Birth of the Southern Common Market Summary

  • Last updated on November 10, 2022

Four countries in South America’s Southern Cone—Brazil, Argentina, Uruguay, and Paraguay—established MERCOSUR, a trade organization intended to increase economic cooperation among the member nations.

Summary of Event

Throughout the decades of the 1970’s and 1980’s, the economies of the world’s major industrial countries became increasingly subject to the pressures of globalization. The concept of free trade, the unrestricted movement of goods across national borders, came to be regarded as a positive economic goal to be pursued. Southern Common Market MERCOSUR Asunción, Treaty of (1991) Trade agreements [kw]Birth of the Southern Common Market (Mar. 26, 1991) [kw]Southern Common Market, Birth of the (Mar. 26, 1991) [kw]Common Market, Birth of the Southern (Mar. 26, 1991) [kw]Market, Birth of the Southern Common (Mar. 26, 1991) Southern Common Market MERCOSUR Asunción, Treaty of (1991) Trade agreements [g]South America;Mar. 26, 1991: Birth of the Southern Common Market[08050] [g]Paraguay;Mar. 26, 1991: Birth of the Southern Common Market[08050] [c]Diplomacy and international relations;Mar. 26, 1991: Birth of the Southern Common Market[08050] [c]Trade and commerce;Mar. 26, 1991: Birth of the Southern Common Market[08050] [c]Organizations and institutions;Mar. 26, 1991: Birth of the Southern Common Market[08050] Alfonsín, Raúl Sarney, José Chávez, Hugo

In 1991, four countries of South America’s Southern Cone—Brazil, Argentina, Uruguay, and Paraguay—initiated a treaty designed to increase economic cooperation and to expedite trade among members of the group. This goal was to be accomplished through the reduction of tariffs on the imports and exports levied on the goods of the member nations as they passed among these nations. The agreement would act as a positive influence on trade and permit the four countries to be more competitive internationally with such industrial giants as the United States and the European Union.

In 1985, José Sarney, Brazil’s first civilian president in twenty-one years, joined with Argentina’s president, Raúl Alfonsín, in the planning of the treaty that would establish the Southern Common Market, or Mercado Común del Sur (MERCOSUR; in Portuguese, Mercado Comum do Sul, or MERCOSUL). Brazil was plagued by inflation, an enormous foreign debt, and internal corruption when Sarney assumed the presidency, and he believed that an economic treaty among South America’s southern countries could do much to reduce the boom-and-bust pattern of the area’s economies. Alfonsín was interested in such a treaty because he thought it would help to control Argentina’s continuing problems with inflation.

The treaty that established MERCOSUR was signed in Asunción, Paraguay, on March 26, 1991. It called for the formation of a number of groups to administer the operation of the member nations’ goals. The primary unit of MERCOSUR is the Common Market Council, which is charged with setting policy and ensuring member nations’ compliance with the goals of the treaty. The Common Market Group is MERCOSUR’s executive body, representing all member countries through their respective Ministries of Foreign Affairs, and the Administrative Office and Socioeconomic Advisory Forum serves as the record-keeping and communications facility of MERCOSUR. A number of work subgroups conduct surveys and submit recommendations to the Common Market Council regarding a wide range of specific issues involving MERCOSUR’s continuing operations.

In the years after MERCOSUR’s founding, a number of additional South American countries became associate members of the organization: Bolivia, Chile, Colombia, Ecuador, and Peru. Ultimately, MERCOSUR announced, its goal is to incorporate all Central and South American countries into MERCOSUR membership. In July, 2006, Venezuela became the fifth nation with full membership in MERCOSUR.

The anticipated trading potential of MERCOSUR proved to be correct. The volume of business among the member countries increased markedly after the inauguration of the Treaty of Asunción, and the addition of Venezuela in 2006 further improved matters for these South American nations. Although the MERCOSUR member nations compete in the production of some exports, the overall trade balances among them produce a positive flow of commerce.

Significance

Although MERCOSUR’s economic program led to substantial increases in both imports and exports among the organization’s member nations, the internal economic problems of Argentina and Brazil complicated the relationships between these two countries as well as the relations between them and the smaller participants in MERCOSUR. The political leadership within the member countries found that they had to respond to domestic considerations before the could acquiesce to the recommendations of MERCOSUR’s governors.

Although MERCOSUR is not designed to be a political instrument, undoubtedly the organization has fostered good political relationships among its members. The original four member nations have held to democratic formats in terms of the operations of their respective governments, where once, in most, military dictatorships had dominated. In contrast, Hugo Chávez, the president of the newest MERCOSUR member, Venezuela, has seized increasingly dictatorial powers for his government. Moreover, Chávez has been bitterly critical of the United States and has sought to rally opposition to U.S. involvement in Latin American affairs. Chávez has dispersed millions of dollars to a number of Latin American countries from Venezuela’s lucrative petroleum profits to undermine relationships between the United States and its Latin American neighbors. Southern Common Market MERCOSUR Asunción, Treaty of (1991) Trade agreements

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Behar, Jaime. Cooperation and Competition in a Common Market: Studies on the Formation of MERCOSUR. New York: Physica-Verlag, 2000. Examines the establishment of MERCOSUR and includes discussion of the association’s progress through 1996. Includes methodological and statistical appendixes, bibliographic references, and index.
  • citation-type="booksimple"

    xlink:type="simple">Grimson, Alejandro, and Gabriel Kessler. On Argentina and the Southern Cone: Neoliberalsim and National Imaginations. New York: Taylor & Francis, 2005. Provides an in-depth analysis of Argentina’s history and the nation’s adaptation to the political and economic challenges it has faced in recent decades.
  • citation-type="booksimple"

    xlink:type="simple">Heymann, Daniel. Regional Interdependencies and Macroeconomic Crises: Notes on MERCOSUR. Buenos Aires, Argentina: United Nations, 2001. Takes a critical look at the actual progress of the members of MERCOSUR in reaching macroeconomic stability.
  • citation-type="booksimple"

    xlink:type="simple">Machinea, José Luis, and Guillermo Rozenwurcel. Macroeconomic Coordination in Latin America: Does It Have a Future? Santiago, Chile: United Nations, 2005. Brief work offers presents negative evaluation of MERCOSUR’s accomplishments up to 2005.
  • citation-type="booksimple"

    xlink:type="simple">Roett, Riordan, ed. MERCOSUR: Regional Integration, World Markets. Boulder, Colo.: Lynne Rienner, 1999. Collection of essays includes discussion of the immense effects Brazil has had on its relationships with the other members of MERCOSUR, especially Argentina.
  • citation-type="booksimple"

    xlink:type="simple">Weintraub, Sidney. Development and Democracy in the Southern Cone: Imperatives for U.S. Policy in South America. Washington, D.C.: Center for Strategic and International Studies, 2000. Examines the effects that Brazil’s and Argentina’s domestic economic problems have had on internal MERCOSUR operations.

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