Mercosur

The Sectoral Commission for MERCOSUR (COMISEC) was created on April 1, 1991 by Executive Decree No. 176/991. It is made up of:
Government Representatives and Delegates from the Office of Planning and Budget
Agrarian Cooperatives Association
This decree entrusts COMISEC with the following functions:
a) Advise the Executive Branch as regards the adoption of internal measures aimed at the application, pursuit and evaluation of the process of regional integration.
b) Coordinate and supervise the performance of the subcommittees.
c) Obtain and disseminate information on integration.
For its part, Decree 175/991 dated April 1, 1991, created the Inter-Ministry Committee on MERCOSUR and gave the Director of the MERCOSUR Sectoral Commission authority to do the following:
a) Plan and propose, to the Inter-Ministry Committee, measures necessary for the orchestration of the internal aspects of the Common Market, paying special attention to the reconversion of economic activities and the adaptation of the country to the common market.
b) Carry out the necessary surveys, and to request the corresponding technical assistance.
Uruguay was the first country within MERCOSUR that developed this institutional structure – which is foreseen in the constitution – so that the different sectors involved could participate in the integration process.

Some Argentine Provinces and some Brazilian States have implemented institutional mechanisms in which the presence of their own social and economic agents is participatory.
Paraguay has just recently created, under the Ministry of Integration, the National Committee on Integration and has invited government representatives (ministries), business groups and unions to participate.
One of the goals of COMISEC is to improve the knowledge of the productive sectors and to create mechanisms for the dissemination of information throughout the country.
In sum, COMISEC is an working environment where the Uruguayan civil society can be represented in order to best pursue, understand, and disseminate, in a timely manner, the key topics that are relevant to Uruguay’s future with regard to its insertion in MERCOSUR.
As Uruguayans, we all have our concerns especially when we think of the size of our partners, Argentina and Brazil. However, we have already been associated with these countries for many years through preferential commercial agreements.
The Common Market of the South (MERCOSUR) is an ambitious economic integration project in which Argentina, Brazil, Paraguay and Uruguay find themselves engaged.

Its principal objectives are: to improve the economies of their countries by making them more efficient and competitive and by enlarging their markets and accelerating their economic development by means of a more efficient use of available resources; to preserve the environment; to improve communications; to coordinate macroeconomic policies; and to harmonize the different sectors of the economies of the member countries.
The Beginnings of the MERCOSUR Integration Process
In the 1970s, Uruguay strengthened its commercial relationship with Brazil by way of the Commercial Expansion Protocol (PEC), and with Argentina by way of the Argentine-Uruguayan Economic Cooperation Agreement (CAUCE).
Between 1984 and 1989 Argentina and Brazil signed twenty-four bilateral protocols with the purpose of improving trade.
Integration efforts date back to 1985 when the Foz de Iguaz Declaration was signed creating the High Level Bilateral Commission for the integration of Argentina and Brazil.
Around the end of 1990, Argentina and Brazil signed, and registered with ALADI, an Agreement on Economic Cooperation (Acuerdo de Complementacin Econmica) that systematized and deepened pre-existing bilateral commercial agreements. Around mid-1990, representatives of both countries met with authorities of Uruguay and Paraguay. It was then that these two countries expressed their firm aspiration to take part in the bilateral process already underway. At this point it was decided that an agreement among all four countries to create a common market should be signed.

On March 26, 1991 the Treaty of Asuncin was signed by the four countries. This Treaty should not be seen as the final creation treaty of the Common Market of the South, but as an instrument, of international character, intended to make the implementation of the Common Market possible.
The Treaty of Asuncin is an economic integration agreement with regional vocation, which remains open to the accession of the other ALADI members.
By virtue of what is established in Article 10 of Annex I of the Treaty of Asuncin, on November 29, 1991, the four countries signed an Agreement of Economic Cooperation under the legal framework of ALADI. It bears number 18, and entered into force on that date.
In December 1994 an additional Protocol to the Asuncin Treaty was signed in relation to the institutional structure of Mercosur and called the Ouro Preto Protocol.
Principal indicators of MERCOSUR members (as of 1993)
ArgentinaBrazilParaguayUruguay
Population (in millions)32.6147.34.32.9
Land Area (thousands of km2)2.767.08.512.0407.0177.5
GNP (thousands of $US)255.326413.1227.00513.144
Per capita GNP ($US)7.8322.8051.6294.532
Balance(3.696)13.406(753)(602)
Source: Our own, based on data from Working Subgroup No. 10 (Basic Macroeconomic Indicators) and MERCOSUR, Statistical Report, volume 1, 1993

Legally, there are no impediments, and the Treaty of Asuncin anticipates that any of the Member States may desire to pull out of the treaty.
Politically, leaving MERCOSUR would bring about significant difficulties.
It is a well-known fact that the four national economies are closely interrelated. In the case of Uruguay, 44% of its exports and a similar percentage of its imports are MERCOSUR-based. This gives an idea of what Uruguays situation would be, should it not belong to MERCOSUR. Moreover, in a growing globalized economy, negotiations are carried out between large economic blocks, and the opportunities for independent action by our country are very slim.
25. Is Uruguay prepared to participate fully in MERCOSUR?
There is a long history, both within the public and private sectors, of efforts made towards integration that started around 1960 when ALALC was created by the Treaty of Montevideo.

Since then, Uruguay has been a staunch supporter of regional integration. This commitment has earned Uruguay the right to be the seat of the two principal regional organizations: ALADI and MERCOSUR. This is both a distinction and a privilege.
29. How does the mechanism for the annual reduction of import duties function?
Argentina and Brazil granted an initial reduction on January 1, 1995. In January 1996 the reduction was of 25%. Further reductions will be: 50% by January 1997; 75% by January 1998; and duties will be completely eliminated by January 1, 1999.
For Paraguay and Uruguay the scale is similar except that it runs one year longer. That is to say that the initial reduction started on January 1, 1996 and the successive reductions to 25%, 50% and 75% are scheduled for January 1997, January 1998 and January 1999, respectively. Total elimination of duties will be on January 1, 2000.

This system is called “Final Adaptation Regime to the Customs Union.” The reductions are applied to the total nominal tariff of each country as of August 5, 1994. No other tariff or non-tariff barriers will be applicable to the products included in this Regime.
153. What was GDP share of the main sectors during the years 1991-1993?
Agriculture 11.3%, manufactured goods 23.1%, construction industry 3.9%, electricity 3.1%, retail and restaurant/hotel services 12.8%, transport, storage and communications 7.7%, financial institutions, insurance, real estate and services to enterprises 22%, municipal, social and personal services 17%. These percentages are reflected in the employment structure.

Employment structure excluding the agricultural sector as of 1993:
Exploitation of mines and quarries 0.3%
Retail, restaurants and hotels 19.2%
Transport, storage and communications 6.4%
Financial institutions and services to enterprises 7.3%
Communication, social and personal services 36.5%
154. What are the main fields within the manufactured goods sector?

Foodstuffs, beverages and tobacco 33%; textiles, apparel industry and hides 19%; paper, printing and publishing houses 5%; chemicals, oil, rubber, plastics 25% (oil refining is 40%); non-metallic minerals 4%; metallurgy, machinery and equipment 13%.
155. What is the relationship between external and domestic trade?
In 1995 exports (FOB) totalled US$2,116.7 million while imports totalled US$2,866.9 million. There was a negative balance of minus US$750.2 million.
156. What are the main geographical areas with which we do business?
Trade with the other MERCOSUR countries during 1995 totalled US$2,316 million (this represents a 47% of overall trade which was US$4,983.6 million).
Exports from Uruguay to MERCOSUR: US$995 million
Uruguays imports from MERCOSUR: US$1,320 million
Exports from Uruguay to Europe: US$482.5 million
Exports from Uruguay to the U.S.A.: US$112.8 million
157. What changes will MERCOSUR bring about?
The coming into effect of MERCOSUR will open new business opportunities in a market of 200 million inhabitants.

At the same time, Uruguayan businessmen will face new and greater challenges and will have to strive in order to meet new market requirements. Similar efforts will have to be made to improve quality of labor, quality of management and productivity, and to foster the use of proper technology. All this will have to be done bearing in mind peoples needs and expectations, guaranteeing job security as far as possible, making better use of national resources and, finally, taking advantage of the benefits of integration.

Once the negotiations have been completed enterprises, workers, professionals, farmers, students, the State, in other words, the society as a whole will have to take a stance within the new regional environment.
In the short term most of the products and services Uruguay has to offer will undergo radical changes. The new markets will undoubtedly offer new opportunities, but in order to seize them Uruguay will have to offer the right products, with an excellent quality level and within a convenient time framework.
158. What do we export to the other MERCOSUR countries?
159. What do we export to the rest of the world?
Fabrics, leather garments and textiles
Wood, vegetable coal and its products
On June 19, 1996 MERCOSUR and Chile signed a Free Trade Agreement which was later endorsed (June 25) by the Presidents of the five countries in San Luis, Argentina.

the agreement complies with the requirements of the World Trade Organization;
the principles of the customs union are maintained (the common external tariff remains unchanged).
Further, it should be pointed out that Chile has not become a new member of MERCOSUR, but has joined MERCOSURs free trade zone without adopting the common external tariff system. This is a 4 + 1 type agreement.
On October 1, 1996 tariffs on goods not subject to exceptions will be reduced by a 40%. Reductions will continue in a progressive manner until a zero tariff is reached in 8 years, more precisely by 2004.
Tariffs for products considered “sensitive” will be liberalized in 10 or 15 years, according to the type of product. In this regard, Chile has decided to close its market for wheat and wheat by-products during 18 years. To counterbalance this, Chile has granted additional quotas for beef and rice and, for the first time, has opened its domestic market to dairy products from MERCOSUR.

A very strict rules of origin regime has been approved by which Chilean products exported to MERCOSUR should have at least a 60% of national (Chilean) components; the remaining 40% may be from outside MERCOSUR. This system is already in force in the other MERCOSUR countries.
Dispute resolution will be done by means of consensus during the first three years after the signing of the Agreement. After that it will be done through arbitration.
The MERCOSUR-Chile Agreement may come to affect the fruit/vegetable and wine sectors in Uruguay. Chile is a large exporter of fruits and wine, internationally known. In Uruguay, however, fruit and vegetable growing is mostly family-run, with no rationalization of productive inputs used.

Even though in general Uruguayan products will not benefit from the above mentioned tariff reductions, the Agreement with Chile will be advantageous for certain products such as rice, dairy products, beef and the apparel industry.
In the case of rice, Chile approved a quota of 14,000 tons for Uruguay until the year 2000 (presently the quota is 4,000 tons for shipments from September through December only).
In the case of dairy products, Uruguay can now access the Chilean market with an advantageous tax of 40% and progressive reductions of up to a 100% by the year 2000. Up to the signing of the Agreement, Chile had refused to negotiate with Uruguay the introduction of dairy products.
Regarding beef, until October 1, 1996 Uruguay had a quota of 750 tons per year, with a tax of 50%. Thanks to the agreement, Uruguay will be able to export 3,000 tons of beef per year (50% of frozen and 50% of fresh meat).
The textile sector was granted an additional quota for some articles with a 100% tax exepmtion (usual tax in this sector is 40%). Moreover, Uruguayan leather garments were completely liberalized in the Chilean market.
Additionally, the MERCOSUR-Chile agreement opens new opportunities for business and investment in Uruguay.