Table of Contents

Introduction ......................................................................................................................................................... 1 History ................................................................................................................................................................. 1 Successes, Failures and the Future...................................................................................................................... 2 Conclusion ........................................................................................................................................................... 2 Bibliography ......................................................................................................................................................... 3

Introduction
With the signing of the Treaty of Maastricht in 1992 - the formal precursor to the formation of the European Union - there began a growing trend of regional integration that is now commonplace, even essential, in the development of global trade. Some of the more notable treaties include the North Atlantic Free Trade Agreement (NAFTA) and the Association of South-East Asian Nations (ASEAN). These agreements were entered into by states with the aim to increase trade and investment, both within the region as well as on an international scale, in the hopes of enabling their economies to become more competitive and help create stronger long term growth paths. The focus of this paper will be on the origin, development and future prospects of Mercado Comn del Sur (MERCOSUR), the Latin American trade agreement between Argentina, Brazil, Paraguay and Uruguay.

History
The establishment of MERCOSUR followed several failed attempts at a formal regional integration agreement, namely LAFTA and LAIA, in 1960 and 1980 respectively. Rather than being intrinsically flawed, their failures were largely a result of the protectionist nature of the world economy, initially in the 1960s and again in the 1980s following the debt crisis (Kaltenthaler & Mora, 2002:72). The restructuring of many Latin American economies in the late 1980s closer to the neoliberal ideal brought about a systemic change which was more conducive to regional and international integration. An important propagating factor which led to the emergence of MERCOSUR was the growing relationship between Brazil and Argentina towards the end of the 1980s. As the process of economic reform towards Washington consensus measures was being implemented, the increased and sociable political relationship between the two nations led, almost naturally, to closer economic integration (Mecham, 2003:376). Following the signing of several largely symbolic treaties, the 1990s brought with them the idea of a more substantial integration agreement (Bajo, 1999:937). By 1991 the Treaty of Asuncin made formal provisions to setup a Common Market for the South (MERCOSUR) - including in it Uruguay and Paraguay - within the next four years. The purpose of this market, the treaty stated, was to promote integration - both political and economic - with the goal of facilitating the development of the region as a whole (Mecham, 2003:377). The Treaty of Asuncin helped expedite the creation of other components of MERCOSUR, such as a customs union and a mechanism for resolving disputes between member countries. Despite an initially successful start,
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MERCOSUR has at times been somewhat problematic. The following section will look at a few of those complications as well as some of the successes had by the trade bloc.

Successes, Failures and the Future

MERCOSUR's permanent members Brazil, Argentina, Uruguay, Paraguay and, pending ratification, Venezuela are hugely influential in the region, together accounting for 75% of South America's GDP (Vogler, 2006). Thus, the success or failure of the bloc has substantial implications for trade, integration and development across South America as a whole. The success of MERCOSUR has not been insignificant, particularly in the early years. Exports between members grew from under 9% prior to the Treaty to 25% in 1998 - where the knock on effects of the Asian crisis served to slow this expansion (Paiva & Gazel, 2004:16). Additionally, trade tariffs in the region have declined from 45% to 13% within the same period. Further, non-tariff barriers fell to 11% from 31% at the end of the 1980s. In addition to tariff reduction, FDI - particularly for Argentinean and Brazilian firms - has increased by an even greater amount than the decline in tariffs (Paiva & Gazel, 2004:18). Despite this progress which MERCOSUR brought to the region, the integration agreement has not been without its problems. One such problem relates to the timing and circumstances of the deal. The inception of MERCOSUR came about at a time when many of the regional economies were already opening up for trade along neoliberal lines. The implementation of MERCOSUR pushed member countries to engage in deeper levels of integration, without fully consolidating previously agreed upon deals (Paiva & Gazel, 2004:21). In addition, the macroeconomic plans of the member states were not effectively synchronised, which served to hinder the liberalisation process, and increase the vulnerability of MERCOSUR to instability from first round shocks that were present in the world economy at the time (Paiva & Gazel, 2004:21).

Conclusion
The space constraints of this essay prevent a more than surface examination of what is in truth a complex and fascinating subject. Nonetheless, it is hoped that the brief overview of the origins of MERCOSUR - as well as some of the benefits and drawbacks which it has had on the economies of the region - have provided a framework through which a fuller, more thorough investigation can be had. What is clear though, is that while the economic integration provided by MERCOSUR has had a positive impact on trade in the region, the risks of poor implementation and political interference could have destabilising effects not just on the member countries but on the South American economy as a whole.
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Bibliography
Bajo, 1999., New Regionalisms in the New Millennium, Third World Quarterly, 20(5): 927-941. Gazel, R. & Paiva, P. 2004. MERCOSUR Economic Issues: Successes, Failures and Unfinished Business. Center for Latin American Studies Working Papers, 4(5): 1-32. Kaltenthaler, K & Mora, F. 2002. Explaining Latin American Economic Integration: The Case of Mercosur. Review of International Political Economy, 9 (1): 72-97. Mecham, 2003. A Failing Development Project. International Affairs, 79 (2): 369-387. Vogler, J. 2006. South America: towards union or disintegration? [Online]. Available: http://www.opendemocracy.net/democracy-protest/union_disintegration_3756.jsp [15 August, 2011].