Trading Together (the Founding of Mercosur Has Resulted in the Attraction of Foreign Investment in Latin America)

Article excerpt

Argentina's regional plans are currently focused heavily on the successful development of Mercosur, the treaty for a "Common Market of the South." The agreement, signed in 1991 by Argentina, Brazil, Paraguay and Uruguay, was originally intended to create a South American common market by 2004, as a counterweight to the North American Free Trade Agreement (NAFTA). The agreement has since expanded to include Chile and Bolivia as associate members in 1996 and 1997 respectively, and similar negotiations are underway with Venezuela and Peru.

Although it currently has no regional commission with supranational jurisdiction, Mercosur represents substantial progress in the South American transition to a liberal model of an international market economy. It has been a key step not only in improving trade relations within South America, but in attracting foreign investment.

Continuing foreign investment is currently among the most important factors in maintaining financial stability in the region. By collapsing the nationalist political and economic boundaries of previous decades, Mercosur has opened large, international markets for potential corporate investors. Moreover, the general liberalization that the treaty reflects has been coupled with the privatization of many state-owned enterprises, further encouraging investment. Direct foreign investment in Mercosur reached US$22 billion in 1997, over three times the 1994 figure.

Mercosur has been a tremendous boon for local investment as well. …