What is Mercosur?

The Southern Common Market is one of the world's leading economic blocs and its fifth-largest economy. Mercosur comprises five member countries-Argentina, Brazil, Paraguay, Uruguay, and Venezuela-and Bolivia is in the final stages of the accession to become the sixth member. Known as Mercosur in Spanish or Mercosul in Portuguese, the group encompasses 295 million people and has a combined GDP of nearly $3.5 trillion. One of Latin America's largest regional integration projects, Mercosur also counts Chile, Colombia, Ecuador, Guyana, Peru, and Suriname serve as associate members.

Mercosur functions as a customs union and free-trade area, and has ambitions to become a common market along the lines of the European Union. However, more than 20 years after its founding, the group still struggles to achieve that goal. Some questioned the bloc's feasibility in recent years following decisions to temporarily suspend Paraguay after its president was impeached, and then to admit Venezuela as a full member. Nevertheless, Mercosur remains an economic and political force in the region, uniting South America's two largest economies and providing a potential springboard for Latin American integration. With the Pacific Alliance, Latin America's newest economic bloc, the two blocs combined represent more than 80 percent of regional trade and over 90 percent of its GDP.

Membership and Its Benefits

Membership in Mercosur is dependent on meeting and maintaining a number of political and economic criteria. On the economic front, Mercosur members agree to the free movement of goods and services between member countries. Any change to Mercosur economic policy requires the consensus of the other members, but countries can ask that certain products be exempt to protect local industries. In recent years, Argentina and Brazil have taken advantage of this option. Some allege that Argentina's application of non-automatic import licenses on imports from its neighbors is a violation of Mercosur policy. The group also subscribes to the CET, which dictates the tariff members apply to trade with non-member or associate countries. The CET is subject to change and is set by consensus, but has been a source of contention. Argentina and Brazil often favor higher duties to protect local industry, while Paraguay and Uruguay favor lower tariffs. During the 2009 global financial crisis and subsequent economic troubles in the Eurozone, Argentina and Brazil requested allowing a tariff increase of up to 35 percent on 200 products. The CET averages between 10 and 12 percent, but often fluctuates.

Mercosur members adhere to a number of agreements guiding currency exchange, investment, tax issues, and educational exchanges. The goal is to standardize regulations between member countries in order to ease commerce. The bloc also has a number of free-trade agreements (FTAs) with third parties, including Chile, Colombia, and Peru, as well as Israel and the Palestinian Authority. Negotiations for an FTA with the European Union began in 1995, were suspended in 2004. Although talks resumed in 2010, a deal has yet to be signed.

In 2002, Mercosur then-member countries, joined by then-associates Bolivia and Chile, agreed to form a "free residence area" which permits citizens of those countries to obtain residence and the right to work in the participating countries without a visa. Mercosur member countries also carry the organization's emblem on their respective national passports. In addition to these economic requirements, the bloc also requires that members maintain democratic governance. Some analysts argue this "democracy clause" aided the consolidation of democracy in constituent countries after Mercosur's founding in 1991, since members saw the end of military dictatorships in the 1980s. This clause served as the basis for Paraguay's suspension from the group in June 2012 in the wake of Lugo's impeachment.

In addition to the permanent members, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname serve as associate members. Associate members are not members of the customs union and do not have voting power in Mercosur's political bodies, though they do have preferential trade access to the market. Mercosur's observer countries are Mexico and New Zealand.

Why choose AMARAL & CIA Consulting ?

• Local Knowledge: Being based in and exposed to Brazilian markets as well as having substantial experience with developed markets markets offers us a unique insight into the potentials and pitfalls of expanding your business into Brazil.

• Networking: Our network of professionals is skilled at striking a balance between quality, price, efficiency and results. We work with other professional services to identify the best way in which to operate your business model for Brazil.

• Focus: Promoting business self-sufficiency and success at an affordable cost. Hiring workers full time and organizing offices are very expensive in Brazil. You do not have to relocate expatriate staff to the market. Essentially our team can be viewed by your customers in the Brazilian market as your company's team.

• Peace of Mind: We give confidence to the Brazilian customer that there is always someone that can help them in market, in the Portuguese language. We are available 24/7 for our clients.

• Legal Requirements: We can help a company establish themselves and fulfill requirements for a Brazilian based Director or Administrator and address.