MERCOSUR: Establishment and Cooperation

The Southern Common Market, known by its Spanish acronym MERCOSUR, originated in efforts by countries in southern South America to reorganize political and economic relations amid democratization. On 30 November 1985, Argentine President Raúl Alfonsín and Brazilian President José Sarney signed the Declaration of Iguazú, advancing bilateral rapprochement and placing trade, transport and energy cooperation on the agenda. Paraguay and Uruguay subsequently joined the process.

On 26 March 1991, Argentina, Brazil, Paraguay and Uruguay signed the treaty establishing the market in Asunción. The presidents participating in its signature were Carlos Menem, Fernando Collor, Andrés Rodríguez and Luis Alberto Lacalle. The UN treaty registration lists entry into force as 29 November that year; signature and entry into force must be distinguished.

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The Treaty of Asunción proposed creating a common market by the end of 1994, progressively enabling the movement of goods, services and factors of production, coordinating economic policies and establishing a common external tariff. This was a transitional objective, not evidence that borders among the four countries disappeared in 1991. The treaty recognized that Paraguay and Uruguay could follow partly different adjustment timetables.

Tariff reduction was only one part of the work. Rules of origin determined which goods qualified for regional preferences, while non-tariff measures, sectoral policies and domestic regulations also required coordination. States faced the task of connecting existing national administrative systems, rather than creating an integrated market through a single signature.

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The initial core bodies were the Common Market Council and the Common Market Group. The Council, comprising foreign and economy ministers, provided political direction. The Group included representatives from each country's foreign and economic ministries and central bank and proposed implementation measures. Decisions required consensus with all members present, leaving principal authority with governments.

Cooperation quickly became a concrete interdepartmental agenda. The Las Leñas timetable adopted on 27 June 1992 scheduled individual tasks in trade rules, tariff classification, customs administration and other areas. Countries would, for example, first submit or exchange national regulations, identify differences, discuss common texts and finally refer them to the responsible authorities. These steps divided broad objectives into administrative work that could be passed from one body to another.

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Opening markets affected business interests and national policies, making procedures for handling disagreements necessary. The four countries signed the Protocol of Brasília on 17 December 1991, establishing dispute settlement for the transitional period. Disputes over treaty interpretation or implementation began with direct negotiations between states; unresolved matters could be referred to the Common Market Group.

The Group could hear both sides, consult experts and make recommendations. If the dispute remained unresolved, the parties could proceed to an ad hoc tribunal of three arbitrators. This was not a regional court equipped from the outset with permanent judges. The Administrative Secretariat handled notifications and procedural support, linking political consultation and arbitration into a continuous process.

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The initial Administrative Secretariat was based in Montevideo, Uruguay, and performed functions including document custody and communication. The Protocol of Ouro Preto, signed on 17 December 1994, further defined the institutional structure, adding bodies including a Trade Commission, a Joint Parliamentary Commission and an Economic and Social Consultative Forum, and granting MERCOSUR international legal personality.

The protocol required the Administrative Secretariat to prepare a budget for approval by the Common Market Group and submit annual accounts and activity reports. Member states shared equally the budget for its operations and authorized expenditure. Joint institutions thus acquired relatively clear sources of funding and reporting responsibilities. The Common Market Group, composed of representatives of foreign and economic authorities, both advanced policy and approved and supervised the budget.

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Around 1995, cooperation entered the customs-union stage, but the common market was still incomplete. Roberto Bouzas's first report for the Inter-American Development Bank's integration institute showed continuing exceptions to intraregional free trade, while the common external tariff included national lists and phased convergence arrangements. Sensitive sectors such as motor vehicles and sugar particularly required further negotiations.

These exceptions prolonged the need for origin checks and impeded completely free movement of goods among members. MERCOSUR's early achievement was to establish continuing exchange of regulations, ministerial and technical negotiations, and procedures for managing disagreements among the four states. It turned a one-off diplomatic commitment into everyday cooperation while retaining tensions among national interests, industrial protection and common rules.

References: [7]