MERCOSUR

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MERCOSUR
Presentation by Marta, Ryan, Simon, Boleslaw and
Mariella
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MERCOSUR - Who is in?
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MERCOSUR

• 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

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MERCOSUR EU Background

• Always strong ties due to colonisation
• Latin America pinned to European economies (e.g.
  WW I)
• Uneven relationship favouring Europe
• Character of relations bilateral ties and
  multilateral co-operation within the framework of
  WTO
• Relationship based on the EU-MERCOSUR
  Interregional Framework Co-operation Agreement
  between the EC and its Member States and the
  MERCOSUR and its Party States (15 December 1995,
  Madrid)
• Into force on 1 July 1999 however the provisional
  application already took place from 1996 onwards.
  The Agreement consists of three main elements
  political dialogue, co-operation and trade issues
• Since 2000 the EU and MERCOSUR are in the process
  of negotiating a bi-regional Association
  Agreement, including a free trade area

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MERCOSUR EU Today

• The EU is MERCOSUR first trade partner (both in
  exports and imports) 22.9 of MERCOSUR total
  trade
• MERCOSUR's ratio of trade to GDP 25.1
• Imports 62.3 billion euro, 1,2 of the world
  flows (2003)
• Exports 93.6 billion euro , 2.0 of the world
  flows (2003)
• In the period 1993- 2003
• EU imports from MERCOSUR grew by 5.6 on average
  per year
• EU exports grew by 3.6 on average per year
• By the end of 2003
• trade with MERCOSUR 2.8 of total EU imports and
  1.8 of total EU exports
• 0.30 of EU FDI from MERCOSUR
• 3.51 of EU FDI went to MERCOSUR

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MERCOSUR A Trading Partner
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MERCOSUR A Trading Partner (2)
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Structure of EU imports
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Structure of EU exports
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ARGENTINA
EU-Argentina relations The 1980s

• Falklands War Europe imposed sanctions on the
  military junta
• Argentina almost in a state of dependency with
  Europe. Dates from the nineteenth century, when
  the export-driven economy relied on selling grain
  and meat to the UK and Germany
• Led to economic downturn in Argentina

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EU-Argentina relations The 1990s

• Democracy restored in 1983
• 1990 Framework Trade and Economic Co-Operation
  Agreement
• Argentina experiences economic growth

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EU-Argentina relations The significance of EU
for Argentina

• EU is Argentinas first trading partner 20.5 of
  Argentinas total trade
• EU is a huge market for Argentine exports vital
  for an export-led economy. Equals 6.22 billion
  euros, 20 of total exports go to EU
• Mainly agricultural products (77). Also,
  chemical products and transport material
• 26 of Argentinas imports from the EU. Vital for
  essential goods such as chemical products,
  machinery and transport material to run the
  agricultural economy
• Europe is Argentinas main investor. FDI
  especially important as many of the privatised
  public services are owned by European companies
• A state of dependency since the scale of trade
  with EU is high

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EU-Argentina relations The December 2001 Crisis

• Dependence heightened when the country fell into
  recession, with a growth rate of 10.9 in 2001
• EU sustained Argentine imports
• In a general way, the increase of Argentinean
  exports to the EU from 2001 to 2002 compensated
  the loss of Argentinean exports to the rest of
  the world in the same period (EU Commission)
• Community-fund projects and temporary measures to
  ease the importation of wine and meat into Europe

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BRAZIL

• Largest economy in Latin America total GDP US
  604.0 billion (2004), per capita US 3,326.21 in
  2004
• Exports to the EU 17.9 billion (2004) 17
  total exports
• Imports from the EU 13.5 billion (2004) 24.7
  total imports
• EU investment stock in Brazil 48.9 billion
  (1999), 69.3 billion (2000), 76.8 billion
  (2001), 78 billion (2002).
• Brazil ranked 11th in the list of EU major trade
  partners in 2004, representing 1.8 of the EU
  total trade.
• Brazil plays a leading role in regional
  integration both in Mercosur and South America,
  and is therefore a key partner in the current
  negotiations for an EU-Mercosur bi-regional
  association agreement.

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EU-Brazil relations

• Present relations based on the 1992 EC-Brazil
  Framework Co-operation Agreement and the 1995
  EU-Mercosul Framework Co-operation Agreement
• The EC-Brazil Framework Co-operation Agreement
  entrusted a Joint Committee, composed of
  representatives of the EU and of the Brazilian
  government its scope
• bilateral co-operation
• trade and trade related issues
• environment
• science and technology information society issues

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Co-operation

• Co-operation with Brazil amounts to some 180m
  in terms of projects under implementation
• Priority areas for co-operation, Country Strategy
  Paper Brazil 2001-2006
• economic reform
• social development
• the environment

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PARAGUAY

• Unstable political system in the past (many,
  frequently changing dictatorships). Since 1992
  more or less stable democracy.
• Landlocked in the heart of South America
  (difficulties for trade)
• Main source of income is selling energy,
  agricultural products and goods cheaper than in
  Brazil
• Dependent on Brazil (imports 60 of GDP comes
  from commerce with Brazil)

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Economic Development

• Severely hit by the regional crisis of its
  neighbours, Argentina and Brazil, in 2002, and
  suffered serious economic and financial
  deterioration, with a fall of real GDP around 4
  in 2002.
• In 2003 and 2004 there was a GDP recovery of 2.6
  and 2.9 respectively, with a an increase in
  export of goods and services of 13.2 and 4.9
  respectively, mainly due to the recovery of
  Argentinean and Brazilian markets.

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PARAGUAY EU Trade

• Bilateral EU-Paraguay trade in goods amounts to
  471 million in 2004 the EU importing around
  315 million and exporting roughly 156 million.
• In 2004, trade between Paraguay and EU
  represented 10.8 of total Paraguays trade and
  around 0.02 of the EU's total trade.
• EU exports to Paraguay are mostly concentrated in
  machinery and transport equipment (35.1),
  chemicals (21.6), and miscellaneous manufactures
  (14.6).
• EU imports coming from Paraguay are mainly crude
  materials, except fuel (82.1), followed by
  manufactured goods (8.2) and food and live
  animals (6.1 ).

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URUGUAY

• Longstanding trade links
• Backbone of future trade relations EU-Mercosur
  Association Agreement
• Uruguay and Merchandise Trade with EU
• Well developed economy
• Important trading partner for the EU and Latin
  America also important source of imports,
  especially agricultural products
• The EU is Uruguays second main trading partner

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Uruguay- EU Level of Merchandise Trade

• Bilateral merchandise trade 1 billion
• EU imports 631 million (2004)
• EU exports 413 million (2004)
• Trade with EU 21,1 of Uruguays total trade
  (2004)
• Trade with Uruguay 0,05 of EUs total trade
  (2004)

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

• Main components of EU imports
• Inedible crude materials (except fuel) 40,3
• Food and live materials 36,6
• Classified manufactured goods 10,9
• Main components of EU exports
• Chemical products 30,5
• Machinery and transport equipment 28,2
• Miscellaneous manufactured goods 12,2
• Manufactured goods 10
• Beverages and tobacco 6

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Uruguay-EU Bilateral and Bi-regional agreements

• Agreements in force
• Framework Co-operation Agreement
• Provides the institutional settings for the
  political ties between the EU and Uruguay Joint
  Committee- regular meetings
• Agreements under negotiation
• EU-Mercosur Association Agreement
• SPS, Wines and Spirits
• Doha WTO round of trade negotiations
• Very important to promote the EU-Uruguay trading
  and market access possibilities
• Can contribute to more open and stable
  environment for trade and investment

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VENEZUELA

• 4.1 of world petroleum production
• sixth largest producer worldwide
• petroleum industry accounts for 30 of GDP
• 80 of Exports
• 50 of government revenues

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Trading partners and trading agreements

• USA 60 of exports and 35 of imports
• EU 0.3 of EU imports and 0.3 of EU exports
• Andean Community of Nations (CAN)
• free trade agreement Grupo de los tres (G-3)2

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Some political and economical aspects of joining
Mercosur

• Disadvantages
• asymmetry between current member states. Brazil
  is responsible for approximately 70 of the
  consolidated GDP in Mercosur.
• Difference in industries and market structures,
  especially between Brazil and Venezuela.
• It seems, most advantages have been exploited
  through bilateral agreements.
• Advantages
• Improvements in efficiency gt positive results
  for national welfare
• Political stability in the long run.
• Raise bargaining power on the international scene
  and provide a balance to US hegemony.
• 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 the U.S.A.
• "We have to give Mercosur a political dimension,
  not only economical, to make it the framework of
  South America's political union",
• President Chavez
• Entry of Venezuela would considerably boost
  Mercosur's economic weight, as it is one of the
  worlds biggest oil exporter.

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VENEZUELAS Way into MERCOSUR

• Venezuela Joins as an associate member Jul 09,
  2004
• Venezuela will be a fundamental element in
  giving Mercosur a new dimension.  - Lula da
  Silva
• for Argentina it is not only an honour, it is
  above all a necessity to have Venezuela with us,
  so as to deepen the changes that we want to bring
  about. - Nestor Kirchner
• Venezuela enters Mercosur as a full member Dec
  09, 2005
• On 9 December 2005, Venezuela was accepted as a
  new member, but it will be officialized later
  this year.
• Were Venezuela to become a full member, Mercusor
  would represent 70 percent of South Americas
  population
• Before joining, Venezuela would need to
• agree to and abide by the groups treaty,
• common external tariffs, and
• agreements with third parties, and
• committed to ongoing negotiations with the block.

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Conclusion

• It appears that the significance of the EU as a
  trading bloc forMERCUSCOR is hugely significant.
  
• It is its first trading partner and there is
  almost a state of dependency on it.
• It requires trade from Europe for influx of money
  but also importation of essential goods.
• There is a difference however on the national
  level, countries such as Venezuela are more
  dependent on the US.
• Overwhelmingly however, most nations require
  Europe for economic growth.
• For Europe, though, trading with MERCUSOR is not
  vitally important- it can look to other trading
  blocs for goods.