| A NEW STAGE OF MERCOSUR?: Clear horizons
after the San Juan Summit
by Félix Peña
English translation: Isabel Romero Carranza
Has a path opened up towards a new stage in the development
of Mercosur? The actual facts support an affirmative answer. The results
of the San Juan Summit have been considered positive, among other reasons,
because they have shown progress in three fronts that are key for the
construction of a space of regional integration among Mercosur member
countries. Furthermore, these three fronts are interconnected.
The first and foremost of these fronts is the strategic
association between Argentina and Brazil. The cooperation in the nuclear
field, a key issue in the strategic relations between the two countries,
received a new thrust at San Juan. The second front is the development
of Mercosur's full potential. Several were the results of the Summit on
this regard. However, the most important ones are related with the consolidation
of the customs union through the approval of instruments, such as the
Customs Code, which had been pending for several years. The third front
is that of the trade negotiations with third countries. On this regard
the conclusion of a free trade agreement with Egypt and, in particular,
the concrete signals towards joint negotiations with the EU based on a
customs union can be highlighted.
While holding the pro-tempore presidency of Mercosur,
during the second semester of this year, it is to be expected that President
Lula promotes initiatives to agree on the new objectives of integration
and to make the conclusion of the EU- Mercosur agreement -at least of
its most relevant aspects- a priority at the Foz de Iguazú Summit
next December. This would be an attainable goal if both sides show political
will, strategic vision and technical ingenuity to cater, with flexible
instruments, to the respective sensibilities.
Has a path opened up towards a new stage in the development of Mercosur?
The results of the San Juan Summit of the 2nd and 3rd of August would
indicate that the conditions to move forward with the construction of
Mercosur are now present. This would seem to be the idea conveyed by the
Brazilian government through the interview given by the Foreign Affairs
Minister Amorim to the newspaper Valor Econômico on August 9. In
it he pointed out that some important steps have already been taken but
that it would be necessary to move forward. The following were mentioned
as some of the issues that will require additional attention: the elimination
of the exceptions to the common external tariff; an agreement of government
purchasing which results in actual preferences; and a broader services
agreement that grants national treatment to the businesses belonging to
the block in all of its countries. He added that "em vez de negociar
setorzinho por setor será que nâo devemos ter meta para definir,
que devem ser alcanzadas?, and wondered whether it would be time to "pensar
grande novamente no futuro? Additionally, he made a cautious reference
to the progress that might be achieved in the negotiations with the European
Union (EU) and considered it more realistic to anticipate advancements
during this year but not necessarily the conclusion of an agreement.
The fact that Brazil has held the pro-tempore presidency of Mercosur
in this second semester -and thus the coordination of the negotiations
with the EU- has given the declarations a special significance. They are
supported by real facts, precisely that the results of the San Juan Summit
have been positive and, in a certain way, unexpected (for another view
of the results of the Summit see the article by the Ambassador Rubens
Barbosa, "A saga do Mercosul", in the newspaper O Estado de
Sâo Paulo of May 10, 2010). These results have been made manifest
in three interconnected fronts.
The first front is the consolidation of the strategic association between
Argentina and Brazil. Launched by the agreements Alfonsín-Sarney,
its fundamental aspects remain unaltered after a quarter of a Century.
However, in a certain way, it is a permanent work under construction.
It constitutes an alliance upheld by two basic pillars.
One of these pillars is the mutual trust in relation to the multiple
outcomes of nuclear development in Argentina and Brazil, and the appreciation
of the reciprocal cooperation in the field. The signals resulting from
the San Juan Summit indicate that both countries firmly stand by their
commitments on this regard (for the texts both in Spanish and Portuguese
of the Declarations of the San Juan Summit of August 3 - San Juan Declaration,
Joint Declaration on Malvinas, Joint Declaration on Nuclear Cooperation
- go to http://www.itamaraty.gov.br/).
This is what makes this bilateral relation the hard core of peace and
political stability in South America. Within the current regional and
global context this is not a minor fact. As such, it even contributes
to generate a favorable climate for the implementation, by businesses,
of investment decisions and productive clusters that help develop the
huge potential that the region has within the new global economic scenario.
The other basic pillar of this strategic association is that of economic
and trade preferences, conceived as instruments for facilitating the joint
productive transformation and the capability for negotiating with other
countries. This is a pillar that, while preserving the bilateral identity
and dynamics, is inserted within a wider Mercosur framework which in several
aspects has a clear South American dimension. On this regard, it should
be noted that the functions and objectives of Mercosur's and UNASUR's
institutional spaces may be considered complementary. This month's events
in the relations between Colombia and Venezuela would illustrate this
point (on the relations between both institutional spaces and their possible
complementation, see our article "La integración del espacio
sudamericano: ¿La Unasur y el Mercosur pueden complementarse?",
in Revista Nueva Sociedad Number 219, January-February 2009).
The second interconnected front is the realization of Mercosur's full
potential. This is a multidimensional and long term project. It is a continuous
process with no finishing line or guarantees of irreversibility. Such
as what is more evident today with the EU, Mercosur does not follow any
text book models nor any of the models developed in other regions. It
is, as it should be, an attempt at joint work between a group of countries
that tries to respond to the characteristics, interests and realities
that are particular to the region. It is not an easy task to accomplish
in practice and this is the reason why it will always seem incomplete
and far removed from any ideal. Even the adjective "imperfect"
normally used in the academic world to describe the customs union that
is the aim of Mercosur may be signaling some difficulties in the understanding
of the real world in which almost anything may be considered imperfect
or incomplete in comparison with the ideal models. It could also be reflecting
a lack of understanding of the regulations that, within the framework
of the World Trade Organization, define such modality of market integration
- especially article XXIV, 8 a) of GATT-.
Among other relevant issues, (see the text of the Joint Declaration of
the Presidents of the Mercosur member countries on http://www.itamaraty.gov.br/),
what was achieved at the San Juan Summit was a significant progress in
the development of those unresolved matters that had been pending since
the approval of the external common tariff in Ouro Preto in 1994 (see
the Minutes from the XXXIX Meeting of the Mercosur Council and Decisions
that were approved on http://www.mercosur.org.uy).
These are the Customs Code (Decision CMC 27/10 on http://www.mercosur.org.uy
here); the elimination of the double imposition of the external tariff
and the distribution of the customs revenue (Decision CMC 10/10, on http://www.mercosur.org.uy/
here); the single administrative document, (Decision CMC 17/10, on
here),and the procedures manual for the control of customs value (Decision
CMC 16/10, on http://www.mercosur.org.uy
here). What was agreed regarding these issues involved reconciling
different interests and views. Additionally, during the final stage of
San Juan, it also demanded technical ability and a great deal of political
Even when it may be considered a clear success of the Argentine presidency
of Mercosur during the first semester of this year, what was achieved
in San Juan does not mean that the job regarding these issues is over.
Still ahead are the meaningful steps that need to be taken for the commitments
to become effective and impact reality. Driving them further will probably
be one of the priorities for this year. This may be a hard task to accomplish.
However, it is a normal aspect of any integration process between two
sovereign nations that aspire to remain so, particularly when there are
marked asymmetries in their size and relative economic power. The idea
of linear paths with no jolts is not compatible with the political and
economic realities, they only exist in theory. On the contrary, the voluntary
integration between sovereign nations entails winding journeys characterized
by crisis, setbacks and, sometimes -as was the case here- forward leaps.
These are processes that can even result in failure or morph into something
different from what was originally planned.
In order to assess the work that still needs to be done regarding the
issues that were approved in San Juan we should note that in the past
other basic instruments of Mercosur, such as for example those related
to the defense of competition or how to deal with investments, were never
fully approved internally by each country. In a manner of speaking it
could be said that Mercosur has several "legal corpses" in its
history. A previous version of the Customs Code had already been approved
in 1994. It is possible that the buildup of agreements that cannot go
beyond the stage of formal approval by the Mercosur Council is one of
the clearest indicators of the institutional inadequacies of the integration
process. Common rules are often approved without having previously been
screened by the filters of the respective national interests or by the
competent technical bodies of each government. The need to produce successful
summits has demonstrated, in the twenty years of Mercosur's existence,
that this can be, depending on the circumstances, either a fact that encourages
the progress of real integration or that only generates episodes of "media
diplomacy", i.e.: headlines for next day's papers that later fail
to translate into facts.
The third of the fronts is that of Mercosur's international trade negotiations
with third countries. A new free trade agreement with Egypt was signed
in San Juan, (for the full text of the agreement and its annexes go to
Previously, an agreement had been signed with Israel. Additionally, there
are those preferential agreements signed with other developing countries.
More than the relative importance of such agreements, measured by their
incidence in the trade and investment flows, what becomes relevant is
that they confirm a strategic idea that had been challenged at times by
some sectors of the member countries. Lately this idea had been questioned
by several personalities in Brazil (see
the July 2010 edition of this Newsletter). What is called into question
is if Mercosur may be able to carry out preferential trade negotiations
with other countries and, in particular, with those with which economic
relations are, or could be, of great significance. Thus the need to prioritize
bilateral trade negotiations that would involve a change in the fundamental
rules of Mercosur has been raised. This could lead to the deterioration
of the necessary mutual trust which constitutes the foundation behind
the idea of the strategic alliance that has been promoted for the last
twenty five years. An interesting precedent on this regard was precisely
the reaction of Brazil, and of Argentina as well, to Uruguay's attempt
to conclude a Free Trade Agreement with the US. during the presidencies
of Jorge Batlle and Tabaré Vázquez. (For an excellent analysis
of this precedent, see the book by Roberto Porzecanski listed under Recommended
From there the importance of the signals that have clearly emerged from
the San Juan Summit in relation to the recently re-launched bi-regional
negotiations with the EU Three of these signals are worth noting. The
first and foremost is the reaffirmation by the partners of their commitment
to strengthen Mercosur, even placing commercial differences within the
broader perspective of a strategic intent that transcends the economical.
On this regard we can recall the definition given not so long ago by the
Foreign Affairs Minister Amorim when he pointed out that, for Brazil,
Mercosur was a synonym of peace and political stability in South America.
The second signal comes precisely from the measures adopted to complete
the basic instruments of a customs union. The Customs Code, the double
imposition of the external tariff, and the distribution of the customs
revenue, have been some of the main priorities in the expectations list
of the EU in order to negotiate with Mercosur. Finally, the third signal
has been the reaffirmation by President Lula of his interest in a fast
progress of the bi-regional negotiation.
While holding the pro-tempore presidency of Mercosur during the second
semester of this year, it is only natural that President Lula should make
of the progress towards the conclusion of an EU-Mercosur agreement -at
least in its fundamental aspects- a priority of the Foz de Iguazú
Summit next December. This is an attainable goal if both sides show a
good dose of political will, strategic vision and technical ingenuity
in order to tend with flexible instruments (multiple-speed, variable geometry,
safety valves, differential treatment) and with the specific rules of
origin, to the respective sensibilities. These are present in all the
participating countries and on both sides of the Atlantic. Additionally,
it could be necessary to give special treatment to certain complex and
sensitive sectors such as the automotive one, among others, which has
had a special treatment since the inception of Mercosur. Something similar
has happened with the agricultural sector in the case of the European
Other issues which have been the purport of agreements signed and decisions
adopted at the San Juan Summit give evidence of the density and relevance
that Mercosur's agenda will have in the future. The main ones refer to
the Guarani aquifer (for the text of the agreement signed by Argentina,
Brazil, Paraguay and Uruguay, go to
http://www.itamaraty.gov.br/); the financing of infrastructure and
productive projects of general interest (for the texts of the Council's
Decisions in reference to these projects go to http://www.mercosur.org.uy/),
and the cooperation with other countries reflected, in this opportunity,
by the trade preferences granted to Haiti http://www.mercosur.org.uy/
The three issues mentioned by Minister Amorim, quoted above, should also
be included in the priorities of the future agenda of Mercosur. Two facts
should be mentioned here in relation to the issue of government purchases.
The first is the approval of Decision CMC 23/10 on the modification of
the Public Purchasing Protocol that is expected to be presented at Mercosur's
Council meeting next December (for the text of Decision CMC 23/10, go
here). The other fact is the approval by the Brazilian government
of the Provisory Measure nº 495 of 19 July 2010 (for the Explanatory
Reasons go to https://www.planalto.gov.br/
and the text of the Provisory Measures on https://www.planalto.gov.br/),
which introduces modifications to the legal regulations of government
purchases to grant a preferential margin of up to 25% for goods and services
of Brazilian origin (the original text reads: "§ 6o A margem
de preferência por produto, serviço, grupo de produtos ou
grupo de serviços, a que refere o § 5o, será definida
pelo Poder Executivo Federal, limitada a até vinte e cinco por
cento acima do preço dos produtos manufaturados e serviços
estrangeiros"). Such preference is extended to the Mercosur countries
(once the Purchasing Protocol comes into force, which constitutes an incentive
for this to be achieved in the short term) and to those countries with
which Brazil has agreements regarding government purchases (the corresponding
text states that: "§ 10. A margem de preferência a que
se refere o § 6o será estendida aos bens e serviços
originários dos Estados Partes do Mercado Comum do Sul - Mercosul,
após a ratificação do Protocolo de Contratações
Públicas do Mercosul, celebrado em 20 de julho de 2006, e poderá
ser estendida, total ou parcialmente, aos bens e serviços originários
de outros países, com os quais o Brasil venha assinar acordos sobre
compras governamentais"). This generates an additional incentive
for European businesses to become interested in the conclusion of the
bi-regional agreement that is currently being negotiated between Mercosur
and the EU (on this Provisory Measure see the articles "Governo quer
frear China em licitaçâo pública", by Sergio
Leo; "Margen de preferencia será estendida e deve facilitar
acordo con UE", by Assis Moreira; and "Margen de preferencia
será estendida e deve facilitar acordo con UE", by Diego Z.Bonomo
published, all published in Valor Econômico on July 22, July 23,
and August 9, respectively).
However, above all, in view of the progress achieved and of the negotiations
that are underway -as well as of others that will come as a consequence
of an eventual agreement with the EU and of the resulting preferences-,
Mercosur will require the refining of its institutions in order to guarantee
a greater transparency and efficiency of its ground rules and an active
involvement of the different social sectors in its future development
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More