eumerc

MERCOSUR
Presentation by Marta, Ryan, Simon, Boleslaw and Mariella
MERCOSUR - Who is in?
MERCOSUR
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Mercado Común del Sur - Southern Common Market
Founded in 1991
Members: Argentina, Brazil, Paraguay and Uruguay
New in 2006: Venezuela
Associated members: Bolivia, Chile, Columbia, Ecuador
and Peru
Free Trade Area & Plans for Single Market
220 million consumers and a GDP of $ 1 trillion
MERCOSUR – EU: Background
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Always strong ties due to colonisation
Latin America pinned to European economies (e.g. WW I)
Uneven relationship favouring Europe
Character of relations: bilateral ties and multilateral co-operation
within the framework of WTO
Relationship based on the EU-MERCOSUR Interregional
Framework Co-operation Agreement between the EC and its
Member States and the MERCOSUR and its Party States (15
December 1995, Madrid)
Into force on 1 July 1999 however the provisional application
already took place from 1996 onwards. The Agreement consists
of three main elements: political dialogue, co-operation and
trade issues
Since 2000 the EU and MERCOSUR are in the process of
negotiating a bi-regional Association Agreement, including a
free trade area
MERCOSUR – EU: Today
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The EU is MERCOSUR first trade partner (both in exports and
imports): 22.9% of MERCOSUR total trade
MERCOSUR's ratio of trade to GDP: 25.1%
Imports: 62.3 billion euro, 1,2% of the world flows (2003)
Exports: 93.6 billion euro , 2.0% of the world flows (2003)
In the period 1993- 2003
 EU imports from MERCOSUR grew by 5.6% on average per
year
 EU exports grew by 3.6% on average per year
By the end of 2003
 trade with MERCOSUR: 2.8% of total EU imports and 1.8%
of total EU exports
 0.30% of EU FDI from MERCOSUR
 3.51% of EU FDI went to MERCOSUR
MERCOSUR – A Trading Partner
MERCOSUR – A Trading Partner (2)
Structure of EU imports
Structure of EU exports
ARGENTINA
EU-Argentina relations: The 1980s
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Falklands War: Europe imposed sanctions on
the military junta
Argentina almost in a state of dependency with
Europe. Dates from the nineteenth century,
when the export-driven economy relied on
selling grain and meat to the UK and Germany
Led to economic downturn in Argentina
EU-Argentina relations: The 1990s
 Democracy
restored in 1983
 1990 Framework Trade and Economic
Co-Operation Agreement
 Argentina experiences economic
growth
EU-Argentina relations: The
significance of EU for Argentina
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EU is Argentina’s first trading partner: 20.5% of Argentina’s
total trade
EU is a huge market for Argentine exports; vital for an exportled economy. Equals 6.22 billion euros, 20% of total exports go
to EU
Mainly agricultural products (77%). Also, chemical products and
transport material
26% of Argentina’s imports from the EU. Vital for essential
goods such as chemical products, machinery and transport
material to run the agricultural economy
Europe is Argentina’s main investor. FDI especially important as
many of the privatised public services are owned by European
companies
A state of dependency since the scale of trade with EU is high
EU-Argentina relations: The
December 2001 Crisis
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Dependence heightened when the country fell into
recession, with a growth rate of –10.9% in 2001
EU sustained Argentine imports
“In a general way, the increase of Argentinean exports
to the EU from 2001 to 2002 compensated the loss of
Argentinean exports to the rest of the world in the
same period” (EU Commission)
Community-fund projects and temporary measures to
ease the importation of wine and meat into Europe
BRAZIL
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Largest economy in Latin America total GDP US$ 604.0 billion
(2004), per capita US$ 3,326.21 in 2004
Exports to the EU: €17.9 billion (2004) = 17% total exports
Imports from the EU: €13.5 billion (2004) = 24.7% total imports
EU investment stock in Brazil: €48.9 billion (1999), €69.3 billion
(2000), €76.8 billion (2001), €78 billion (2002).
Brazil ranked 11th in the list of EU major trade partners in 2004,
representing 1.8% of the EU total trade.
Brazil plays a leading role in regional integration both in
Mercosur and South America, and is therefore a key partner in
the current negotiations for an EU-Mercosur bi-regional
association agreement.
EU-Brazil relations
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Present relations – based on the 1992 EC-Brazil
Framework Co-operation Agreement and the 1995 EUMercosul Framework Co-operation Agreement
The EC-Brazil Framework Co-operation Agreement
entrusted a Joint Committee, composed of
representatives of the EU and of the Brazilian
government; its scope:
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bilateral co-operation
trade and trade related issues
environment
science and technology information society issues
Co-operation
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Co-operation with Brazil amounts to some €
180m in terms of projects under
implementation;
Priority areas for co-operation, Country Strategy
Paper Brazil 2001-2006:
economic reform
social development
the environment
PARAGUAY
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Unstable political system in the past (many,
frequently changing dictatorships). Since 1992 more
or less stable democracy.
Landlocked in the heart of South America
(difficulties for trade)
Main source of income is selling energy, agricultural
products and goods cheaper than in Brazil
Dependent on Brazil (imports & 60 % of GDP
comes from commerce with Brazil)
Economic Development
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Severely hit by the regional crisis of its neighbours,
Argentina and Brazil, in 2002, and suffered serious
economic and financial deterioration, with a fall of
real GDP around 4% in 2002.
In 2003 and 2004 there was a GDP recovery of
2.6% and 2.9% respectively, with a an increase in
export of goods and services of 13.2% and 4.9%
respectively, mainly due to the recovery of
Argentinean and Brazilian markets.
PARAGUAY – EU – Trade
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Bilateral EU-Paraguay trade in goods amounts to €471
million in 2004; the EU importing around €315 million
and exporting roughly €156 million.
In 2004, trade between Paraguay and EU represented
10.8% of total Paraguay’s trade and around 0.02 % of
the EU's total trade.
EU exports to Paraguay are mostly concentrated in
machinery and transport equipment (35.1%), chemicals
(21.6%), and miscellaneous manufactures (14.6%).
EU imports coming from Paraguay are mainly crude
materials, except fuel (82.1%), followed by
manufactured goods (8.2%) and food and live animals
(6.1 %).
URUGUAY
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Longstanding trade links
Backbone of future trade relations: EUMercosur Association Agreement
Uruguay and Merchandise Trade with EU
Well developed economy
 Important trading partner for the EU and Latin
America; also important source of imports,
especially agricultural products
 The EU is Uruguay’s second main trading partner
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Uruguay- EU: Level of Merchandise
Trade
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Bilateral merchandise trade: € 1 billion
EU imports: € 631 million (2004)
EU exports: € 413 million (2004)
Trade with EU: 21,1% of Uruguay’s total trade
(2004)
Trade with Uruguay: 0,05% of EU’s total trade
(2004)
Uruguay- EU: Level of Merchandise
Trade (1)
Uruguay- EU: Merchandise Trade
Components
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Main components of EU imports
Inedible crude materials (except fuel): 40,3%
Food and live materials: 36,6%
Classified manufactured goods: 10,9%
Main components of EU exports
Chemical products: 30,5%
Machinery and transport equipment: 28,2%
Miscellaneous manufactured goods: 12,2%
Manufactured goods: 10%
Beverages and tobacco: 6%
Uruguay-EU: Bilateral and Biregional agreements
Agreements in force
 Framework Co-operation Agreement
 Provides the institutional settings for the political ties
between the EU and Uruguay: Joint Committee- regular
meetings
Agreements under negotiation
 EU-Mercosur Association Agreement
 SPS, Wines and Spirits
 Doha WTO round of trade negotiations
 Very important to promote the EU-Uruguay trading and
market access possibilities
 Can contribute to more open and stable environment for
trade and investment
VENEZUELA
 4.1%
of world petroleum production
 sixth largest producer worldwide
 petroleum industry accounts for 30%
of GDP
 80% of Exports
 50% of government revenues
Trading partners and trading agreements
USA: 60% of exports and 35% of imports
 EU: 0.3% of EU imports and 0.3% of EU
exports
 Andean Community of Nations (CAN)
 free trade agreement Grupo de los tres
(G-3)2
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Some political and economical
aspects of joining Mercosur
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Disadvantages:
asymmetry between current member states. Brazil is responsible for approximately 70% of the
consolidated GDP in Mercosur.
Difference in industries and market structures, especially between Brazil and Venezuela.
It seems, most ‘advantages’ have been exploited through bilateral agreements.
Advantages:
Improvements in efficiency => positive results for national welfare
Political stability in the long run.
Raise bargaining power on the international scene and provide a balance to US hegemony.
“We want to see in our ships, in our pipes, in our medicines, and in other goods the words, ‘Made in Argentina’ or
Made in Brazil’ instead of ‘Made in the U.S.A.’”
"We have to give Mercosur a political dimension, not only economical, to make it the framework of South
America's political union",
President Chavez
Entry of Venezuela would considerably boost Mercosur's economic weight, as it is one of the
world’s biggest oil exporter.
VENEZUELA’S Way into
MERCOSUR
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Venezuela Joins as an associate member Jul 09, 2004
“Venezuela will be a fundamental element in giving Mercosur a new dimension.” - Lula
da Silva
“for Argentina it is not only an honour, it is above all a necessity to have Venezuela with
us, so as to deepen the changes that we want to bring about.” - Nestor Kirchner
Venezuela enters Mercosur as a full member Dec 09, 2005
On 9 December 2005, Venezuela was accepted as a new member, but it will
be officialized later this year.
Were Venezuela to become a full member, Mercusor would represent 70
percent of South America’s population
Before joining, Venezuela would need to
agree to and abide by the group’s treaty,
common external tariffs, and
agreements with third parties, and
committed to ongoing negotiations with the block.
Conclusion
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It appears that the significance of the EU as a trading bloc for
MERCUSCOR is hugely significant.
It is its first trading partner and there is almost a state of
dependency on it.
It requires trade from Europe for influx of money but also
importation of essential goods.
There is a difference however on the national level, countries
such as Venezuela are more dependent on the US.
Overwhelmingly however, most nations require Europe for
economic growth.
For Europe, though, trading with MERCUSOR is not vitally
important- it can look to other trading blocs for goods.