MERCOSUR

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 Context:

• Bolivia joined as the full time member of MERCOSUR(Southern Common Market)

 Details

• Bolivia has been an associated member of MERCOSUR since 1996.
• This status allows for partial integration and participation in some of the bloc’s activities but does not confer full membership rights and obligations.
• Bolivia had signed a protocol of accession to MERCOSUR in 2012.

 MERCOSUR

About	● It is a trading bloc of South America. ●Modelled on the lines of the European Union. ●  It is the fourth-largest integrated market after the European Union (EU)
Formation	● 1991
Formation	●MERCOSUR was formed in 1991 with the objective of free movement of goods, services, capital and people and it became a customs union in January 1995. It is now pursuing the third stage of its integration ‘Common Market’.
Headquarters	● Montevideo (Uruguay)
AIM	●Free movement of Goods, Services, Capital and People.
Members	●Brazil, Argentina, Uruguay and Paraguay being the founding members, Venezuela joining Mercosur in 2012. Bolivia is a new member now.

Implications of joining MERCOSUR

Integration in Customs union

• This would help to integrate Bolivia more deeply into MERCOSUR’s customs union, potentially increasing trade with member countries (Argentina, Brazil, Paraguay, and Uruguay).

Market access

• Bolivian goods would benefit from reduced tariffs and fewer trade barriers within the bloc, promoting export growth.

Increased Trade:

• Easier access to the larger markets of MERCOSUR countries could significantly boost Bolivia’s exports.

Investment

• The avenues for investment opportunities in Bolivia would widen since being part of a larger economic bloc could attract more foreign investment.

Boost to energy and natural gas

• The aspects of energy and natural resources would get a boost with Bolivia’s presence because of significant natural gas and lithium reserves that are of strategic importance. This would, therefore, enhance energy cooperation and investment in the sector.

Regional politics

• Additionally, concerning political and diplomatic regional Influence, joining MERCOSUR as a full member would strengthen Bolivia’s influence in regional politics and decision-making within the bloc.
• This would also signify a stronger commitment to South American integration and cooperation.

India - MERCOSUR Trade Agreement

• Intra-Mercosur trade is duty-free while there is Common External Tariff (CET) for imports from other countries.
• Although the average CET is 14% it could range from 0 to 20%. CET has 800 exceptions including cars and sugar.

 India - MERCOSUR Preferential Trade Agreement

• The negotiations on the Preferential Trade Agreement (PTA) were concluded in March 2005 and the agreement has become operational since June 2009.
• Preferential duty (10-20 % in most cases) is given to 450 Indian products entering MERCOSUR and reciprocal concession to 450 products of MERCOSUR entering India.
• The aim of this Preferential Trade Agreement is to expand and strengthen the existing relations between MERCOSUR and India and promote the expansion of trade by granting reciprocal fixed tariff preferences with the ultimate objective of creating a free trade area between the parties.

 Trade volume:

• India’s trade with MERCOSUR for 2013 was 15.2 billion US dollars accounting for 60% of India’s total trade with Latin America. Today this value has crossed 40 Billion USD.
• India’s imports mainly included crude oil from Venezuela and soya from the region.
• The major products of export: Meat and meat products, organic & inorganic chemicals, dyes & pigments, raw hides and skins, leather articles, wool, cotton yarn, glass and glassware, articles of iron and steel, machinery items, electrical machinery and equipments, optical, photographic & cinematographic apparatus

Bolivia ●Bolivia, officially the Plurinational State of Bolivia, is a landlocked country located in western-central South America. ●It is bordered by Brazil to the north and east, Paraguay to the southeast, Argentina to the south, Chile to the southwest, and Peru to the west. ●The seat of government and administrative capital is La Paz, which contains the executive, legislative, and electoral branches of government, while the constitutional capital is Sucre, the seat of the judiciary. ●The largest city and principal industrial center is Santa Cruz de la Sierra, located on the Llanos Orientales (eastern tropical lowlands).

Challenges within MERCOSUR

Mercosur continues to face internal division.

• Brazil’s desire to modernise the bloc, including by allowing for bilateral deals with third-party countries, had been opposed by the former Argentine President.
• Argentina has threatened to withdraw from the bloc entirely.

Inking FTA with China

• Uruguay’s ongoing efforts to ink an FTA with China have likewise created tension, and Bolivia’s recent accession while amid an economic crisis could add to the pressure.

Protectionism

• The bloc’s protectionist policies and reluctance toward creating value-added supply chains or regional production hubs are stifling integration.

Economic disparities

• Within the bloc members, there are substantive economic disparities especially since Bolivia’s economy is smaller and less industrialised compared to other MERCOSUR members, which may pose challenges in contending within the bloc.

Conclusion

• The full membership of Bolivia in MERCOSUR holds promise for greater economic integration, increased trade, and heightened Latin American regionalism. However, the foreseen challenges will need to be addressed by Bolivia to fully benefit from the opportunities presented by joining the bloc.
• For the ease of regulatory alignment, it is imperative for Bolivia to align its regulations and standards with those of MERCOSUR. It would necessitate significant technical and policy modifications within the domestic domain.

Important articles for reference :

India Bolivia Relations

India Brazil Relations

Free Trade agreements

Types of Trade agreements

Lithium Triangle

 Sources:

• https://www.financialexpress.com/business/defence-expanding-horizons-in-south-american-regionalism-as-bolivia-joins-mercosur-3564016/
• https://commerce.gov.in/international-trade/trade-agreements/india-mercosur-pta/#:~:text=MERCOSUR%20is%20a%20trading%20bloc,among%20the%20four%20member%20countries.

PRACTICE QUESTION Q.With reference to “MERCOSUR( Southern Common Market)”, consider the following pairs: Brazil Argentina Uruguay Paraguay Chile Panama Which of the above are the members of MERCOSUR? (a) 1, 2,3 and 5 (b) 2, 3, 5 and 6 (c) 1, 2, 3 and 4 (d) All of the above  Answer: c Explantion MERCOSUR was formed in 1991 with the objective of free movement of goods, services, capital and people and it became a customs union in January 1995. It is now pursuing the third stage of its integration ‘Common Market’. Brazil, Argentina, Uruguay and Paraguay being the founding members, Venezuela joining Mercosur in 2012. Bolivia is a new member now.