South American nations founded the commercial and political organization known as MERCOSUR. One could think of South America as the common market. The Spanish Southern Common Market is known as Mercado Comun del Sur, hence the acronym MERCOSUR. With the signing of the Asuncion Agreement by Argentina, Brazil, Paraguay, and Uruguay, MERCOSUR was created in 1991. Other than the four founding members, the main MERCOSUR members are Bolivia, Chile, Peru, Colombia, Ecuador, and Suriname. Members New Zealand and Mexico have observer state status.
Free trade between South American nations was the main driver behind the creation of MERCOSUR. The four founding states decided to impose a common 35% customs duty on all types of goods and services coming from abroad to these countries even though they removed the customs barriers for trade among themselves. The adoption of a common currency and visa-free travel between South American nations, similar to that of the European Union, were among MERCOSUR’s long-term objectives. In contrast, MERCOSUR has succeeded in evolving over time into a commercial union rather than a political union like the European Union.
The MERCOSUR organization is based in Montevideo, Uruguay. The Common Market Council is MERCOSUR’s top authority and decision-making body. The foreign and economic ministers of the member states make up the Common Market Council’s membership. According to the alphabetical order of the nations, the presidency of the council is rotated every six months. The Council should meet at least once a year, though it may convene more frequently if it sees fit. A commercial court exists within MERCOSUR to handle disputes between businesses with headquarters in various member states.
Due to issues with democratic practices in the nation, Venezuela’s membership in MERCOSUR, which had joined in 2012 with the same status as the founding states, was suspended in 2016. The founding members of MERCOSUR collectively have a GNP of $2.9 trillion. After the European Union and NAFTA, this makes MERCOSUR the third-largest trade union in the world. The states that are MERCOSUR members but do not have the status of founding states are still allowed to trade freely with the founding states even though they are not allowed to participate in the union’s decision-making processes or cast votes there. Although MERCOSUR members must make decisions collectively when conducting business with third parties, this is not how things usually work.
For instance, Brazil imposed antidumping restrictions on steel imports from China in 2011 without consulting the union’s decision-making bodies or other union members. As a result, it is challenging to claim that the union is fully formed like the European Union.
The European Union and NAFTA, the other two major trade unions in the world, are parties to various commercial agreements that MERCOSUR intends to enter into in the future. Argentina and Brazil, the union’s largest members in terms of economy and population, will determine the future and success of MERCOSUR.