Mercosur or Mercosul purpose is to promote free trade and the fluid movement of goods, people, and currency among its member countries.
Mercosur origins trace back to 1985 when Presidents Raul Alfonse of Argentina and Jose Sarney of Brazil signed the Argentina Brazil Integration and Economics cooperation Program of PICE. The programme also proposed the Gaucho as a currency for regional trade.
Bolivia, Chile, Colombia, Ecuador and Peru signed a membership agreement on 17 June 2006, but before becoming a full member its entry has to be ratified by the Paraguayan and the Brazilian parliaments.
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The founding of the Mercosur Parliament was agreed at the December 2004 presidential summit. It should have 18 representatives from each country by 2010.
Role and potential:
Some South Americans see Mercosur as giving the capability to combine resources to balance the activities of other global economic powers, especially the North American Free Trade Agreement (NAFTA) and the European Union.
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The organisation could also potentially preempt the Free Trade Area of the Americas. (FTAA); however, over half of the current Mercosur member countries rejected the FTAA proposal at the IV cumber de las Americas (IV Summit of the Americas) in Argentina in 2005.
The development of Mercosur was arguably weakened by the collapse of the Argentina economy in 2001 and it has still seen internal conflicts over trade policy, between Brazil and Argentina, Argentina and Uruguay, Paraguay and Brazil, etc. In addition, many obstacles are to be addressed before the development of a common currency in Mercosur.
In 2004, it signed a cooperation agreement with the Andean Community of Nations trade block (CAN) and they published a joint letter of intention for future negations towards integrating all of South America. The prospect of increased political integration within the organisation, as per the European Union and advocated by some, is still uncertain.
The block comprises a population of more than 270 million people, and the combined Gross Domestic Product of the full-member nations is in excess of US$2.4 trillion a year (Purchasing power parity, PPP) according to International Monetary Fund (IMF) numbers, making Mercosur the fifth largest economy in the World. It is the fourth largest trading bloc after the European Union.
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The working of Mercosur has not met with universal approval within interested countries. Chile has to a certain extent preferred to pursue bilateral agreements with trading partners, and there have been calls from Uruguayan politicians for this example to be followed.