Integration in South America: A Brief Analysis of the MERCOSUR Case in Light of the European Experience

Image Caption: Some political scientists have judged MERCOSUR’s progress on integration against the benchmark set by the EU, but such a comparison may result in a misunderstanding of the organization.


Political integration can be defined as a process whereby nations seek to make joint decisions or to delegate the decision-making process to new central organs.[1] Integration may be examined through a myriad of dimensions, including those of politics and economics. In this context, the European Union (EU) is the first project pursuing integration in the political sense, considered by many scholars as a key step along the way to stable international peace.[2] The European experience is, ipso facto, a paradigm among attempts of regional integration. The Common Market of the South (MERCOSUR), on the other hand, can so far be considered simply as a customs union aspiring to become a common market and has been criticized for failing to fulfill its promises.[3] This comment aims to briefly analyze the peculiarities of MERCOSUR and to critically discuss its future prospects.

Established in 1991 by the Treaty of Asunción, MERCOSUR has four founding members: Argentina, Brazil, Paraguay and Uruguay. The Treaty also prescribed the free circulation of goods between nations within the bloc and introduced a common external tariff to third countries, among other economic policies. The basic institutional structure was later outlined in 1994 by the Treaty of Ouro Preto. Throughout the integration process, the scope was gradually expanded from the economic realm to social and political spheres, including a focus on human rights.[4] Apart from the full members, many Latin American countries (such as Chile, Colombia, Ecuador and Peru) hold the status of associate members. Venezuela achieved full membership in 2012[5], but it is currently suspended due to noncompliance with the bloc’s democratic principles. The four founding members corresponded in 2016 to 76.2% of South American GDP (Gross Domestic Product).[6]

In comparison to the EU, does MERCOSUR fall short of expectations?

One of the most obvious differences between the EU and MERCOSUR consists in the increasing institutionalization at a supranational level in the former (demonstrated by a powerful Court of Justice and a Parliament whose members are directly elected by the European peoples), while the latter progresses through intergovernmental mechanisms. Therefore, MERCOSUR presents a politicized pattern, instead of an institutionalized one.[7] While supranationalism does not allow member states to retain complete control over developments and decisions (even those that may go against their wishes), intergovernmentalism allows nations to decide the extent and nature of the cooperation, fully preserving their sovereignty.[8] The preference for intergovernmentalism reveals South American nations’ desire to leave their sovereignty unscathed. However, such a model based on political negotiations among governments is more susceptible to domestic political drifts and might prevent member states from creating stable ties.

When it comes to politics, the power differences inside MERCOSUR are a result of an imbalance between Argentina-Brazil, the two largest nations of the bloc, and the other smaller nations. Because of their size and economic power, Argentina and Brazil possess a de facto veto power, preventing other members from fully participating in decision-making processes. A power imbalance exists even between Argentina and Brazil, with the latter possessing a more dominant economy that may lead to a hegemonic leadership within MERCOSUR. It should be highlighted, however, that this imbalance comes with burdens as well as benefits for Brazil, and the acceptance of its leadership by other members cannot be based on coercive means, but on reciprocity and common interests.[9]

Nevertheless, political tensions are far from the only stumbling block to MERCOSUR’s integration efforts. When it comes to economic aspects, several standoffs have occurred since its creation. In 1999, for example, Brazil’s currency faced a relevant devaluation, causing Argentina to negotiate and obtain import restraints on Brazilian products. And the more the countries moved towards left-wing governments, the more protectionist they became. As a result, negotiated exemptions between member states as opposed to unrestricted trade became the norm.[10]

In MERCOSUR’s defense, it is usually argued that integration a) should be regarded as a process, not as a product; b) is not free from conflict; c) is driven by a convergence of interests, not by the formation of an identity; and d) may involve states at different levels of development and varying degrees of per capita wealth[11]. Besides, integration should not be seen as a loss of sovereignty. Instead, it can be viewed as an effective way by which Argentina and Brazil may withstand a volatile world market with the potential to erode their sovereignty.[12]

Furthermore, MERCOSUR was characterized by the celerity of its development and exiguousness of norms ruling the process in the 1990s. Both traits (velocity and political action) are typical of Latin American presidentialism and generally result in minimal, flexible institutionalization. Previous attempts of integration in South America were probably not successful due to either an excess or a lack of formal institutionalization. Considering that the bloc survived even after much turbulence, an equilibrium appears to have been reached.[13] Taking these aspects into consideration, one should not regard the different degrees of institution-based decisions as a negative characteristic, but as an ability to adjust to the Latin American political reality.

Finally, even the EU is criticized for an alleged excessive role played by the France-Germany axis (much like MERCOSUR’s Argentina-Brazil axis) and over polar divisions between larger and smaller countries, Nordic and Southern countries, etc.[14] It would therefore be unfair to accuse MERCOSUR of being doomed to failure merely based on the fact that some countries participate more than others.

What can be expected from the future?

MERCOSUR’s future progress is closely related to how efficiently it implements measures to harmonize business cycles and achieve productive complementarity, especially considering that global trade is now growing slower and nationalist movements are rising in developed economies. Alongside these measures, the remedy for many problems may lie in a redesign of integration, which is currently jeopardized by massive structural asymmetries. The budget dedicated to the FOCEM (MERCOSUR Structural Convergence Fund) has been insufficient to reduce inequalities. In addition, there seems to be a mismatch between the partial progress at the social and cultural levels and the staggering economic integration. Since it strongly depends on domestic economic health, maybe one specific European aspect should be envied: in contrast to the EU, the countries of MERCOSUR have a relatively low rate of participation in services and higher value-added products, such as manufacturing. This asymmetry could be an important cause of the low rates of GDP growth experienced by South American countries since 2013. This unfavorable context can be reflected in the reduction of Brazilian exports to MERCOSUR countries from $27 billion in 2011 to $17 billion in 2015.[15]

Moreover, the delay in reaching a free trade agreement with the EU reveals a lack of strategic planning in MERCOSUR’s regional development and the bloc’s hopes for international engagement. As a consequence, the Brazilian private sector in particular has questioned the relevance of the bloc, also citing the fact that MERCOSUR has complicated the country’s relationship with the United States and the EU.[16]

Conclusions

Not surprisingly, there is a trend to compare the integration processes in South America to those of the EU, considered to be archetype in this sense. While it took decades to structure the EU, this process is conspicuously more recent in MERCOSUR.  On a preliminary basis, we may judge the lower degree of institutionalization as a drawback of its celerity.  However, MERCOSUR seems instead to have adjusted its goal of integration to an acceptable degree of institutionalization, based on political consent rather than on supranational decisions, albeit not exempt from the limits of the interpresidentialism. As strong evidence for this standpoint, the bloc has not been dissolved, even after facing huge stalemates and economic crises. Furthermore, the recent suspension of Venezuela shows how an untimely attempt to expand membership and strengthen ties may, in fact, lead to instability.

Comparing the power imbalances within the two blocs, there are striking similarities when it comes to the noticeable central power axes (France-Germany in the EU and Argentina-Brazil in MERCOSUR). In spite of the economic and productive asymmetries, it is possible to address power imbalance inside the bloc, provided that Argentina and Brazil (particularly the latter) are inclined to reciprocal debates with their neighbors (rather than coercion), and that inequalities are turned into a catalyst for cooperation.

As a conclusion, it is possible to infer that MERCOSUR has tremendous potential for fulfilling its original purpose (the formation of a common market) and that its future will be driven by the ability to break deadlocks and allow smaller countries to take part in decision-making. Nonetheless, integration will hardly be achieved unless the bloc undertakes efforts towards solving internal discrepancies and ensuring competitiveness through investment on services and value-added products. Brazil, the bloc’s largest country, will hold national elections in October 2018, and their results will likely determine not only the future path of Brazilian politics, but also whether such a path will promote or hinder MERCOSUR’s integration efforts.


About the Author

Frederico Ribeiro is currently an International Relations undergraduate student at the University of Sao Paulo, Brazil. His research interests include Regional Integration, International Trade, Comparative Constitutionalism and Documental Investigation. 


Endnotes

[1] Leon N. Lindberg, “The Political Dynamics of European Integration”. Stanford University Press: Stanford, 1963.

[2] Nikola Lj. Ilievski. “The Concept of Political Integration: the Perspectives of Neofunctionalist Theory”, Journal of Liberty and International Affairs, v1, no.1(2015), 1-14.

[3] Andrés Malamud, Philippe C. Schmitter, “The Experience of European Integration and the Potential for Integration in South America”, IBEI Working Papers, no. 6(2007), 3-27.

[4] http://www.mercosul.gov.br/saiba-mais-sobre-o-mercosul

[5] Walter Antonio Desiderá Neto, “The Evolution of Mercosur Behaving as an International Coalition, 1991-2012”, Contexto Internacional, v.38, no.2(2016), 593-620.

[6] http://www.mercosul.gov.br/saiba-mais-sobre-o-mercosul

[7] Andrés Malamud, “Presidentialism and Mercosur: A Hidden Cause for a Successful Experience”. In “Comparative Regional Integration”, edited by Finn Laursen, 53-73. Aldershot: Ashgate, 2003

[8] Neill Nugent, “The Government and Politics of the European Union, 8th Edition, 436. Macmillan: London, 2017.

[9] Monica Hirst, “Atributos e Dilemas Políticos do Mercosul”, Cadernos do Fórum Euro-Latino-Americano, 2001, 1-16.

[10] https://www.economist.com/the-americas/2012/07/14/mercosur-rip

[11] Andrés Malamud, Philippe C. Schmitter, “The Experience of European Integration and the Potential for Integration in South America”, IBEI Working Papers, no. 6(2007), 3-27.

[12] Monica Hirst, “Atributos e Dilemas Políticos do Mercosul”, Cadernos do Fórum Euro-Latino-Americano, 2001, 1-16.

[13] Andrés Malamud, “Presidentialism and Mercosur: A Hidden Cause for a Successful Experience”. In “Comparative Regional Integration”, edited by Finn Laursen, 53-73. Aldershot: Ashgate, 2003.

[14] Ibid.

[15] Eduardo Viola, Jean Santos Lima, “Divergences Between New Patterns of Global Trade and Brazil/Mercosur”, Brazilian Political Science Review, no.3(2017), 1-31.

[16] Carlos Ricardo Caichiolo, “The Mercosur Experience and Theories of Regional Integration”, Contexto Internacional, v.39(2017), 117-134.

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