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Monday, 21 June 2021

MERCOSUR celebrates its 30th anniversary

Formed 30 years ago to promote economic integration in the South American region, the Southern Common Market of MERCOSUR is developing its Free Trade Agreement with Egypt

Eduardo A Varela, Antonio Patriota, Fernando Arroyo and Arnaldo Salazar, Tuesday 23 Mar 2021
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Eduardo A Varela, Antonio Patriota, Fernando Arroyo and Arnaldo Salazar
Eduardo A Varela, Antonio Patriota, Fernando Arroyo and Arnaldo Salazar

On 26 March 1991, thirty years ago today, the presidents of Argentina, Brazil, Paraguay and Uruguay signed in Asunción, Paraguay, the treaty to establish the Southern Common Market (known as MERCOSUR in its Spanish acronym and MERCOSUL in its Portuguese one), paving the way for the most ambitious economic integration process in the region.

MERCOSUR is an open and dynamic process. Since its creation, its main objective has been to promote a common space that generates business and investment opportunities through the competitive integration of national economies into international markets.

This experience is based on the principles of democracy and economic development, underpinned by humanist values. Aligned with these, different legal instruments have been adopted in addition to the original treaty in areas such as migration, labour and cultural and social matters, just to mention a few, which reflect the values of the region’s inhabitants.

These protocols reflect the incorporation of the social dimension into an integration process centred on our citizens. For this to be achieved, it has been necessary to adapt and expand the institution’s structure by meeting new demands and deepening the effective participation of the citizenry. Moreover, MERCOSUR has developed different ways to reduce asymmetries, and self-financing mechanisms have been established, such as the MERCOSUR Fund for the Structural Convergence (FOCEM), among others.

The territory of MERCOSUR extends over almost 15 million square km, in which diverse ecosystems coexist, both terrestrial and marine, constituting one of the largest biodiversity reserves in the world. The total population of our countries reaches to more than 280 million inhabitants. MERCOSUR ranks as the fifth-largest economy in the world. At its geographical heart it has one of the most important reserves of fresh water in the planet.

The functioning of MERCOSUR during the past 30 years has been a powerful transformative force for all member states. Although the most obvious consequence has been the increase in intra-regional trade, there have also been significant developments in cooperation and coordination in all the areas covered by the integration process, which have resulted in broad benefits for all the member societies.

MERCOSUR, being a customs union, has become a platform for integration in global trade. A pioneer Free Trade Agreement (FTA) between MERCOSUR and Egypt has been in force since September 2017. Even though this FTA established a period of ten years for the full liberalisation of tariffs (with a few specific exceptions for strategic products) in three-and-a-half years, the agreement has already had a relevant impact, in particular as regards Egyptian exports to MERCOSUR countries, which in some cases have increased up to three times since the FTA’s entry into force. 

In 2020, the trade flow between our countries and Egypt reached $3.4 billion, of which $3 billion accounts for exports from MERCOSUR and $431.5 million accounts for Egyptian exports to the South American bloc. 

MERCOSUR is indeed a very active global player when it comes to trade negotiations. After 20 years of negotiations, in June 2019 an agreement in principle between MERCOSUR and the European Union was concluded, representing the first trade agreement between two regional integration organisations and one that will potentially create goods and services market of 800 million consumers and a quarter of the world’s GDP. 

Furthermore, trade negotiations on a European Free Trade Agreement (EFTA) were also concluded in that period. Through both agreements, MERCOSUR guarantees access to important markets, improving the competitiveness of its exports in Europe. 

Besides traditional FTAs, MERCOSUR also has a wide scope of agreements with its partners, such as the Preferential Trade Agreements with the South African Customs Union (SACU) and India, and the Economic Complementation Agreements with Colombia, Peru, Chile and Ecuador. Moreover, Bolivia is presently going through the accession process. 

Currently, there are negotiations in progress at different levels and in different forms with partners such as Canada, the Republic of Korea and Lebanon, as well as with the Pacific Alliance and member countries of the Central American Integration System, among others.

Anniversaries are customarily an occasion for taking stock and planning ahead. Looking back and contrasting where we were in 1991 with where we are now, it is clear that important progress has been made and concrete benefits have been reaped. However, it is also evident that there is still much to be done, as regards the strengthening and widening of the agenda and the corresponding response at the institutional and organisational levels.

The same could be said of the MERCOSUR-Egypt FTA. There is great potential that is yet to be released for the good of our peoples, not only in the field of trade, but also in the creation of joint ventures and the promotion of investments and partnerships to establish and promote value chains and create jobs and economic opportunities for both sides.

For our governments and our peoples, this 30th anniversary is a moment to celebrate achievements on the one hand, and on the other, to renew the commitment to strive for the fulfillment of the values and objectives set out in 1991. 

As representatives of the MERCOSUR countries in Cairo we wish to reaffirm our commitment to work together with the Egyptian government and private sector in order to fully realise the potential of our Free Trade Agreement in a spirit of friendship and mutual benefit.

 

*A version of this article appears in print in the 25 March, 2021 edition of Al-Ahram Weekly

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