MERCOSUR Presentation by Marta Ryan Simon Boleslaw and

MERCOSUR Presentation by Marta, Ryan, Simon, Boleslaw and Mariella

MERCOSUR - Who is in?

MERCOSUR n n n n 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 n n n n 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 cooperation 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, cooperation 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 n n n 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 n EU imports from MERCOSUR grew by 5. 6% on average per year n EU exports grew by 3. 6% on average per year By the end of 2003 n trade with MERCOSUR: 2. 8% of total EU imports and 1. 8% of total EU exports n 0. 30% of EU FDI from MERCOSUR n 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 1980 s Falklands War: Europe imposed sanctions on the military junta n 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 n Led to economic downturn in Argentina n

EU-Argentina relations: The 1990 s n Democracy restored in 1983 n 1990 Framework Trade and Economic Co-Operation Agreement n Argentina experiences economic growth

EU-Argentina relations: The significance of EU for Argentina n n n 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 n n 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 n n n 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 11 th 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 n n Present relations – based on the 1992 EC-Brazil Framework Co-operation Agreement and the 1995 EU-Mercosul 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: n n bilateral co-operation trade and trade related issues environment science and technology information society issues

Co-operation with Brazil amounts to some € 180 m in terms of projects under implementation; n Priority areas for co-operation, Country Strategy Paper Brazil 2001 -2006: n economic reform n social development n the environment n

PARAGUAY n n 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 n n 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 n n 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 Longstanding trade links n Backbone of future trade relations: EUMercosur Association Agreement n Uruguay and Merchandise Trade with EU n Well developed economy n Important trading partner for the EU and Latin America; also important source of imports, especially agricultural products n The EU is Uruguay’s second main trading partner n

Uruguay- EU: Level of Merchandise Trade Bilateral merchandise trade: € 1 billion n EU imports: € 631 million (2004) n EU exports: € 413 million (2004) n Trade with EU: 21, 1% of Uruguay’s total trade (2004) n Trade with Uruguay: 0, 05% of EU’s total trade (2004) n

Uruguay- EU: Level of Merchandise Trade (1)

Uruguay- EU: Merchandise Trade Components n n n n n 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 n Framework Co-operation Agreement n Provides the institutional settings for the political ties between the EU and Uruguay: Joint Committee- regular meetings Agreements under negotiation n EU-Mercosur Association Agreement n SPS, Wines and Spirits n Doha WTO round of trade negotiations n Very important to promote the EU-Uruguay trading and market access possibilities n Can contribute to more open and stable environment for trade and investment

VENEZUELA n 4. 1% of world petroleum production n sixth largest producer worldwide n petroleum industry accounts for 30% of GDP n 80% of Exports n 50% of government revenues

Trading partners and trading agreements n USA: 60% of exports and 35% of imports n EU: 0. 3% of EU imports and 0. 3% of EU exports n Andean Community of Nations (CAN) n free trade agreement Grupo de los tres (G-3)2

Some political and economical aspects of joining Mercosur n n n 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 n n n 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 n n n 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.