MERCOSUR

By: developer

MERCOSUR, a trading bloc made up of South American countries, was created in 1991 to promote free trade and the fluid movement of goods.

MERCOSUR bloc met in July at their 48th summit where Bolivia was officially incorporated as its sixth permanent member.  More newsworthy, particularly in light of the bloc’s troubled economic performance, there was some progress towards advancing on long-stalled trade initiatives, specifically an agreement with the EU.  These initiatives appear to show promise are in part due to mounting pressure from Brazil to gain greater market access.

Trade among member countries continues to decline with a 20.3 percent drop in the first quarter of 2015 compared to the same period last year. Last year, intra-bloc trade declined 13.1 percent.  All of the Mercosur member countries were hit with a decline in exports to other member states according to a report recently released by the Argentine Chamber of Commerce (CAC). The report highlighted the following:

  • Venezuela with a 46.3 percent decline
  • Uruguay with a 32.6 percent decline
  • Argentina with 24.9 percent decline
  • Brazil with 13.7 percent decline
  • Paraguay with a 12.5 percent decline

Intra-regional trade has not been the only problem as the overall export sector has taken a hit due to commodity prices and economic instability as well as uncertainty facing its largest member nations.

Obstacles still remain such as Mercosur’s Resolution 32/2000, which requires consensus from all members in trade issues, including bilateral agreements.  Resolution 32/2000 has been called a source of gridlock by Forbes because of the requirement of consensus from all members on all trade issues. Overcoming a culture of protectionism will also be a challenge as this has led to a countless regulations which will be difficult to reverse and will likely makes any short term gains improbable.

What does this mean for Florida? A decline in MERCOSUR bloc economies has had an impact on Florida’s overall trade numbers. Brazil, Florida’s most important trading partner, saw a decline of 11.3 percent, significantly affecting Florida exports in several sectors.  Argentina and Venezuela are also important Florida export destinations and their instability and uncertainty have also had repercussions.

But bright spots remain in Latin America. Peru, an important member of the Pacific Alliance, is growing and is well positioned for additional growth.  While the Pacific Alliance bloc is not as large – economically speaking – as MERCOSUR, its benefits from strong policies that favor increased market access and openness which will certainly generate new opportunities for Florida exporters.

 

Get Involved:

Learn what your business needs to know in order to successfully trade with the world’s growing economies by becoming a part of the Florida Chamber’s Global Florida program. Contact Alice Ancona today for more information.