Regionalism in Latin America: MERCOSUR
One of the features of the world economy in the last 50 years after the emergence of neoliberalism as a hegemonic paradigm has been regional integration (Harvey, 2005). The opening of national economies to the world market that characterised neoliberalism often happened in the form of free trade agreements, trade blocks, or even international political entities. All these shapes of international integration go under the name of regionalism (Börzel, 2016). Being regionalism one of the main features of the neoliberal economic conjecture, it affected most geographical areas in which neoliberalism penetrated. This is especially true for Latin America. The Latin American sub-continent underwent a period of crisis in the late 1970s and early 1980s that represented a stage of transformation of the economies in the region. By the end of the 1980s, the regional economic arrangement was deeply reshaped, with most countries previously adopting economic policies oriented to inward-looking development now witnessing a pronounced opening of those economies to the world market.
Examples of such a deep — and somehow abrupt — reshaping of the region are the North American Free Trade Agreement (NAFTA) which entered into force in 1994 or the US-led proposal of a Free Trade Area of the Americas (FTAA) — rejected by most Latin American countries. Another manifestation of the opening of Latin American economies is the creation of MERCOSUR (Common Market of the South) in 1991, establishing a free trade area between Argentina, Brazil, Paraguay, and Uruguay. MERCOSUR is particularly interesting because, unlike the above-mentioned projects, it entailed the integration of four developing countries, and thus it was way less asymmetrical than NAFTA or FTAA.
The aim of this piece is first to describe MERCOSUR and provide some insight into how it has been interpreted by scholars. To this end, the article will be divided as follows: the first part will describe MERCOSUR highlighting its main historical and political features. Secondly, the academic debate around MERCOSUR will be analysed.
MERCOSUR: Historical and Political features
The history of MERCOSUR traces back to the initial agreement between Argentina and Brazil signed in 1986 (Kan, 2019). The shift towards neoliberalism, and thus free market, led the two countries of the Southern cone to adapt to such a tendency by initiating talks regarding the possibility of cooperation to face the worst effects of the abrupt access to the world market. The presidents Alfonsìn (Argentina) and Sarney (Brazil) were originally moved by the intention of somehow preserving the integrity of their respective economies vis-à-vis the world market (Kan, 2016), adopting the concept of open regionalism postulated by the Economic Commission for Latin America and the Caribbean (ECLAC). Open regionalism, in fact, fostered the insertion of Latin American economies into the world market protecting them from the most detrimental effects of international competition. By forming a trade block, countries of the region were expected to be stronger vis-à-vis the international market, and thus less exposed to its fluctuations (CEPAL, 1994). In line with the prescriptions of the ECLAC in 1991 the treaty of Asuncion was signed, officially establishing MERCOSUR, and expanding the previous agreement between Brazil and Argentina to Uruguay and Paraguay. The objective of the treaty was that of progressively removing trade barriers among member states and thus the constitution of a common market (Caetano, 2011).
The initial institutional structure of MERCOSUR established in 1991 was characterised by the presence of two executive organs: the Council of the Common Market (CCM) and the Group of the Common Market (GCM) (Caetano, 2011). Hence, the most evident political feature of Mercosur is intergovernmentalism, as both the CCM and the GCM are composed of one representative of the government of each of the four member states. Those two organs, in fact, are the only ones capable of producing effective and binding decisions regarding issues connected to the common market. Such an institutional structure was confirmed in the Ouro Preto protocol of 1994, which gave international juridical validity to the treaty of Asuncion, officially putting in practice the prescriptions set out in Asuncion three years earlier (Caetano, 2011). Furthermore, the Ouro Preto treaty established that Mercosur countries would adopt a common external tariff for a variety of import goods (Caetano, 2011). Therefore, from 1994 onwards, MERCOSUR assumed the form of a common market between Argentina, Brazil, Paraguay, and Uruguay, which thus entails the free movement of goods, capital, and services among the four states.
During its more than 30 years of activity, MERCOSUR has undergone different phases. The first decade was characterised by the unconstrained liberalisation of the markets within the block, reflecting the political inclination of the governments of Menem (Argentina) and Collor de Mello (Brazil), openly leaning towards neoliberalism (Rapoport, 2003). Both governments, in fact, were committed to reshaping their respecting economies in terms of enhancing competition to achieve a renewed level of efficiency, and MERCOSUR was one of the means to pursue those ends (Rapoport, 2003). Starting from the mid-1990s, and parallel to the phase of unconstrained liberalisation, a claim for social integration also appeared, coming from sectors of civil society such as the labour movement. The original institutional arrangement of MERCOSUR did not provide for any institution aimed at perpetrating social norms beyond free trade, and several sectors of civil society were deprotected facing the sudden change that the constitution of the trade block entailed, especially in terms of employment (Uriarte, 2003).
For this reason, and with the decisive impulse of the labour movement, the Socio-Economic Consultative Forum (SECF) was created in 1994 and in 1998 the MERCOSUR Socio-Labour Commission (SLC) was established (Uriarte, 2003). Both institutions respond to the need of creating, in the words of Uriarte (2003), a “social MERCOSUR” (p. 2), as an integration of the already existing trade block. It must be noted, however, that the nature of the social bodies established in the 1990s is prominently consultative, and thus they do not have decisional power, nor they can impose sanctions. By the end of the 1990s and early 2000s, MERCOSUR suffered a sort of paralysis due to the economic crisis that invested the region, prominently Brazil and Argentina (Caetano, 2011). It was during the pink tide — the wave of leftist governments in Latin America as a consequence of the crisis of the early 2000s — that MERCOSUR was brought to the centre of political debate. The governments of the pink tide did attempt to reshape MERCOSUR in order to incorporate social issues into its institutional structure. However, such action was only marginally possible due to the instability of those governments and the return of neoliberal-oriented ones in the region by the end of the first decade of the XXI century.
A lot has been written by academics on MERCOSUR, with its importance residing in the fact that it is a regional project that joins countries of the Global South, differently from other arrangements such as the NAFTA of the FTAA. For this reason, some scholars interpret MERCOSUR, in line with the ECLAC’s view of open regionalism, as a project of empowerment of countries of the Global South, and thus in contrast with the neoliberal declination of world capitalism. According to them, MERCOSUR is capable of upholding values that go beyond the free market: hence, it protects the economies and societies of the Southern Cone from the worst effects of globalisation (Uriarte, 2003; Miazala & Romaguera, 1997; Olmos Giupponi, 2014). In contrast, other academics adopt a class perspective and focus on those aspects of MERCOSUR that encourage free trade, providing capital with a decisive advantage over labour (Granato, 2020; Socoloff, 2014). They consider MERCOSUR as the regional declination of neoliberal globalisation, which thus does not foster a decisive shift from the neoliberal mode of accumulation based on free trade, international competition and financialisation, but rather facilitates its introduction in the region.
The next section will confront both views, analysing the internal tension to MERCOSUR itself, caught between two different logics of development.
MERCOSUR: An Internal Contradiction
The rapprochement between Argentina and Brazil during the 1980s, which culminated with the Buenos Aires act of 1986, was moved by neo-developmentalist claims, aimed at enhancing cooperation between the two countries of the Global South. Such an inclination responded, in fact, to the ECLAC’s logic of promoting development from within the region, which echoed its neo-developmentalist inclination — whose tenets were the promotion of internal industrialisation by fostering import substitution and stimulating the national market (Fuentes, 1994). However, even though the Buenos Aires act was the practical basis upon which the idea of MERCOSUR was conceived, the footprint of the neoliberal paradigm is evident in the initial arrangement of MERCOSUR sealed by the Treaty of Asunción of 1991 and the Ouro Preto Protocol of 1994 (Merino, 2018). The vision of neoliberalism as a variegated concept, building on Madra & Adaman (2013), helps to better understand its application in the real world, specifically when, as in the case of Mercosur, it is the result of adaptation to a specific context. As Fine & Saad-Filho argued (2017), the capacity to adapt to a variety of contexts and assume different forms are the features that made neoliberalism hegemonic. The reacquisition of the subjectivity of the state in the project of MERCOSUR is evident, as shown by its intergovernmental inclination.
MERCOSUR was initially seen as an alternative vis-à-vis other projects of regional integration that took place during the same period in Latin America under the aegis of neoliberal structural adjustments, such as the NAFTA, the FTAA and North-South bilateral agreements. The neoliberal model of economic integration was deeply rooted in the economic thinking postulated by the Washington Consensus (WC), which entailed international integration of the markets, global competition, and generalised liberalisation (Valadao, 2009). Latin America underwent a season of structural exogen changes in the 1980s, strongly encouraged by the WC institutions — notably the IMF and the World Bank — that profoundly reshaped the economic regional arrangement in a neoliberal way (Bértola & Ocampo, 2012). The alternative position of MERCOSUR vis-à-vis neoliberal globalisation was underpinned by the ECLAC’s idea of regionalism developed during the late 1980s and early 1990s, which fostered a new model of regionalism in compliance with a neo-developmentalist or neo-structuralist inclination.
This so-called open regionalism relied upon the principle of insertion of Latin American economies in the world market but at the same time on the preservation of their independence vis-à-vis the Global North (Fuentes, 1994, p. 84). The central idea underpinning open regionalism was that: “[economic] Integration can contribute to achieve a model of development that fosters, simultaneously, growth and equity. Accordingly, horizontal integration, meaning the integration of the markets, shall be accompanied by vertical integration, springing from social integration…” (CEPAL, 1994, p. 10). The influence of the ECLAC’s ideas on MERCOSUR was reflected in the introduction of the Treaty of Asunción, where economic development is accompanied by equality (Tratado de Asuncion, 1991). This was the manifestation of a broader inclination of the ECLAC in the 1990s that leaned towards a compromise between hegemonic neoliberalism and the preservation of the autonomy of the region (Bielschowski, 1998).
However, the departure of MERCOSUR from the neoliberal paradigm must here be questioned. The negotiations led to clear supremacy of economic over political integration. As the founding treaty established, the harmonisation of policies at the regional level is only understood as to “…ensure the conditions for fair competition among Member States” (Tratado de Asuncion, 1991, p. 2). This conceptualisation of regional institutions reflects the role of the state in the mature phase of neoliberalism: relegated to the role of facilitator of competition and free market following the model of the “competition state” (Genschel & Seelkopf, 2015, p. 5), and therefore fostering what Madra and Adaman (2013) called the “economisation of social life” (p. 17) through the neoliberal tenet of competition. This imbalance led some scholars to refer to MERCOSUR as a model of Phoenician or Mercantilist integration, to highlight the prominently commercial character of the agreement (Caetano, 2011; Instituto social del Mercosur, 2012).
In the words of Merino (2018), at least until 1999 “…Mercosur did not challenge the role of Latin American Countries in the international division of labour as, essentially, exporters of raw materials.” and represented “the regional expression of neoliberal globalisation with a strong financial component” (pp. 1055-1056). Thus, from a perspective that highlights class relations, MERCOSUR is seen as a factor that enables certain sectors of capital — or the entrepreneurial class — to improve their conditions of reproduction through international competition, which seriously hinders the labour movement to reclaim better conditions as it must compete on a regional scale. The segments of the capitalist class that benefit from MERCOSUR are those that encouraged its constitution, carefully analysed by Kan (2019): notably, they include the agribusiness and part of the industrial sector in Brazil and Argentina. Therefore, the MERCOSUR’s repercussions are visible in the weakness of the labour class vis-a-vis capital, for the latter benefits of the freedom of movement among different economies, being able of demanding better conditions of production to the labour force and more advantageous labour legislation to states (Granato, 2015).
Conclusion
The establishment of MERCOSUR traces back to the rapprochement between Brazil and Argentina in the mid-1980s, aimed at facing the rise of neoliberalism and perpetrating a neo-developmental regional adaptation to neoliberal globalisation. During its 30 years of activity, it has gone through different phases ranging from unconstrained liberalisation to the incorporation of social issues. Nevertheless, MERCOSUR has always maintained a prominently intergovernmental character, leaving social bodies at the margin of the institutional setting. Furthermore, the treaty of Asunción that establishes MERCOSUR was highly influenced by neoliberal tenets of international competition and the free market. A double soul of MERCOSUR is reflected in how scholars have conceptualised and analysed the trade block, giving way to an analytical tension. On the one hand, some academics have highlighted the neo-developmentalist features of MERCOSUR, capable of facilitating the insertion of the economies of the Southern Cone into the world economy without generating a dependence on the Global North. On the other hand, mainly from a critical point of view, several scholars have stressed how the trade block reproduces neoliberal mechanisms at the regional level, and rather than perpetrating a cohesive development of the region, it contributes to enhancing the inequality between capital and labour in the region by advantaging the former over the latter.
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The explanation of the MERCOSUR agreement is well-structured and incisive. It is a well written and very interesting article, and it helped me learn more about a topic I knew very little about. I highly recommend reading this article!
Really interesting article! I especially appreciated how you presented your arguments logically and clearly, highlighting the visions and dynamics underlying the MERCOSUR agreement while also underscoring their impact. Great job!