MERCOSUL - The best succeeded diplomatic iniciative in the History of the Continent

MERCOSUL - South Common Market - is the most importanty foreign policy project in Brazil. This iniciative represents, today,a regional group which is economicaly mighty and politicaly strable, and has been taking advantage of the teachings and opportunities of globalization for the integration of South America thus attractring more and more the interest of all the world.

MERCOSUL is an economical integration process among Argentina, Brazil, Paraguay and Uruguay, which began with the signing of the Treaty of Assuncion which aims the formation of a common market, by means of the free circulation of goods, services and production factors, elimination of all restrictions on reciprocal commerce; setting of a common external fare; adopting of common commercial policies facing other countries; coordination of macro economiccal and sectorial polices.

The signing of the Treaty of Assuncion, on March 26th, 1991, culminates a negotiation process strated in August 1990, among Brazil, Argentina, Paraguay and Uruguay. The treaty materializes an ancient wish of their peoples, reflecting the growing regional political understanding, the density of the economical and commercial connections and the facility of communication created through the transportation infrastructure of the four countries.

The ongoing integration gives follow up to the dispositive incorporated in the article 4, only paragraph, of our Constitution and is a valuable tool for a more competitive insertion of the four economies in the international market, on a situation in which the formation of large economical blocks and the great chalenges given by globalization. are highlighted.

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THE FREE MARKET OF THE SOUTH - MERCOSUL

Antecedents

MERCOSUL evoluted from an economical aproximation process between Brazil and Argentina, started in the mid 80's. This process can be described in the following chronologial order:

- In 1985, the presidents of Brazil and Argentina settled an integration agreement, known as "Declaration of Iguaçu".

- In 1986, the Act for Integration Argentina-Brazil was signed, occasion in which the Economical Integration and Cooperation Program - EICP, was instituted betwens the two countries. The Act is based on the principles which later headed the "Treaty of Assuncion": flexibility, which would allow adjustments in pace and objectives, gradualism, simetry and dynamic balance;

- In 1988 the Treaty of Integration, Cooperation and Development Argentina - Brazil was signed, on the occasion, 24 protocols about several subjects such as: capital goods, wheat, industrialized food products, automobile sector, nuclear cooperation, oceanic transportation, land transportation, among others, were signed;

- In July 1990, the Act of Buenos Aires, which settled January 1995 as the starting date for a common marked between the two countries was signed;

- In December 1990, the protocols above mentioned were consolidated in one only instrument denominated Economic Complementation Agreement - ECA 14, signed between Brazil and Argentina, which constituted the referential later adopted in the Treaty of Assuncion;

- In March 26th, 1991 the Treaty of Assuncion among Argentina, Brazil, Paraguay and Uruguay for the constitution of MERCOSUL was signed.

Objective

MERCOSUL is an economic integration process among Argentina, Brazil, Paraguay and Uruguay, started with the signing of the Treaty of Assuncion, which aims the formation of a common market, by means of the free circulation of goods, services and productive factors: elimination of the restrictions on reciprocal commerce; setting of a common external fare; adoption of common commerce policies in relation to other countries; coordination of macro economical and sectorial policies.

Treaty of Assuncion and its Protocols

The signing of this Treaty started the "transition period" of MERCOSUL, which lasted from March 1991 to December 1994. This period was characterized by two basic elements: development of a Trading Liberalization Program, consisting of progressive, linear and automatic fare reductions and by the negotiation of common trading policies.

The Treaty was suplemented by Additional Protocols, like the Protocol of Brasilia, which deals with the mechanisms for Controversy Solutions, signed on December 17th, 1991 (Decree 922 of September 10th, 1993) and the Protocol of Ouro Preto, about the institutional structure of MERCOSUL, signed on December 17th, 1994 (Decree 1.901 of May 09th, 1996). With the signing of the Treaty of Ouro Preto, was established the institutional structure fo MERCOSUL, having also been the instrument which gave this block juridic personality of international law, enabling the relationship with other countries, economic blocks and international organisms.

Organs Structure

MERCOSUL has the following organs:

1) Common Marked Council - CMC: superior organ responsible for the political conduction of the integration and decisions to ensure the enforcement of the objectives established in the Treaty of Assuncion. It consists of the Departments of Foreign Relations and the Departments of Economy or their equivalent in the Partner-States. The presidency of the Council is rotary in alphabetical order, for a period of six months. They may meet as often as they find advisabe, but they must meet at least once every six months with the participation of the Partner-States.

2) Common Market Group - CMG: Executive organ which takes the necessary measures to apply the decisions made by the Council and sets work programs which assure advances in the establishment of the Common Market. It consists of four members per country .In Brazil, it consists of: the Sub-Secretary for Integration, Economic and Foreign Trade Affairs (MRE), the Director of International Affairs of the Federal Reserve, the Secretary of Foreign Trade, the Secretary of Production Development of MDIC and the Secretary of Agricultural policy of the Agriculture Department.

3) MERCOSUL COMMERCE COMMISSION - MCC: is the organ assigned to support CGC, having as one of its roles to care for the use of the common commerce policy by the Partner-States for the performance of the Customs Union,as well as to follow up and revise matters related to the common commerce policies, like the inter-MERCOSUL commerce, and with other countries. It consists of four members per country and is coordinated by the Foreign Relation Departments. This commmission must have one meeting per month or whenever requested by CGM. In Brazil it consists of the head of the Latin American Integration Department, the ERM, the Director of the International Negotiation Department, the SECEX (ForeignTrade Department), the General Coordinator of the Agricultural Economy Department, the Agriculture Department and the Adjunct-Secretary for International Affairs of the Treasure Department.

4) Group Parliamentary Commission - organ that represents the Parliaments of the Partner-States, and is responsible for accelerating the internal procedures in the Partner-States, for the immediate introduction of the norms created by the organs in MERCOSUL. It may also operate to harmonize the legislations, as a consequence of the advance in the integration process.

5) Social-Economical Advisory Forum, is the organ which repersents the social sectors. It has an advising function.

6) Administrative Secretary - organ for operational support, with head-office in Montevideo - Uruguay. , It is the organ responsible for the support service to the other organs in MERCOSUL.

Regime of Final Adequation to the Customs Union

It was a regime in which there was a transitory exclusion of some products from the Free Trade area. it was a system aimed the interblock market. The productive sectors of each of the four countries, with greater competitivity problems, used this regime and were benefited with additional time to adapt to the free commerce. It was established in January 01st, 1995. In Brazil and in Argentina it was valid until December, 31st, 1999.

Common Nomenclature of MERCOSUL - CNM

Based on the Goods Designation and Codification Harmonized System, the Partner-States created a nomenclature of 8 digits, named Common Nomenclature of MERCOSUL,which constitutes the base of the Common Foreign Fare.

Common Foreign Fare - CFF and the List of Exceptions

From January, 1995, was established the customs union which implied the adoption of a Common Foreign Fare. The CFF correlates the items from Common Nomenclature of MERCOSUL - CNM with the rights of importing on each of these items, and applies only to products coming from non member countries.

Each Partner State elaborated a List of Exceptions to the CFF mamde up of products from the capital goods, computers and telecomunications, and other national exceptions (products which immediate inclusion in CFF would bring up problems to a determined Member of the block). Each country could include, at most, in this list, up to 300 items, with the exception of Paraguay which could include up to 399 products. All these fare items must converge to CFF levels in 2001, except computer and telecomunication goods, as well as the extra exceptions of Paraguay, which will be converted to CFF in 2006.

The National Lists of Exceptions to the CFF were defined by each country, according to the following criteria.

- Basic List - with converging programmed for Jan, 01st 2001 made up of up to 300 items for Argentina, Brazil and Uruguay, and of up to 399 items for Paraguay.

- Capital Goods List - with convergence programmed for Jan 01st, 2001 for Argentina and Brazil. Paraguay and Uruguay may converge them until January 01st, 2006. There is no limit to the number of items, but only the fare items listed in the universe of capital goods defined by MERCOSUL can be included.

- Computer an Telecomunication Goods List - which convertion programmed for January 01st, 2006 for all four countries. There is no limit for the number of items, although only the fare items listed in the universe of computer and telecomunication goods defined by MERCOSUL can be included.

- Exceptions List - created for the inclusion of products in the Adequation Regime: permited for the cases in which the fares in the Adequation Regime (based on the national fares in use in August, 1994) were superior to the ows in CFF. The dead lines were those of the Adequation Regime itself, which means January 01st, 1999 for Argentina and Brazil, and January 01st, 2000 for Paraguay and Uruguay.