MERCOSUR: Chile to Join Southern Common Market

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Jun 19 1996 (IPS) - The four nations of Common Market of the South (Mercosur) are ironing out final terms for admitting a new member – Chile – at the 10th summit meeting of the trade group next week.

Foreign Ministers and Finance Ministers from Argentina, Brazil, Paraguay and Uruguay began high-level discussions here Wednesday ahead of a meeting June 25 between the presidents of the four countries. The summit will take place in the Argentinean province of San Luis.

The Ministers will focus on defining the percentage of local components that Chilean products must contain to be exported duty free to other Mercosur countries. The present members want the figure to be 60 percent, while Chile hopes for 40 percent.

Argentine industrialists have expressed fears that Chile might become a dumping ground for industrial products from Southeast Asia with little Chilean value being added to these goods.

Mercosur came into being in 1991 and Chile, because of its geographic position and close cultural and economic connections with the countries of the bloc, presently has 48 percent of its foreign investment in Mercosur – mostly in Argentina.

Chile’s exports to Mercosur were 1.772 billion dollars in 1995, 157 percent higher than in 1990. Mercosur’s exports to Chile totalled 2.558 billion dollars in 1995, 154 percent higher than the 1990 figure.

Chile does not want to be a full participant in Mercosur because of tariff policy differences. Chile has a fixed 11 percent tariff, while Mercosur has defined a tariff band of between zero and 20 percent.

That is why Chile has stopped short of full membership in favour of preferential treatment from Mercosur while maintaining its independence in commercial policy-making.

After the last summit, held in december in Punta del Este, Uruguay, the main objective of the bloc has been to finalize the accord with Chile and agree to reduce the tariff on 90 percent of products by 40 percent. In eight years, tariffs on these products will be totally eliminated. Other products, mainly in the agricultural sector, will have a 10 to 18 year span in which to adjust to the new conditions.

Negotiators also came to terms on sanitary and technological norms that will allow for quicker shipment of products. During Chilean President Eduardo Frei’s visit to Argentina in April, Argentina and Chile agreed to commit 300 million dollars to road infrastructure.

In this way, Mercosur countries will have greater access to Asian markets through Chile, reducing their shipping costs, and Chile will have access to a market of 200 million people.

The European Union already has a signed agreement with Mercosur and sees the arrangement between Mercosur and Chile as an additional attraction.

The Chilean economy is one of the most dynamic in Latin America and as a percentage of Gross Domestic Product it is the most open economy in the region.

Frei along with the Presidents of Argentina (Carlos Menem), Brazil (Fernando Henrique Cardoso), Paraguay (Juan Carlos Wasmosy), and Uruguay (Julio Maria Sanguinetti), chose San Luis – 800 kms west of Buenos Aires – as the site for signing the agreement.

Chile’s special membership arrangement is due to become effective July 1 and lining up for similar agreements are Bolivia, Peru, Colombia. Potentially the Mercsur common market could encompass all of South America.

Cardoso will assume the Mercosur presidency of Mercosur next month and has already stated that after Menem announces agreement with Chile, he expects to announce an agreement with Venezuela in before the end of this year.