Mercosur’s Expansion Sows Seeds of Slow Decline

Mercosur’s Expansion Sows Seeds of Slow Decline

Over the past three decades, Brazil and Argentina’s rapprochement paved the way for the two largest economies in South America to end their economic and military rivalry and commence a promising effort to institutionalize the process of regional integration in South America.* The Common Market of the South, or Mercosur, was the chief creation of that initiative and was quick to embrace Uruguay and Paraguay. Last year Venezuela became Mercosur’s fifth member, and the bloc is expected to become even bigger as Ecuador and Bolivia seek membership in the near future.

But bigger does not necessarily mean better or stronger. In the past decade, Mercosur has been bogged down by internal trade disputes and by members’ ongoing reluctance to implement the basic rules needed to fully bind their economies together in a customs union. Consequently, in relative terms, trade flows within the bloc are much lower than they were in the late-1990s. Instead of becoming an instrument for further trade liberalization, Mercosur today resembles a trade fortress, stalled by its members’ proclivities toward more-protectionist measures.

The good news is that those shortcomings do not undermine Mercosur’s success from a geopolitical perspective. Trade disputes aside, Brasilia and Buenos Aires agree more than they disagree on strategic issues—that is, nuclear and military cooperation. But the bad news is that shifting global trade dynamics, in particular U.S.-led global trade negotiations like the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), may actually deepen Mercosur’s deficiencies as a trade bloc if member states do not react.

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