Free Trade in the Americas

Free Trade in the Americas

Economic and Political Issues for Governments and Firms

New Horizons in International Business series

Edited by Sidney Weintraub, Alan M. Rugman and Gavin Boyd

This book examines the Free Trade Area of the Americas (FTAA), an ambitious venture in regional market integration which builds on the principles of the North American Free Trade Agreement. It assesses the long-term corporate and public policy measures to cope with the increased monetary, fiscal and structural interdependence that will be required if the benefits of the FTAA are to be realized.

Chapter 6: The future of MERCOSUR

Heinz G. Preusse

Subjects: business and management, international business, economics and finance, international economics


Heinz G. Preusse INTRODUCTION MERCOSUR, like most other projects of regional integration, comprises both political and economic objectives. The most important political objectives have been the de-escalation of long-standing rivalries and distrust between Argentina and Brazil and the formation of a politically more influential entity of Latin American countries in the globalizing world (and in America). While the former aspect had been prevalent during the pre-foundation period of the 1980s and progress in this field is evident, the attainment of the latter objective is still pending. In fact, to enhance the political impact of Latin America on the international arena by means of regional integration will only have a serious chance if MERCOSUR and its potential enlargements develop into a politically stable and economically prosperous region. Thus, it is not surprising that the economic conditions for successful regional integration have become a centerpiece in the discussion of MERCOSUR issues from the implementation period up to now. At the time of writing this chapter the economic prospects of MERCOSUR are gloomy. When the turbulences of the Asian (1997) and the Brazilian crises (1999) seemed to calm down, the breakdown of the Argentine currency board almost destroyed any hope for a rapid recovery of the region. Instead, Uruguay, Paraguay, and even Brazil are on the brink of disaster. On the face of it, the misery of MERCOSUR appears to be the result of these external events. However, a closer look reveals some important deficiencies of the integration scheme itself, which have contributed...

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