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

2. MERCOSUR - Who is in?

3. MERCOSUR 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

4. MERCOSUR – EU: Background
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 co-operation 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, co-operation 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

5. MERCOSUR – EU: Today
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
EU imports from MERCOSUR grew by 5.6% on average per year
EU exports grew by 3.6% on average per year
By the end of 2003
trade with MERCOSUR: 2.8% of total EU imports and 1.8% of total EU exports
0.30% of EU FDI from MERCOSUR
3.51% of EU FDI went to MERCOSUR

6. MERCOSUR – A Trading Partner

7. MERCOSUR – A Trading Partner (2)

8. Structure of EU imports

9. Structure of EU exports

10. ARGENTINA
EU-Argentina relations: The 1980s
Falklands War: Europe imposed sanctions on the military junta
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
Led to economic downturn in Argentina

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

12. EU-Argentina relations: The significance of EU for Argentina
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 export-led 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

13. EU-Argentina relations: The December 2001 Crisis
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

14. BRAZIL
Largest economy in Latin America total GDP US$ billion (2004), per capita US$ 3, 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 11th 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.

15. EU-Brazil relations
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:
bilateral co-operation
trade and trade related issues
environment
science and technology information society issues

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

17. PARAGUAY
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)

18. Economic Development
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.

19. PARAGUAY – EU – Trade
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 %).

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

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

22. Uruguay- EU: Level of Merchandise Trade (1)

23. Uruguay- EU: Merchandise Trade Components
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%

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

25. VENEZUELA 4.1% of world petroleum production
sixth largest producer worldwide
petroleum industry accounts for 30% of GDP
80% of Exports
50% of government revenues

26. Trading partners and trading agreements
USA: 60% of exports and 35% of imports
EU: 0.3% of EU imports and 0.3% of EU exports
Andean Community of Nations (CAN)
free trade agreement Grupo de los tres (G-3)2

27. Some political and economical aspects of joining Mercosur
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.

28. VENEZUELA’S Way into MERCOSUR
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.

29. Conclusion
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.