MERCOSUR

Presentation by Marta, Ryan, Simon, Boleslaw and Mariella

MERCOSUR - Who is in?MERCOSUR - Who is in?

MERCOSURMERCOSUR

Mercado Común del Sur - Mercado Común del Sur - Southern Common Market

Founded in 1991 Members: Argentina, Brazil, Paraguay and

Uruguay New in 2006: Venezuela Associated members: Bolivia, Chile, Columbia,

Ecuador and Peru Free Trade Area & Plans for Single Market 220 million consumers and a GDP of $ 1 trillion

MERCOSUR – EU: MERCOSUR – EU: BackgroundBackground

Always strong ties due to colonisationAlways strong ties due to colonisation Latin America pinned to European economies (e.g. Latin America pinned to European economies (e.g.

WW I)WW I) Uneven relationship favouring EuropeUneven relationship favouring Europe Character of relations: bilateral ties and multilateral Character of relations: bilateral ties and multilateral

co-operation within the framework of WTOco-operation within the framework of WTO Relationship based on the EU-MERCOSUR Relationship based on the EU-MERCOSUR

Interregional Framework Co-operation Interregional Framework Co-operation AgreementAgreement between the EC and its Member States between the EC and its Member States and the MERCOSUR and its Party States (15 and the MERCOSUR and its Party States (15 December 1995, Madrid)December 1995, Madrid)

Into force on 1 July 1999 however the provisional Into force on 1 July 1999 however the provisional application already took place from 1996 onwards. application already took place from 1996 onwards. The Agreement consists of three main elements: The Agreement consists of three main elements: political dialogue, co-operation and trade issuespolitical dialogue, co-operation and trade issues

Since 2000 the EU and MERCOSUR are in the process Since 2000 the EU and MERCOSUR are in the process of negotiating a bi-regional of negotiating a bi-regional Association AgreementAssociation Agreement, , including a free trade areaincluding a free trade area

MERCOSUR – EU: TodayMERCOSUR – EU: Today The EU is MERCOSUR first trade partner (both in The EU is MERCOSUR first trade partner (both in

exports and imports): 22.9% of MERCOSUR total tradeexports and imports): 22.9% of MERCOSUR total trade MERCOSUR's ratio of trade to GDP: 25.1%MERCOSUR's ratio of trade to GDP: 25.1% Imports: 62.3 billion euro, 1,2% of the world flows Imports: 62.3 billion euro, 1,2% of the world flows

(2003)(2003) Exports: 93.6 billion euro , 2.0% of the world flows Exports: 93.6 billion euro , 2.0% of the world flows

(2003)(2003) In the period 1993- 2003In the period 1993- 2003

EU imports from MERCOSUR grew by 5.6% on EU imports from MERCOSUR grew by 5.6% on average per yearaverage per year

EU exports grew by 3.6% on average per yearEU exports grew by 3.6% on average per year By the end of 2003By the end of 2003

trade with MERCOSUR: 2.8% of total EU imports and trade with MERCOSUR: 2.8% of total EU imports and 1.8% of total EU exports1.8% of total EU exports

0.30% of EU FDI from MERCOSUR0.30% of EU FDI from MERCOSUR 3.51% of EU FDI went to MERCOSUR3.51% of EU FDI went to MERCOSUR

MERCOSUR – A Trading MERCOSUR – A Trading PartnerPartner

MERCOSUR – A Trading MERCOSUR – A Trading Partner (2)Partner (2)

Structure of EU importsStructure of EU imports

Structure of EU exportsStructure of EU exports

ARGENTINAARGENTINA

Falklands War: Europe imposed Falklands War: Europe imposed sanctions on the military juntasanctions on the military junta

Argentina almost in a state of Argentina almost in a state of dependency with Europe. Dates from dependency with Europe. Dates from the nineteenth century, when the the nineteenth century, when the export-driven economy relied on selling export-driven economy relied on selling grain and meat to the UK and Germanygrain and meat to the UK and Germany

Led to economic downturn in ArgentinaLed to economic downturn in Argentina

EU-Argentina relations: The 1980s

EU-Argentina relations: The EU-Argentina relations: The 1990s1990s

Democracy restored in 1983Democracy restored in 1983 1990 Framework Trade and 1990 Framework Trade and

Economic Co-Operation Economic Co-Operation AgreementAgreement

Argentina experiences Argentina experiences economic growtheconomic growth

EU-Argentina relations: The EU-Argentina relations: The significance of EU for significance of EU for

ArgentinaArgentina EU is Argentina’s first trading partner: 20.5% of EU is Argentina’s first trading partner: 20.5% of

Argentina’s total tradeArgentina’s total trade EU is a huge market for Argentine exports; vital for an EU is a huge market for Argentine exports; vital for an

export-led economy. Equals 6.22 billion euros, 20% of export-led economy. Equals 6.22 billion euros, 20% of total exports go to EUtotal exports go to EU

Mainly agricultural products (77%). Also, chemical Mainly agricultural products (77%). Also, chemical products and transport materialproducts and transport material

26% of Argentina’s imports from the EU. Vital for 26% of Argentina’s imports from the EU. Vital for essential goods such as chemical products, machinery essential goods such as chemical products, machinery and transport material to run the agricultural and transport material to run the agricultural economyeconomy

Europe is Argentina’s main investor. FDI especially Europe is Argentina’s main investor. FDI especially important as many of the privatised public services important as many of the privatised public services are owned by European companiesare owned by European companies

A state of dependency since the scale of trade with EU A state of dependency since the scale of trade with EU is highis high

EU-Argentina relations: The EU-Argentina relations: The December 2001 CrisisDecember 2001 Crisis

Dependence heightened when the country fell Dependence heightened when the country fell into recession, with a growth rate of –10.9% in into recession, with a growth rate of –10.9% in 20012001

EU sustained Argentine importsEU sustained Argentine imports ““In a general way, the increase of Argentinean In a general way, the increase of Argentinean

exports to the EU from 2001 to 2002 exports to the EU from 2001 to 2002 compensated the loss of Argentinean exports to compensated the loss of Argentinean exports to the rest of the world in the same period” (EU the rest of the world in the same period” (EU Commission)Commission)

Community-fund projects and temporary Community-fund projects and temporary measures to ease the importation of wine and measures to ease the importation of wine and meat into Europemeat into Europe

BRAZILBRAZIL Largest economy in Latin America total GDP US$ 604.0 Largest economy in Latin America total GDP US$ 604.0

billion (2004), per capita US$ 3,326.21 in 2004billion (2004), per capita US$ 3,326.21 in 2004 Exports to the EU: €17.9 billion (2004) = 17% total exportsExports to the EU: €17.9 billion (2004) = 17% total exports Imports from the EU: €13.5 billion (2004) = 24.7% total Imports from the EU: €13.5 billion (2004) = 24.7% total

importsimports EU investment stock in Brazil: €48.9 billion (1999), €69.3 EU investment stock in Brazil: €48.9 billion (1999), €69.3

billion (2000), €76.8 billion (2001), €78 billion (2002).billion (2000), €76.8 billion (2001), €78 billion (2002). Brazil ranked 11th in the list of EU major trade partners in Brazil ranked 11th in the list of EU major trade partners in

2004, representing 1.8% of the EU total trade.2004, representing 1.8% of the EU total trade. Brazil plays a leading role in regional integration both in Brazil plays a leading role in regional integration both in

Mercosur and South America, and is therefore a key Mercosur and South America, and is therefore a key partner in the current negotiations for an EU-Mercosur bi-partner in the current negotiations for an EU-Mercosur bi-regional association agreement. regional association agreement.

EU-Brazil relationsEU-Brazil relations Present relations – based on the 1992 EC-Present relations – based on the 1992 EC-

Brazil Framework Co-operation Agreement Brazil Framework Co-operation Agreement and the 1995 EU-Mercosul Framework Co-and the 1995 EU-Mercosul Framework Co-operation Agreementoperation Agreement

The EC-Brazil Framework Co-operation The EC-Brazil Framework Co-operation Agreement entrusted a Joint Committee, Agreement entrusted a Joint Committee, composed of representatives of the EU and composed of representatives of the EU and of the Brazilian government; its scope: of the Brazilian government; its scope: bilateral co-operation bilateral co-operation trade and trade related issuestrade and trade related issues environment environment science and technology information society science and technology information society

issuesissues

Co-operationCo-operation

Co-operation with Brazil amounts to Co-operation with Brazil amounts to some € 180m in terms of projects some € 180m in terms of projects under implementation;under implementation;

Priority areas for co-operation, Priority areas for co-operation, Country Strategy Paper Brazil 2001-Country Strategy Paper Brazil 2001-2006: 2006:

economic reformeconomic reform social developmentsocial development the environmentthe environment

PARAGUAYPARAGUAY

Unstable political system in the past Unstable political system in the past (many, frequently changing dictatorships). (many, frequently changing dictatorships). Since 1992 more or less stable democracy.Since 1992 more or less stable democracy.

Landlocked in the heart of South America Landlocked in the heart of South America (difficulties for trade)(difficulties for trade)

Main source of income is selling energy, Main source of income is selling energy, agricultural products and goods cheaper agricultural products and goods cheaper than in Brazilthan in Brazil

Dependent on Brazil (imports & 60 % of Dependent on Brazil (imports & 60 % of GDP comes from commerce with Brazil)GDP comes from commerce with Brazil)

Economic DevelopmentEconomic Development

Severely hit by the regional crisis of its Severely hit by the regional crisis of its neighbours, Argentina and Brazil, in 2002, neighbours, Argentina and Brazil, in 2002, and suffered serious economic and financial and suffered serious economic and financial deterioration, with a fall of real GDP around deterioration, with a fall of real GDP around 4% in 2002. 4% in 2002.

In 2003 and 2004 there was a GDP recovery In 2003 and 2004 there was a GDP recovery of 2.6% and 2.9% respectively, with a an of 2.6% and 2.9% respectively, with a an increase in export of goods and services of increase in export of goods and services of 13.2% and 4.9% respectively, mainly due to 13.2% and 4.9% respectively, mainly due to the recovery of Argentinean and Brazilian the recovery of Argentinean and Brazilian markets. markets.

PARAGUAY – EU – TradePARAGUAY – EU – Trade Bilateral EU-Paraguay trade in goods amounts Bilateral EU-Paraguay trade in goods amounts

to €471 million in 2004; the EU importing to €471 million in 2004; the EU importing around €315 million and exporting roughly around €315 million and exporting roughly €156 million. €156 million.

In 2004, trade between Paraguay and EU In 2004, trade between Paraguay and EU represented 10.8% of total Paraguay’s trade represented 10.8% of total Paraguay’s trade and around 0.02 % of the EU's total trade. and around 0.02 % of the EU's total trade.

EU exports to Paraguay are mostly EU exports to Paraguay are mostly concentrated in machinery and transport concentrated in machinery and transport equipment (35.1%), chemicals (21.6%), and equipment (35.1%), chemicals (21.6%), and miscellaneous manufactures (14.6%). miscellaneous manufactures (14.6%).

EU imports coming from Paraguay are mainly EU imports coming from Paraguay are mainly crude materials, except fuel (82.1%), followed crude materials, except fuel (82.1%), followed by manufactured goods (8.2%) and food and by manufactured goods (8.2%) and food and live animals (6.1 %).live animals (6.1 %).

URUGUAYURUGUAY Longstanding trade linksLongstanding trade links Backbone of future trade relations: EU-Backbone of future trade relations: EU-

Mercosur Association AgreementMercosur Association Agreement Uruguay and Merchandise Trade with Uruguay and Merchandise Trade with

EUEU Well developed economyWell developed economy Important trading partner for the EU and Important trading partner for the EU and

Latin America; also important source of Latin America; also important source of imports, especially agricultural productsimports, especially agricultural products

The EU is Uruguay’s second main trading The EU is Uruguay’s second main trading partnerpartner

Uruguay- EU: Level of Uruguay- EU: Level of Merchandise TradeMerchandise Trade

Bilateral merchandise trade: € 1 Bilateral merchandise trade: € 1 billion billion

EU imports: € 631 million (2004)EU imports: € 631 million (2004) EU exports: € 413 million (2004)EU exports: € 413 million (2004) Trade with EU: 21,1% of Uruguay’s Trade with EU: 21,1% of Uruguay’s

total trade (2004)total trade (2004) Trade with Uruguay: 0,05% of EU’s Trade with Uruguay: 0,05% of EU’s

total trade (2004)total trade (2004)

Uruguay- EU: Level of Uruguay- EU: Level of Merchandise Trade (1)Merchandise Trade (1)

Main components of EU importsMain components of EU imports Inedible crude materials (except fuel): Inedible crude materials (except fuel):

40,3%40,3% Food and live materials: 36,6%Food and live materials: 36,6% Classified manufactured goods: 10,9%Classified manufactured goods: 10,9%

Main components of EU exportsMain components of EU exports Chemical products: 30,5%Chemical products: 30,5% Machinery and transport equipment: 28,2%Machinery and transport equipment: 28,2% Miscellaneous manufactured goods: 12,2%Miscellaneous manufactured goods: 12,2% Manufactured goods: 10%Manufactured goods: 10% Beverages and tobacco: 6%Beverages and tobacco: 6%

Uruguay- EU: Merchandise Uruguay- EU: Merchandise Trade ComponentsTrade Components

Uruguay-EU: Bilateral and Uruguay-EU: Bilateral and Bi-regional agreementsBi-regional agreements

Agreements in forceAgreements in force Framework Co-operation AgreementFramework Co-operation Agreement

Provides the institutional settings for the political Provides the institutional settings for the political ties between the EU and Uruguay: Joint ties between the EU and Uruguay: Joint Committee- regular meetingsCommittee- regular meetings

Agreements under negotiationAgreements under negotiation EU-Mercosur Association AgreementEU-Mercosur Association Agreement SPS, Wines and SpiritsSPS, Wines and Spirits Doha WTO round of trade negotiationsDoha WTO round of trade negotiations

Very important to promote the EU-Uruguay Very important to promote the EU-Uruguay trading and market access possibilitiestrading and market access possibilities

Can contribute to more open and stable Can contribute to more open and stable environment for trade and investmentenvironment for trade and investment

VENEZUELAVENEZUELA

4.1% of world petroleum 4.1% of world petroleum productionproduction

sixth largest producer worldwidesixth largest producer worldwide petroleum industry accounts for petroleum industry accounts for

30% of GDP30% of GDP 80% of Exports80% of Exports 50% of government revenues50% of government revenues

Trading partners and trading agreements

USA: 60% of exports and 35% of USA: 60% of exports and 35% of importsimports

EU: 0.3% of EU imports and 0.3% EU: 0.3% of EU imports and 0.3% of EU exportsof EU exports

Andean Community of Nations Andean Community of Nations (CAN)(CAN)

free trade agreement Grupo de free trade agreement Grupo de los tres (G-3)2los tres (G-3)2

Some political and economical aspects of

joining Mercosur Disadvantages:Disadvantages: asymmetry between current member states.asymmetry between current member states. Brazil is responsible for Brazil is responsible for

approximately 70% of the consolidated GDP in Mercosur.approximately 70% of the consolidated GDP in Mercosur. Difference in industries and market structures, especially between Brazil and Difference in industries and market structures, especially between Brazil and

Venezuela.Venezuela. It seems, most ‘advantages’ have been exploited through bilateral It seems, most ‘advantages’ have been exploited through bilateral

agreements.agreements.

Advantages: Advantages: Improvements in efficiency => positive results for national welfareImprovements in efficiency => positive results for national welfare Political stability in the long run.Political stability in the long run. Raise bargaining power on the international scene and provide a balance to Raise bargaining power on the international scene and provide a balance to

US hegemony.US hegemony. ““We want to see in our ships, in our pipes, in our medicines, and in other We want to see in our ships, in our pipes, in our medicines, and in other

goods the words, ‘Made in Argentina’ or Made in Brazil’ instead of ‘Made in goods the words, ‘Made in Argentina’ or Made in Brazil’ instead of ‘Made in the U.S.A.’”the U.S.A.’”

"We have to give Mercosur a political dimension, not only economical, to make "We have to give Mercosur a political dimension, not only economical, to make it the framework of South America's political union",it the framework of South America's political union",

President ChavezPresident Chavez Entry of Venezuela would considerably boost Mercosur's economic weight, as Entry of Venezuela would considerably boost Mercosur's economic weight, as

it is one of the world’s biggest oil exporter.it is one of the world’s biggest oil exporter.

VENEZUELA’S Way into VENEZUELA’S Way into MERCOSURMERCOSUR

Venezuela Joins as an associate member Jul 09, 2004Venezuela Joins as an associate member Jul 09, 2004 ““Venezuela will be a fundamental element in giving Mercosur Venezuela will be a fundamental element in giving Mercosur

a new dimension.”  - Lula da Silva a new dimension.”  - Lula da Silva ““for Argentina it is not only an honour, it is above all a for Argentina it is not only an honour, it is above all a

necessity to have Venezuela with us, so as to deepen the necessity to have Venezuela with us, so as to deepen the changes that we want to bring about.” - Nestor Kirchnerchanges that we want to bring about.” - Nestor Kirchner

Venezuela enters Mercosur as a full member Venezuela enters Mercosur as a full member Dec 09, Dec 09, 20052005

On 9 December 2005, Venezuela was accepted as a new On 9 December 2005, Venezuela was accepted as a new member, but it will be officialized later this year.member, but it will be officialized later this year.

Were Venezuela to become a full member, Mercusor would Were Venezuela to become a full member, Mercusor would represent represent 70 percent70 percent of South America’s population of South America’s population

Before joining, Venezuela would need to Before joining, Venezuela would need to agree to and abide by the group’s treaty, agree to and abide by the group’s treaty, common external tariffs, and common external tariffs, and agreements with third parties, and agreements with third parties, and committed to ongoing negotiations with the block.committed to ongoing negotiations with the block.

ConclusionConclusion It appears that the significance of the EU as a trading It appears that the significance of the EU as a trading

bloc forbloc forMERCUSCOR is hugely significant. MERCUSCOR is hugely significant.

It is its first trading partner and there is almost a state of It is its first trading partner and there is almost a state of dependency on it. dependency on it.

It requires trade from Europe for influx of money but also It requires trade from Europe for influx of money but also importation of essential goods. importation of essential goods.

There is a difference however on the national level, There is a difference however on the national level, countries such as Venezuela are more dependent on the countries such as Venezuela are more dependent on the US. US.

Overwhelmingly however, most nations require Europe Overwhelmingly however, most nations require Europe for economic growth. for economic growth.

For Europe, though, trading with MERCUSOR is not For Europe, though, trading with MERCUSOR is not vitally important- it can look to other trading blocs for vitally important- it can look to other trading blocs for goods.goods.