[INST] Ask the same question ofa north-easterner, [/INST] and he will answer that Mercosur is simply irrelevant. </s> |
1,698 | <s>[INST] Its name doesn't help: Brazilians tend [/INST] to assume that it concerns only the south of their country. </s> |
1,699 | <s>[INST] Repeat the question in Buenos Aires, [/INST] and you have more chance of an enthusiastic answer. </s> |
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