Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
March 1991 “The American Dream is becoming a reality.” Carlos Menem Former President of Argentina As presidents of Argentina, Brazil, Paraguay and Uruguay sign the treaty to form Mercosur March 2001 “On March 26th, a small and rather sad ceremony took place outside Mercosur’s headquarters in Montevideo. A few officials gathered in autumn drizzle to raise the trade block’s flag to commemorate the tenth anniversary of the founding treaty. None of the leaders of the member states turned up. Even Uruguay’s president felt unable to travel the five kilometers from his office to take part.” - The Economist 3/31/01 Mercosur: From Here to Where? Gracie Alcid, Alexa Hall, Stacia Huddleston, Atul Pahwa, and Michael Schultz The Objectives of Mercosur To improve the economies of member countries by making them more efficient and competitive • Enlarging markets • Improving communications • Coordinating macroeconomic policies • Harmonizing different sectors of the economy The History of Mercosur • 1970s Uruguay and Brazil Commercial Expansion Protocol (PEC) • 1980s Argentina and Brazil sign 24 bilateral trade improvement protocols • 1990 Uruguay and Paraguay signal intent to join new trade federation • 1991 Treaty of Ascunsion signed by four countries creating Mercosur Mercosur: A Marriage of Unequals • Brazil & Argentina • 97% of the trade • 210 million people • $1 trillion in goods/services • Uruguay over dependent on Brazil/Argentina • Paraguay lacks access to ports Destination of Mercosur Exports EU Other Intra Mercosur US Chile Andean Community Mexico 25.6% 25.9% 20.7% 18.4% 3.8% 3.8% 1.9% 1999 % of Total: 74.3bn Analysis of Member Countries Argentina • Banking Crisis • Frozen Economy • Can Argentina’s problems rescue Mercosur? • Rebuilding alliance with Brazil and Mercosur No country can trap itself in a single relationship. In foreign relations, I am more for polygamy.” -Argentinean Foreign Minister Carlos Ruckauf Analysis of Member Countries: Brazil Current Economic Pressures • • • • • • Energy Crisis Slowing Global Economy Political Instability Exports Slowing Domestic Savings Slim Human Capital Possible Solutions • Increase both imports and exports • Overcome legacy of import substitution • Move toward integration • Look to world markets Analysis of Member Countries • Uruguay • Still recovering from 1999 devaluation of Brazilian Real • Relies greatly on exports to Brazil & Argentina • COMISEC • US Bilateral Trade “Officially, Uruguay has to break its ties with Mercosur if it is to negotiate separately with the US.” -Brazil’s Ambassador to Argentina, Botafogo Goncalves Analysis of Member Countries • Paraguay • Primarily agrarian • Poorest country in South America after Bolivia • Political friction and exiled former leaders • Smuggling of exports to Brazil & Argentina Chile & Bolivia: Associate Members Chile • Free Trade and The Customs Union • Chile wanted to maintain external tariffs lower than those imposed by the Mercosur countries • Chile’s tariff is applied evenly to almost all imports at 9% (falling to 6% by 2003) • Mercosur’s tariffs vary from 0-20% on most imports (tariffs to converge going forward at 12.5%) Chile Threatens Regional Integration “The presence or the absence of Chile in the long run will be a sign of Mercosur’s efficiency.” Former Uruguayan President Luis Lacalle at Mercosur’s birth 03/26/1991 • Chile applies for full membership in Mercosur • In 2000, Chile announces it would negotiate a free trade agreement with the US • Entry into Mercosur “on hold” Should Chile Join Mercosur? Mercosur Viewpoint • Mercosur itself gains access to Pacific ports and Asian trade links • Chilean membership strengthens bloc in near term Chilean Viewpoint • PRO: globalized private sector well positioned to capitalize on opportunities • CON: very stable economy becomes more exposed to shocks like the Argentina crisis (exports to Argentina dropped 35%) Macroeconomic Coordination • Developing Common Macroeconomic targets • Annual inflation ceiling 5% 2002-’05 • Maximum common consolidated public sector deficit of 3% as of 2002 • Maastricht-style targets • The Mercosur Monetary Institute “Now that Argentina has adopted a floating exchange rate system, it will be easier to move forward with the project for a single currency for the bloc.” Correio Braziliense website Factors Affecting Future of Mercosur “If Mercosur wants further economic integration, it will have to resolve underlying differences.” Botafogo Goncalves, Brazil’s chief Mercosur negotiator • History • Trade agreements • Politics, personality, and culture • Nature of local economy • Banking crisis and current world events Predictions for Mercosur’s Future “I have been defending a pattern since 1988, the Chilean one,…We cannot search for ideas in Europe or Australia, because they are very different from us.” Eduardo Duhalde – Argentine President • Breakdown of the bloc • Threat of independent alliances • Alexander Yeats: pros and cons of regional trading agreements – the relevance of comparative advantage • The acceptance of a supranational authority Mercosur: Conclusions • Mercosur’s future existence uncertain • Successes have been few • Argentina crisis could be a positive stimulus for integrating the bloc • Chile’s entry and coordinated macroeconomic policies are CSFs • History informs today: Back to ISI? Thank You. Questions? Back-up Slides Analysis of Member Countries: Brazil • Facts • Region’s largest economy • Largest debtor • Proxy for South America • History • • • • Public sector dominance Protectionism Heavy regulation of private industry High concentration and utilization of price controls to limit competition and inflation Analysis of Member Countries: Brazil • Problems • Currency • Depreciated 25% this year • CB raise interest ratios to stick to inflation target of 4% • Argentina • Mercosur • Efficacy • Adequacy • Market access Chile: Economic Statistics • Unprecedented growth 1990-1997 (real GDP growth averaged 8%) • Reported negative growth only once since 1990 • 1998, due to global financial crisis and severe drought • A role model for economic reform 1999 2000E GDP – real growth rate 1.1% 5.6% unemployment 9.7% 9.5% inflation 2.3% 4.5% foreign debt $33.9B $36.0B exports $15.6B $17.7B imports $13.9B $16.7B Chile: Current Trade Agreements Rio Group member countries include: Argentina, Bolivia, Brazil, Columbia, Ecuador, Mexico, Panama, Paraguay, Peru, Uruguay, Venezuela Latin America Integration Association (LAIA) member countries include: Argentina, Bolivia, Brazil,Columbia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela Chile – Mexico Free Trade Agreement Chile – Canada Free Trade Agreement Chile – Venezuela Free Trade Agreement Chile – Columbia Free Trade Agreement Chile – Ecuador Free Trade Agreement Chile – in discussions with the U.S. Name Members Type Status Rio Group Argentina, Bolivia, Brazil, Columbia, Ecuador, Mexico, Panama, Paraguay, Peru, Uruguay, Venezuela Political and economic cooperation Signed December 1999 Latin American Integration Association (LAIA) Argentina, Bolivia, Brazil,Columbia, Ecuador, Mexico, Paraguay, Peru, Uruguay, Venezuela Economic cooperation and preferential trade agreement Chile – Mexico Free Trade Agreement Mexico Free trade area Economic complementarity agreement signed September 1991 Chile – Canada Free Trade Agreement Canada Free trade area Signed November 1996, went into effect July 1997 Chile – Venezuela Free Trade Agreement Venezuela Free trade area Signed April 1993, went into effect July 1993 Chile – Columbia Free Trade Agreement Columbia Free trade area Partial agreement signed December 1993 Chile – Ecuador Free Trade Agreement Ecuador Free trade area Signed December 1994, went into effect January 1995