MERCOSUR, NAFTA, and Latin American Integration: Challenges and Solutions
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MERCOSUR Integration: Problems and Solutions
Internal Challenges
Latin America historically had a protectionist scheme, characterized by extremely high import tariffs and, in general, import bans on locally manufactured products. This was further complicated by the presence of military governments in most countries. Companies had reserved domestic markets without foreign competition, leading to significant resistance when tariff reductions were proposed.
External Challenges
External challenges included the fall in international commodity prices and global economic crises.
Solutions
Since the 1980s, Latin American integration has been facilitated by political and economic circumstances.
Policies
The return of democratic governments in most countries.
Economics
The abandonment of protectionism, reduced tariffs, policies to stabilize economies, and economic openness. Outward-oriented policies viewed integration as a key path for growth.
NAFTA: North American Free Trade Agreement
NAFTA facilitates the free movement of capital and goods between its members: the USA, Canada, and Mexico. The agreement also extends to new areas of economic and political importance, including intellectual property, public markets, and energy.
Mexico and Canada's Dependence on the U.S.
Mexico and Canada are increasingly dependent on the U.S. because the U.S. buys a significant portion of their production. Mexico and Canada buy goods they cannot sell elsewhere, leading to decreased external trade relations or closures. This creates a greater dependence, and a negative aspect of this dependence is that economic crises in the U.S. can negatively impact these countries.
Bill Clinton's Proposal and Latin America
Bill Clinton's proposal did not resonate in Latin America (excluding Cuba) due to repeated natural disasters, including earthquakes, hurricanes, floods, and El Niño. Austerity policies imposed by the IMF in many countries accentuated social inequalities and dissolved regional solidarity.