Abstract

The case elaborates on the factors that led to the creation of Mercosur as a free trade area, especially the long-drawn out efforts for Latin American integration. The case discusses in detail Mercosur’s initial successes and also its institutionalization. It then turns the focus on to its transition into a customs union and discusses how its success was hampered by the changes in the international environment. It goes into the currency systems in Brazil and Argentina in detail and how they complicated the matter of economic cooperation between the two economies. The case also takes a look at the problems faced by developing economies in trying to forge a link between the domestic politics in their respective countries and at the necessity for regional integration. It looks at the problems faced by small economies that are sandwiched between large economic powerhouses and ends with a note on Mercosur’s subtle transformation from being an economic bloc to a political solidarity bloc.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Recognize the efforts made toward Latin American integration
• Understand the various stages and aspects of economic integration as well as the benefits and challenges in accomplishing them
• Comprehend how the external environment can affect the growth and functioning of a trade bloc
• Understand the interplay between national politics and regional integration.

Keywords

MERCOSUR, Customs Union, The Latin American Free Trade Association, Latin American Integration Association, Free Trade Area, Common External Tariff, Tariff Barriers, Non-Tariff Barriers, Treaty of Asuncion, European Union, The Ouro Preto Protocol, Free Trade Area of the Americas, Andean Community, South American Free Trade Area, Monetary Union