Mercosur - Role and Potential

Role and Potential

Some South Americans see Mercosur as giving the capability to combine resources to balance the activities of other global economic powers, especially the North American Free Trade Agreement (NAFTA) and the European Union. The organization could also potentially pre-empt the Free Trade Area of the Americas (FTAA); however, over half of the current Mercosur member countries rejected the FTAA proposal at the IV Cumbre de las Américas (IV Summit of the Americas) in Argentina in 2005.

The development of Mercosur was arguably weakened by the collapse of the Argentine economy in 2001 and it has still seen internal conflicts over trade policy, between Brazil and Argentina, Argentina and Uruguay, Paraguay and Brazil, etc. In addition, many obstacles are to be addressed before the development of a common currency in Mercosur.

In 2004, Mercosur signed a cooperation agreement with the Andean Community of Nations trade bloc (CAN) and they published a joint letter of intent for future negotiations towards integrating all of South America. The prospect of increased political integration within the organization, as per the European Union and advocated by some, is still uncertain. Bolivia, also a member of CAN and an associate member of Mercosur before the UNASUR process started, plays a crucial part in relations, says Marion Hörmann, since Bolivia is traditionally seen as a mediator between the Andean countries and the rest of South America. Regional Integration: Key Role for Bolivia

The bloc comprises a population of more than 270 million people, and the combined Gross Domestic Product of the full-member nations is in excess of US$3.0 trillion a year (Purchasing power parity, PPP) according to International Monetary Fund (IMF) numbers, making Mercosur the fifth-largest economy in the World. It is the fourth-largest trading bloc after the European Union.

The working of Mercosur has not met with universal approval within interested countries. Chile has to a certain extent preferred to pursue bilateral agreements with trading partners, and there have been calls from Uruguayan politicians for this example to be followed.