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International business management

Introduction Mercosur (also known as Mercosul or the Southern Common Market) is an RTA (Regional Trade Agreement) found in early 1991 by means of the Treaty of Asuncion between the countries of Paraguay, Uruguay, Argentina and Brazil. After its formation in 1991 it has later been upgraded and modified in 1994 by the Treaty of Ouro Preto. The primary objective of the Mercosur is to allow and encourage free trade as well as the easy traffic of man, merchandise and money between the aforementioned countries.

While Peru, Ecuador, Colombia, Chile and Bolivia are presently the associate members of the agreement Venezuela has only recently (17th June 2006) become a signed member. However, despite having been agreed a membership Venezuela will be acknowledged as a formal member only after the Paraguayan and Brazilian parliaments ratify its entry into the confederation. (King, 2007) A number of South American countries view Mercosur as the one means by which they might unite their economic capacities and resources together and thereby compete with other global powers, such as the U. S. A as well as the European Union.

The Mercosur is also being seen as a possible hurdle the FTAA (Free Trade Area of the Americas) might have a difficult time crossing. A majority of the present members of the Mercosur have refused the FTAA proposal at the IV Summit of the Americas (Argentina, 2005). While this raised questions regarding the level of cooperation between the various South American countries concerned the Union of South American Nations has successfully proved that it isn’t the unification of the south but rather the US overshadowed policies of the FTAA that the South American countries have objection to.

(Kar, 2007) The sudden breakdown of the Argentine economy (2001) possibly had a negative effect on the progress of the Mercosur. Even today however it isn’t completely free of internal troubles. Various trade related disagreements still exist between Argentina and Brazil. Additionally, the idea of ‘free movement of individuals’, one of the initial objectives of the agreement, has not exactly worked out the way it was planned and countries such as Argentina continue to charge a certain amount of fee for every Mercosur citizen passing through its borders.

For Venezuela however Mercosur, with or without its very many shortcomings, is a longtime dream that has managed to evade her time and again. Today after 8 long years, numerous protocols and over 10 years of requests and failed attempts Venezuela is finally a part of the Common Market of the South. From a diplomatic point of view Venezuela’s entry into Mercosur is of far more importance than its attachment to the OAS, where she will undoubtedly be segregated and overshadowed by the US of A. (Kar, 2007).