What the future for Mercosur looks like?
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Mercosur is a group of countries that includes about 300 million people and covers almost 15 million square kilometres. They’ve got some awesome things going for them, like tons of biodiversity, rich farmlands, and lots of energy resources. The group started in 1991 when Brazil and Argentina decided to put their differences aside and work together. They made a treaty called the Treaty of Asunción, which said that they wanted to be able to move goods, services, and production factors between countries. In 1994, they agreed to make a customs union with a common external tariff, which is basically a way to ensure that all the countries in the group have the same import tax rates.
Things were going pretty well initially, and the 1990s were known as the “golden age” of Mercosur. Trade between member countries and international trade grew fast, tariffs decreased, cooperation increased, and border tensions decreased. But then they missed their deadline to fully implement the customs union in 2000 and still haven’t gotten it all done. “Lists of Exceptions” still let member countries apply different import tax rates. Brazil’s currency went down in 1999 and there was a massive economic crisis in Argentina in 2001, which made things even harder.
They tried to expand the group by adding Venezuela in 2012, but it didn’t go well, and they kicked them out in 2017. Bolivia wanted to join too, but they’re still waiting for approval from Brazil. Many other countries, like Chile and Colombia, aren’t part of the customs union but still get some trade benefits. Mercosur has been slow to make trade deals with other countries too. They said no thanks to the US’s idea for a big free-trade area in 1998. They finally made a trade deal with the EU in 2019, which still needs approval. They also made a deal with a group of European countries, which must also be approved. In 2022, Uruguay said they wanted to make a deal with China, making things even tenser.
The member countries always talk about the customs union and how to improve things. They usually agree on a 10-12% import tax rate, but they’re still figuring out the rules for exceptions and other trade barriers. Some groups help with this, but they’re not as strong as the ones in the EU. The people in charge of the countries usually make big decisions, meaning the group’s interests can get pushed aside. This has been a big problem lately because the member countries have had a lot of political and economic turmoil. Trade between member countries used to be way higher than it is now, and that’s not good news. They used to trade about $48.9 billion in 2013, but now it’s much less. They made about $40.6 billion in 2021, but that’s still not as good as it used to be.
The countries in Mercosur used to depend on each other, but that’s been changing. Other countries, like China, have been trading with them more, making things different. They’re still a big economic group, but they’re not really a common market yet. The countries have started to make more protectionist policies, which makes things even harder. The big question is whether they can fix all these problems and reach their potential or if they’re just doomed from the start because the countries are too different.
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About Geoffrey W W McRae
With a highly distinguished career spanning more than three decades across five different countries, New Zealander Geoffrey McRae has established himself as a leading authority on South American real estate, agricultural, and commercial matters. As the founder of Gateway to South America – a real estate consulting group specialising in six South American countries – Geoffrey has developed a reputation for discretion, expertise, and experience that has seen him represent some of the most prestigious clients in the region. His deep knowledge and experience of South American markets have placed him at the forefront of the industry and given him the opportunity to guide and advise with confidence and surety. His long and successful career – which continues to evolve and expand daily – is a testament to his talent, tenacity, and ambition.
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