Leading the Pack in Trading Pacts

Santi Lopez | Jan 9, 2012

Our North is Our South!


South America’s number one trading group, Mercosur has a motto—“Nuestro Norte es el Sur” which literally translates in English to: “Our North is our South”. The word “North” used in this context of course refers to the “direction” or “focus” of the trading pact.

Mercosur was established in 1991 by the Treaty of Asuncion (capital of Paraguay) and is the 2nd largest trading bloc in the Americas after NAFTA. The members include Brazil, Argentina, Paraguay and Uruguay and its primary aim is to create trading channels that are free of tariffs and other international tax barriers.. Mercosur in Spanish (in Portuguese, Mercosul) means “Mercado Comun del Sur “or Southern Common Market. Venezuela was actually accepted as a member in 2006 but is still undergoing the rigorous integration process, and, although Colombia, Peru, Chile, Bolivia and Ecuador are not granted voting status, they do enjoy many of the economic benefits afforded to the trading partners as Associate Members. Colombia, Peru, Bolivia and Ecuador are actually members of the Andean Community of Nations which happens to be the 3rd largest customs group in the Americas.

 

Origins as a "Trade Bridge"


Mercosur was primarily established as a trade-bridge to facilitate trade between Portuguese-speaking Brazil and Spanish-speaking Argentina. In fact, most Mercosur transactions are between Argentina and Brazil. When trading with Brazil, given the sharp differences between Spanish and Portuguese, a hybrid tongue, referred to as Portuñol is often spoken between business factions of varying Mercosur countries. Note that in Paraguay, Guarani, and not Spanish or Portuguese is the official language and is the 3rd official Mercosur language. It also happens to be the name given to Paraguayan currency.

 

Major EU Trading Partner


Mercosur trade with the EU has been critical to South America’s, southern cone’s (Argentina, Chile, Uruguay and Paraguay) economic development.

    • In 2008, EU was Mercosur’s largest trading partner representing more than 20% of total Mercosur trade.

    • In 2009 EU-Mercosur trade represented nearly as much as EU trade with the rest of Latin America added together. This is noteworthy considering that Mercosur countries represent a mere 4 out of 13 countries in South America!

    • Finally, the EU also benefits by exporting almost 20% of its total agricultural output to the Mercosur bloc, making it the number one importer of European agricultural products.


 

Shifting Political Winds


Mercosur and the Andean trading agreement are examples of a larger movement towards South American free trade. However, the recently left-leaning governments that pepper much of this region present a tricky landscape, which companies seeking to expand in these geographies will need to learn to navigate.

 

Consilium Global Business Advisors can assist your company in developing a strategic plan for optimizing South American export opportunities while planning around import barriers and minimizing political risk exposure.  The LatAm market is an exciting one with huge potential for US Exporters - but it requires experienced guidance to avoid the numerous potential pitfalls.  Contact us today.