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For the common good.

A new buzzword is making the rounds of Latin America these days: Mercosur, short for Mercado Comun del Sur (The Southern Cone Common Market). Signed in Asuncion earlier this year by the presidents of Argentina, Brazil, Uruguay and Paraguay, and now linked to an overall "trade and investment framework" offered by the United States, Mercosur seeks to gradually eliminate all customs, duties, and trade restrictions among its signatory nations by December 31, 1994.

Supporters say this agreement will improve the lives of 200 million people living in the four countries and hasten the establishment of the Western Hemispherewide free trade zone so strongly urged by President Bush in his Enterprise for the Americas Initiative. Opponents of the plan worry that the open-border policy may aid drug traffickers. Yet most politicians and economists are optimistic that Mercosur is Latin America's best chance for competing against Europe and the Far East in the international marketplace.

"My opinion is that Mercosur will work. The world is going toward free trade," says Pablo J. Baques, executive director of the American Chamber of Commerce in Buenos Aires. "The idea of Mercosur is extremely coherent with the continental trade zone envisioned by Bush on a bloc-by-bloc basis. Instead of all countries negotiating separately with the United States, it pays to integrate these countries into regional trading blocs. But that's not a key purpose of Mercosur. Its real purpose is taking a step towards ultimate integration of this continent."

In a nutshell, Mercosur calls for the following: free circulation of goods, services and labor between the four countries; common import duties; coordination of macroeconomic, agricultural, fiscal and monetary policies; harmonization of laws that deal with economic issues. The "framework" agreement with the United States was signed inJune 1991 when Brazilian President Fernando Collor de Mello met with U.S. President George Bush in Washington, D.C. Currently, Brazil's maximum import tariff is around 125 percent while Argentina's is only 22 percent. The two countries have four years to bring their duties down to zero, while Uruguay and Paraguay, because of their small populations and economies, will be allowed five years.

In fact, the political and economic stability of Brazil and Argentina is crucial to the success of Mercosur. The Brazilian government is expected to begin negotiations this month with commercial banks to ease the country's foreign debt crisis. Argentina has already achieved a measure of economic stability with its Cavallo Plan, which links the Argentine austral to the U.S. dollar, and inflation has slowed dramatically.

Daniel Elicetche, a partner with the accounting firm Coopers & Lybrand in Asuncion, thinks that Paraguay stands the most to gain from the free trade agreement. "Paraguayan producers have struggled forever with contraband," says Elicetche. Indeed, one likely casualty of Mercosur is the Paraguayan river port of Ciudad del Este, an infamous smuggler's paradise where visiting Brazilians buy perfumes and fake Rolex watches at cut-rate prices to enjoy or resell once they get home. On a typical day, the city's streets are crammed with vendors hawking "Shrap" calculators, "Chross" pens and even bootlegged Madonna tapes for $2 apiece. Haggling goes on in Spanish, Portuguese and Guarani, while little boys sell everything from pencils to parrots in between their fathers' stalls. "Ciudad del Este will be a loser," says one foreign observer. "If Mercosur succeeds, it would make little sense to import something through Paraguay when you could send it directly to Sao Paulo."

Perhaps the most ringing endorsement of Mercosur comes from Maurice Bougeois, chairman of the liquor importing firm Edesa in Ciudad del Este. "A lot of people here are very nervous about Mercosur, but the agreement only talks about merchandise produced within the four countries, not imports from third parties," he says. "The object of Mercosur is to equalize the prices of products so they can be sold freely. Opening up is the spirit of things."
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Title Annotation:Southern Cone Common Market program linked to United States' trade and investment framework
Author:Luxner, Larry
Publication:Americas (English Edition)
Date:May 1, 1991
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