This should not come as a shock to anyone who has been paying attention, but Mercosur is falling apart. Mercosur, or the Common Market of the South, was founded with a trade agreement signed in 1991 between Argentina, Brazil, Paraguay and Uruguay. Since then, Bolivia, Chile, Colombia, Ecuador and Peru have joined as associate members, and Venezuela is on track to do the same.
Its current state is aptly summed up in the small town of Gualeguaych??, Entre R?os in Argentina, across the river from Frey Bentos, Uruguay, where locals have been protesting the construction of two cellulose paste factories. Protesters started by blocking access to roads at arranged times and for specific intervals. Now, they are closing off the roads for practically everyone, ranging from Chilean truck drivers to Argentine beach-goers. A fellow Jumbo and I made this road trip last December with two companions, and though we were warned of potential riots, we were able to cross the border without too much trouble.
Across the Uruguay River, the government of Tabar?© V??zquez supports the construction of the two factories, which amount to a 1.4 billion Euro investment, the largest in Uruguayan history, and one which equals about 10 percent of its GDP. Uruguay claims that the factories are being built in accord to strict European Union (EU) regulations (the project is a Finnish and Spanish investment), and the World Bank has acknowledged this. Argentines, though, are worrying about their fresh air and water, and have threatened to take this case to the International Court of Justice.
What is most significant in this international flare up is not so much the future of the local water quality, but more so the complete lack of a functioning infrastructure capable of dealing with such things.
The sad truth is that the Mercosur agreement, in my opinion, was a byproduct of its times and as such, and end in itself; its founders did not see it as a means towards development, integration and prosperity. In 1991 free trade was "in," even in Latin America. The Cold War was winding down, and open markets were increasingly seen as a quick fix for poverty. Moreover, over the previous two decades, Mercosur's two biggest players, Argentina and Brazil, had transitioned out of dictatorships and had begun to form some loose alliances and friendly pacts.
Now, Hugo Chavez is "in" in Latin America and free trade is not nearly as popular. Nationalism is prevalent again (though it may have never truly disappeared).
Consequently, in a time when agreements that promote the international movement of people and investments should be growing, Mercosur is shriveling.
In another backwards step for Mercosur, Argentina and Brazil agreed on setting limits on exports to curb trade deficits and protect local industries.
The issue of Brazilian-made cars being exported to Argentina is a particularly delicate one, and one for which Argentina has been demanding "safeguards."
Interestingly, these safeguards were agreed upon outside of Mercosur negotiations, as Argentina and Brazil worked within the frameworks of a bilateral agreement that predates Mercosur.
Aside from arbitration, Mercosur has also been a complete disaster in promoting social development and regional integration.
Some member states have become dependent (like Paraguay, with close to 60 percent of its total trade going to other Mercosur members), while others have remained wholly detached (like Brazil, which trades more with the United States and the EU than with Argentina).
Time and again, Argentine and Brazilian reluctance to pool sovereignty, develop collective macroeconomic policies and act in unison in the international arena has hindered Mercosur, prompting many to call its long-term feasibility into question.
Mercosur must be resuscitated, especially considering that many of its members rejected a free trade agreement with the United States last November. Political dialogues have to be encouraged, and politicians must see their citizens for what they are: individuals forming part of a much larger, and potentially much more powerful whole, not just votes in a district.
The trading bloc must be reformed, its institutional and political weaknesses resolved, and then (and only then) it should be expanded. For now, the issue of papers and borders will help to determine the future of the region.
Though realistically Mercosur will probably not collapse, if nothing is done, it may well fade into irrelevance.
