ABSTRACT
The 1990s ended in the Mercosur with a widespread perception of a need to go back to the drawing board. While some loud voices were advocating the abandonment of the project, as we have seen, the most common argument was that of Brazilian senator Antonio Carlos Magalhaes: that ‘the Mercosur is useful, but it must be rethought’ (Folha de São Paulo, 18 July 1999, cited in INTAL 2000: 27) in order to address collectively the sources of divergence and fragility that had characterised the Mercosur’s first decade. The key issues revolved around the relative competitiveness of Mercosur economies and, to use Sylvia Ostry’s (1996) interesting formulation, around the management of ‘system frictions’ within the bloc. System frictions are seen to stem from lags in market-driven convergence, as the resulting imbalances move market interactions into the realm of domestic politics and as domestic structures of other countries consequently become stakes in local politics (Berger 1996:15). This is particularly pronounced when a balance of competitiveness between economies is disturbed-or else an existing imbalance is exacerbated-by economic crisis or unilateral policy innovation. The upshot of recurrent or prevalent system frictions is-and in the Mercosur has been-a build-up of pressures for collective and negotiated solutions and for a levelling of the competitive playing field by means of convergence in a range of key policy areas.
