Mercosur (also known as Mercosul or Ñemby Ñemuha) is a South American trade bloc established by the Treaty of Asunción in 1991 and Protocol of Ouro Preto in 1994. Its full members are Argentina, Brazil, Paraguay and Uruguay. Venezuela is a full member but has been suspended since December 1, 2016. Associate countries are Bolivia, Chile, Peru, Colombia, Ecuador and Suriname. Observer countries are New Zealand and Mexico.
Mercosur's purpose is to promote free trade and the fluid movement of goods, people, and currency. The official languages are Spanish, Portuguese, and Guarani. Since its foundation, Mercosur's functions have been updated, amended, and changed many times: it is now a full customs union and a trading bloc. Mercosur and the Andean Community of Nations are customs unions that are components of a continuing process of South American integration connected to the Union of South American Nations (USAN).
Mercosur was established in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Mercosur originated in 1988, when presidents Raúl Alfonsín of Argentina and José Sarney of Brazil signed the Argentina-Brazil Integration and Economics Cooperation Program or PICE (Portuguese: Programa de Integração e Cooperação Econômica Argentina-Brasil, Spanish: Programa de Integración y Cooperación Económica Argentina-Brasil). The protocol Number 20 of the program also proposed the Gaucho as a currency for regional trade.
After suspending Paraguay in 2012, the presidents of the Mercosur countries (Argentina, Brazil, Uruguay, and Venezuela) said in July 2013 that they would lift the suspension after the inauguration of Paraguay's newly elected President, Horacio Cartes, on 15 August 2013. However, Paraguay said it would not return to the Mercosur fold as long as Venezuela held its rotating presidency. Venezuela held Mercosur's rotating presidency until July 2014. Paraguay has objected to Venezuela's inclusion in the trading bloc, and says that a new member can only be included after a unanimous vote and argues that such a vote should not have been held while Paraguay was suspended. Foreign Minister Eladio Loizaga said he would rather deal with Paraguay's neighbours individually at first. "We have pending issues with Argentina, with Uruguay; we have to recompose all that," he said. "Mercosur will be later because our priority are [sic] the bilateral relations," he added.
On 7 December 2012, Bolivian President Evo Morales signed a protocol aimed at accession to full membership of the block. Such a proposal requires review and possible legislative approval. On July 7 of 2015, the heads of Mercosur having decided to accept Bolivia's request to become a full member country, Bolivian president Evo Morales signed the Brasilia protocol. This acted Bolivia's full membership to the Mercosur.
In August 2016, the presidents of Brazil, Argentina, and Paraguay, while present in Rio de Janeiro for the Olympic Games, met to discuss suspending Venezuela from Mercosur. The three countries were in doubt about whether Venezuela was complying with the union's requirements for full membership, citing human rights violations among other issues. In fact, Venezuela was rejected from assuming the presidency of Mercosur by those three countries, prompting a dispute that continued in full throttle to the end of the year.
On 21 November 2016, Paraguayan Foreign Minister Eladio Loizaga announced that Venezuela would be suspended in December 2016 after the nation was given a three-month period to reform its laws to abide to Mercosur requirements, with Mercosur noting that "rules governing trade, politics, democracy and human rights" needed to be overhauled in Venezuela. On 1 December 2016, Venezuela was suspended from Mercosur.
Mercosur is composed of 5 sovereign member states: Argentina; Brazil; Paraguay; Uruguay and Venezuela (suspended since December, 2016); and a state in process of incorporation, Bolivia (since July 17, 2015)[better source needed]
Following the impeachment of President Fernando Lugo by the Paraguayan Senate, this country was suspended from Mercosur, and the admittance of Venezuela as a full member became effective on 31 July 2012. Venezuela had four years to fully adapt to the trade bloc regulations and failed to do so, with the nation being suspended from Mercosur on 1 December 2016.
Directly subordinated to the Common Market Group, the Work Subgroups draw up the minutes of the decisions to submit for the consideration of the Council, and study specific Mercosur concerns. The work subgroups are:
Work subgroups are held quarterly, alternating in every member state, in alphabetical order, or at the Common Market Group Administrative Office. Activities are carried out by the Work Subgroups in two stages: preparatory and conclusive. In the preparatory stage, members of the Work Subgroups may request the participation of representatives from the private sector of each member state. The decision-making stage is reserved exclusively for official representatives of the member states. The delegations of representatives from the private sector in the preparatory stage of the Work Subgroup activities will have a maximum of three representatives for each member state directly involved in any of the stages of the production, distribution or consumption process for the products that fall within the scope of the subgroup's activities.,
The territory of Mercosur consists of the combined territories of six of the 12 countries of South America and their population. Including the overseas territories of member states, Mercosur experiences most types of climate from Antarctic to tropical, rendering meteorological averages for Mercosur as a whole meaningless. The majority of the population lives in areas with a subtropical climate (Uruguay, Southern Paraguay, Northeastern Argentina and Southern and Southeastern Brazil), or a tropical climate (Venezuela and Northeastern Brazil).
|Paraguay||6.7 million||16.4/km²||Spanish and Guaraní|
The region is highly urbanized, and the largest cities in Mercosur are the global cities Buenos Aires, Rio de Janeiro and São Paulo. The white population is the majority in Argentina and CLGT and represents around half the population in Brazil. Venezuela's racial structure comprises 49.9% mestizo, while the other half about 42.2% of the country's population is considered white, less of 10% of the country's population is considered black, indigenous, Asian and others. Mestizos form the majority population in Paraguay. All Mercosur nations have significant Native American populations, especially in Paraguay (Guaraní is a national language in the country along with Spanish, and almost all Paraguayans have Guaraní genetic ancestry), Argentina (especially in the country's North-Western, Northern, and Southern provinces), Brazil (in the Northern Amazonian states of the nation, where Native American tribes have vast reservation lands), Venezuela (in the Guayana region).
Along with Paraguay (where it is one of two official languages), sectors of Argentina (Corrientes) speak Guaraní. However, the Mercosur does not provide all, or even most, services in Guaraní. The official website, almost all official summits are only held in Spanish and Portuguese.
Intra-Mercosur merchandise trade (excluding Venezuela) grew from US$10 billion at the inception of the trade bloc in 1991, to US$88 billion in 2010; Brazil and Argentina each accounted for 43% of this total. The trade balance within the bloc has historically been tilted toward Brazil, which recorded an intra-Mercosur balance of over US$5 billion in 2010.  Trade within Mercosur amounted to only 16% of the four countries' total merchandise trade in 2010, however; trade with the European Union (20%), China (14%), and the United States (11%) was of comparable importance. Exports from the bloc are highly diversified, and include a variety of agricultural, industrial, and energy goods. Merchandise trade with the rest of the world in 2010 resulted in a surplus for Mercosur of nearly US$7 billion; trade in services, however, was in deficit by over US$28 billion. The EU and China maintained a nearly balanced merchandise trade with Mercosur in 2010, while the United States reaped a surplus of over US$14 billion; Mercosur, in turn, earned significant surpluses (over US$4 billion each in 2010) in its trade with Chile and Venezuela. The latter became a full member in 2012.
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The Asunción Treaty and Ouro Preto Protocol established the basis for the institutional Mercosur structure, creating the Common Market Council and the Common Market Group, both of which function at the outset of the transition phase. As provided for in this Treaty, before establishing the common market the member nations must call a special meeting to determine the definitive institutional structure for the public agencies managing Mercosur, as well as define the specific functions of each agency and the decision making process.
The Council is the highest-level agency of Mercosur with the authority to conduct its policy, and responsibility for compliance with the objects and time frames set forth in the Asuncion Treaty. The Council is composed of the Ministers of Foreign Affairs and the Economy (or the equivalent) of all five countries. Member states preside over the Council in rotating alphabetical order, for six-month periods. Meetings: Council members shall meet whenever necessary, but at least once a year. The presidents of the member nations shall partake of the annual Common Market Council meeting whenever possible. Decision Making: Council decisions shall be made by consensus, with representation of all member states.
The Group is the executive body of Mercosur, and is coordinated by the Ministries of Foreign Affairs of the member states. Its basic duties are to cause compliance with the Asuncion Treaty and to take resolutions required for implementation of the decisions made by the Council. Furthermore, it can initiate practical measures for trade opening, coordination of macroeconomic policies, and negotiation of agreements with nonmember states and international agencies, participating when need be in resolution of controversies under Mercosur. It has the authority to organize, coordinate and supervise Work Subgroups and to call special meetings to deal with issues of interest. Composition: The Common Market Group shall be made up of four permanent members and four alternates from each member state, representing the following public agencies: (i) the Ministry of Foreign Affairs; (ii) the Ministry of Economy, or the equivalent (from industry, foreign affairs and/or economic coordination); and (iii) the Central Bank. The members of the Common Market Group appointed by a given member state will constitute the National Section of the Common Market Group for that particular nation. Meetings: The Common Market Group will meet ordinarily at least once every quarter in the member states, in rotating alphabetical order. Special meetings may be freely called at any time, at any previously scheduled place. The meetings will be coordinated by the Head of the Delegation of the host member state. Decision Making: Common Market Group decisions shall be made by consensus, with the representation of all member states. The official Mercosur languages will be Portuguese and Spanish, and the official version of all work papers will be prepared in the language of the country hosting the meeting.
The Administrative Office will keep documents and issue the Mercosur official bulletin in both Portuguese and Spanish, and will also be charged with communicating the activities of the Common Market Group so as to allow for the maximum disclosure of decisions and the relevant documentation. The Socioeconomic Advisory Forum is consultative by nature, and represents the various socioeconomic sectors of the member nations.
Directly subordinated to the Common Market Group, the Work Subgroups draw up the minutes of the decisions to submit for the consideration of the Council, and conduct studies on specific Mercosur concerns. The work subgroups are the following: commercial matters; customs matters; technical standards; tax and monetary policies relating to trade; land transport; sea transport; industrial and technology policies; agricultural policy; energy policy; coordination of macroeconomic policies; and labor, employment and social security matters. meetings. The meetings of the Work subgroups will be held quarterly, alternating in every member state, in alphabetical order, or at the Common Market Group Administrative Office. Activities will be carried out by the Work Subgroups in two stages: preparatory and conclusive. In the preparatory stage, the members of the Work Subgroups may request the participation of representatives from the private sector of each member state. The decision-making stage is reserved exclusively for official representatives of the member states. The delegations of representatives from the private sector in the preparatory stage of the Work Subgroup activities will have a maximum of three representatives for each member state directly involved in any of the stages of the production, distribution or consumption process for the products that fall within the scope of the subgroup's activities.
The Committee will have both an advisory and decision-making nature; with powers to submit proposals as well. It will be competent, inter alia, to: follow up on the integration process and keep the respective Congresses informed; Take the necessary steps for the future instatement of a Mercosur Parliament; Organize subcommittees to examine matters relating to the integration process; Submit its recommendations to the Common Market Council and Group as to how the integration process should be conducted and Southern Common Market formed; Make the adjustments necessary to harmonize the laws of the different member states and submit them to the respective Congresses; Establish relationships with private entities in each of the member states, as well as international agencies and bureaus so as to obtain information and specialized assistance with matters of interest: Establish relationships targeting cooperation with Congresses of the nonmember nations and entities involved in regional integration schemes; Subscribe to cooperation and technical assistance accords with public and/or private entities whether domestic, supranational or international. The Committee will be composed of a maximum of 64 acting parliamentary members, 16 per member state, and an equal number of alternates, appointed by the Congress to which they pertain, and with a term of office of at least two years. The meetings shall be conducted by a directors' board consisting of four presidents (one for each member state). The Committee will ordinarily meet twice a year, and extraordinarily whenever summoned by any of its five presidents. Meetings are held in the territory of each member state on a successive and alternating basis. Decision Making: Meetings of the Joint Parliamentary Committee will only be valid when attended by parliamentary delegations from all member states. Decisions by the Joint Parliamentary Committee will be made by consensus vote of the majority of the members accredited by the respective Congresses of each member state. Portuguese and Spanish are the official languages of the Joint Parliamentary Committee.
The Trade Commission will assist the Mercosur executive body, always striving to apply the instruments of common trade policy agreed to by the member states for operation of the customs unification. The commission should also follow up on the development of issues and matters related to common trade policies, the intra-Mercosur trade and trade with other countries. The Commission will have five actual members and four alternates, with each member nation's indicating a member. The Trade Commission shall exert every effort to apply common trade policy instruments such as: trade agreements with other countries or international entities; administrative/commercial product lists; final adaptation system for Mercosur customs unification; rrigin system; free-trade zone system, special customs areas and export processing zones; system to discourage unfair trade practices; elimination and harmonization of tariff restrictions; nonmember country safeguard systems; customs coordination and harmonization; consumer protection systems; and export incentive harmonization.
Furthermore, the trade commission should speak out regarding the issues raised by the member states regarding application and compliance with common offshore tariffs and other common trade policy instruments. The commission shall meet at least once a month, as well as whenever asked to by the Mercosur executive agency or by a member state. The commission can take decisions entailing administration and application of trade policies adopted under Southern Common Market, and whenever necessary submit proposals to the executive body regarding regulation of the areas under its authority; additionally, it can propose new guidelines or modify those in existence in Mercosur trade and customs matters. In this respect, the trade commission can propose a change in the import duty on specific items under common external tariffs, including cases referring to development of new Mercosur production activities. To better achieve its objectives, the trade commission can create technical committees targeting direction and supervision of the work it engages in. It can also adopt internal operating regulations. Proposals and decisions of the trade commission will be taken by a consensus of the representatives indicated by each member nation. Any disputes ensuing from the application, interpretation or compliance with the acts issued by the trade commission are referred to the Mercosur executive body, and should be resolved using the directives set forth in the Dispute Resolution System adopted under Southern Common Market.
The rules on litigation jurisdiction over contractual matters will apply to disputes arising from civil or commercial international contracts between private-law legal entities or individuals provided that: They are domiciled or headquartered in different member states: At least one of the parties to the contract is domiciled or headquartered in any member state and, additionally, has made a choice of jurisdiction in favor of a court in one of the member states. In this case, there must be a reasonable connection between the jurisdiction chosen and the controversy. The scope of the application of the international jurisdiction guidelines over contractual matters excludes the following: legal relationships between bankrupt entities/individuals and their creditors and any other analogous proceedings (especially concordatas composition with creditors); matters under agreements involving family and succession law; social security contracts; administrative contracts; employment contracts; consumer sales contracts; transport contracts; insurance policies; and rights in rem.
Courts in member nations to whose jurisdiction the contracted parties have agreed to submit the matter in writing will have jurisdiction to settle controversies stemming from civil or commercial international contracts.
The jurisdiction can be agreed on at the time the contract is signed, during the life of the contract, or even when the dispute actually arises. The validity and effects of the choice of venue will be governed by the law of the member nations that normally have jurisdiction to hear the case, always resorting to the law most favorable to the validity of the contract. Whether or not jurisdiction is chosen, such jurisdiction will be prorogated in favor of the courts of the member state where the proceedings are in fact filed, provided the respondent voluntarily allows this in an affirmative and unfeigned way.
Should the contracted parties not agree on courts competent to settle disputes, the member state chosen by the plaintiff of the case has jurisdiction—the court of the place where the contract is to be performed, the court of the domicile of the respondent, or the court of the domicile, or headquarters of the claimant when the latter can show that it has done its part. For purposes of item (i) above the place of performance of the contract is the member state where the obligations on which the claim is based have been or should be performed, taking into consideration the following: For contracts involving certain specific items, the place where they existed at the time of contract signing; For contracts involving specific items according to their type, the place of domicile of the debtor at the time of contract signing; For contracts involving fungible items, the place of domicile of the debtor at the time of conclusion of the contract; and For service rendering contracts:
In the event of there being a counterclaim based on any act or fact that served as the basis for the main proceeding, the courts hearing the main proceeding will be competent to hear any counterclaims that may arise.
Based on the premise that education is a fundamental factor in the regional integration process, educational courses at the primary or junior high level, provided that they do not entail technical studies, will be recognized by member states as being on the same level for all member nations. Likewise, to facilitate continuing education, course certificates issued by an institution accredited in one of the member states is valid in all other member states. Nontechnical primary and junior high level studies that have not been completed are accredited by any member state, thereby allowing course conclusion in another member nation. Studies are completed using an equivalency table to determine the level achieved.
A regional technical commission harmonizes mechanisms for accreditation across member nations, and resolves any situation not be covered by the equivalency table. This commission includes delegations from the ministries of education of each member nation, and meets whenever at least two member states think it necessary. Meeting sites are established on a rotating basis. Any disputes among member states as a result of application, construction, or noncompliance regarding provisions related to education are initially resolved by direct diplomatic negotiations. Should the countries not reach an accord or only partially resolve the dispute, they resort to procedures set out in the dispute resolution system. Should the member nations enter into a bilateral convention or accord with provisions more favorable to their students, the member states in question can apply whichever provisions they consider most advantageous.
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The member nations can have commercial free-trade zones, industrial free-trade zones, export processing zones, and special customs areas, all of which target providing merchandise marketed or produced in these areas with treatment different from that afforded in their respective customs territories. Uruguay's Vice-President Danilo Astori said the issue of a free trade agreement with the United States must be dealt and that "opportunities must be built". He also said that "each Mercosur country should have a multiplicity of memberships. Mercosur must have joint international policies, an agreement on moderate protection from third parties and above all must have agreements with other trade blocks".
The member states can assess merchandise from these areas with the common external tariff used for Mercosur merchandise, or, in the case of certain special products, the domestic tariff prevailing in each individual state. In this way, the products from the free-trade zones can have the more favorable tax treatment established under Southern Common Market, given to the merchandise produced in the normal customs zones of each member state or, in the case of certain special products, can have the normal customs treatment prevailing in each nation. Products coming from outside of Mercosur are highly taxed so that local companies do not feel the need to compete with large international companies.
Products produced or marketed in the free-trade zones of each member nation will be eligible for the safeguard system whenever this entails an increase not provided for in imports, but capable of causing damages or threatened damages to the importer country.
In the event of the producing nation's granting special incentives for production from the free-trade zones that are not compatible with the corresponding guidelines established under the General Agreement on Tariffs and Trade (GATT), the member nation can make any adjustments needed to return the situation to equilibrium.
The member nations agreed that any free-trade zones that in August 1994 were already in operation could operate normally under Mercosur, along with any that are set up in light of legal guidelines prevailing or in course in congress during this same time period. This means that a member nation can no longer create new free-trade zones that are more privileged. Mercosur is an effective agreement for its members.
The actual implementation of Mercosur will not affect the special Manaus, Brazil, and Tierra del Fuego, Argentina, free-trade zones organized in light of their special geographic situations. These two free-trade zones may continue normal operations until 2013.
The nations subscribing to the Asunción Treaty consider that the creation and maintenance of conditions favorable to individual or corporate investment for the jurisdiction of one of the member states in the territory of another state is essential to intensify the economic cooperation targeted so as to accelerate the integration process among all four member states. In this context, Argentina, Uruguay, Paraguay and Brazil signed on 1 January 1994 in the city of Colonia del Sacramento, Uruguay, the Colonia Protocol for the Reciprocal Promotion and Protection of Mercosur Investments (Colonia Protocol). It was established in this protocol that investments under Mercosur by investors resident or domiciled in the territory of any member state will be entitled to treatment no less favorable than that accorded by the other member state to national investors or nonmember states.
For the purposes of constructing the Colonia Protocol, investors are considered to be: Individuals who are citizens of any of the member nations or that reside there on a permanent basis or are domiciled there, with due regard for legislation prevailing in such territory; Legal entities organized pursuant to the legislation of one of the member nations that are headquartered there; and Legal entities organized in the territory where the investment is made, actually and directly or indirectly controlled by the legal entities or individuals mentioned above.
The term investment includes all types of assets such as: movable or immovable property, such as rights in rem and guarantee in rem rights; shares, corporate holdings and any other type of corporate participation; credit instruments and rights that may have an economic value; intellectual property rights or materials, Including copyrights and industrial property rights such as patents, industrial drawings, trademarks, commercial names, technical procedures, know-how and goodwill; Economic concessions involving public law, such as research, cultivation, extraction or natural resource exploration concessions.
The nation receiving the investment cannot avail itself of unjustified or discriminatory means capable of restricting the investor's freedom to manage, maintain, use, enjoy and dispose of its investments.
The member states are not however obligated to extend to investors in the other nations signatory to the Colonia Protocol the benefits of any treatment, preference or privilege resulting from international accords relating fully or partially to tax matters.
In addition, the member nations can temporarily establish a list of exceptions where the new treatment will not yet prevail.
In this way, the various member nations decided to except the following economic sectors:
The member nations undertook to do nothing to nationalize or expropriate investments in their territories that pertain to investors from the signatory countries, unless such measures are taken based on public need. In such case, nothing discriminatory can be done, but everything must be implemented by due legal process. Compensation for the investment holder that is expropriated or nationalized should be both adequate and effective, and made in advance, based on the real investment value determined at the time the decision is publicly announced by the proper authorities. This payment will be updated until actual payment, and the affected investor will receive interest.
The original member state investors will be ensured free transfer of their investments and any earnings thereon. These transfers can be made in freely convertible currency, using the exchange rate prevailing on the market pursuant to the procedures established by the member state receiving the investment. Member nations cannot adopt any exchange measures restricting free transfer of the funds invested or from activities exercised in their respective territories.
Some South Americans see Mercosur as giving the capability to combine resources to balance the activities of other global economic powers, especially the North American Free Trade Agreement (NAFTA) and the European Union. The organization could also potentially pre-empt the Free Trade Area of the Americas (FTAA); however, over half of the current Mercosur member countries rejected the FTAA proposal at the IV Cumbre de las Américas (IV Summit of the Americas) in Argentina in 2005.
The development of Mercosur was arguably weakened by the collapse of the Argentine economy in 2001 and it has still seen internal conflicts over trade policy, between Brazil and Argentina, Argentina and Uruguay, Paraguay and Brazil, etc. In addition, many obstacles must be addressed before the development of a common currency in Mercosur.
In 2004, Mercosur signed a cooperation agreement with the Andean Community of Nations trade bloc (CAN) and they published a joint letter of intent for future negotiations towards integrating all of South America. The prospect of increased political integration within the organization, as per the European Union and advocated by some, is still uncertain. Bolivia, also a member of CAN and an associate member of Mercosur before the UNASUR process started, plays a crucial part in relations, says Marion Hörmann, since Bolivia is traditionally seen as a mediator between the Andean countries and the rest of South America. Regional Integration: Key Role for Bolivia
The bloc comprises a population of more than 270 million people, and the combined Gross Domestic Product of the full-member nations is in excess of US$3.0 trillion a year (Purchasing power parity, PPP) according to International Monetary Fund (IMF) numbers, making Mercosur the fifth-largest economy in the World. It is the fourth-largest trading bloc after the European Union.
The working of Mercosur has not met with universal approval within interested countries. Chile has to a certain extent preferred to pursue bilateral agreements with trading partners, and there have been calls from Uruguayan politicians to follow this example.
With the 2005 cooperation agreement with Mercosur, the Andean Community gained four new associate members: Argentina, Brazil, Paraguay, and Uruguay. These four Mercosur members were granted associate membership by the Andean Council of Foreign Ministers meeting in an enlarged session with the Commission (of the Andean Community) on 7 July 2005. This move reciprocates the actions of Mercosur, which granted associate membership to all the Andean Community nations by virtue of the Economic Complementarity Agreements (Free Trade Agreements) signed between the CAN and individual Mercosur members.
In 2016, Brazilian presidents, Dilma Rousseff and later Michel Temer, along with Argentine President Macri have placed pressure to negotiate a free trade agreement between Mercosur and the European Union and other Latin American nations.
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