ABSTRACT

On 26 March 1991 the Presidents of Argentina, Brazil, Paraguay and Uruguay, meeting at Asunción, Paraguay, signed an agreement, the Treaty of Asunción, to create a new common market in the Southern Cone, with its headquarters at Montevideo, Uruguay. This was followed by a 47% reduction in tariffs in June of the same year and the signature of a framework free-trade agreement with the USA. The new grouping, the Southern Common Market (Mercado Común del Sur-Mercosur or, in Portuguese, Mercado Comum do Sul-Mercosul), represented a natural development in view of the geographical unity of the Paraguay-Paraná Basin and a long series of bilateral accords, but its targets were exceptionally ambitious. With an estimated population in 1991 of more than 190m. and a combined gross national product of some US $550,000m., from the beginning it aimed to achieve free movement of goods and services by 31 December 1994. Despite all difficulties, agreement was reached on the twin problems of the common external tariff and trade imbalances. The Ouro Prêto Protocol, signed in December 1994, gave Mercosur international legal status and the power to sign agreements with other such entities. The customs union came into existence on schedule on 1 January 1995. From then on, there was a marked increase in intra-regional trade. Though Argentina and Brazil continued to have sharp differences on trade in motor vehicles, these were resolved at a presidential summit in March 2000, where they also agreed to defer longstanding disputes on footwear, pigs, poultry, steel, sugar and textiles, thus opening the way for enlargement.