Mercosur and the end game of the FTAA negotiations: challenges and prospects after the Argentine crisis

The negotiations to create a Free Trade Area of the Americas (FTAA) by January 2005 are at a crossroads. Although goals and deadlines have been met, the hard bargaining to reduce trade barriers among the 34 participating countries has just begun and there are formidable obstacles to concluding the negotiations on schedule. On the other hand, the Southern Cone Common Market (Mercosur) is slowly emerging from the crises provoked by the Brazilian devaluation of 1999 and the implosion of the Argentine economy in December 2001. This article examines the interplay between Mercosur, the FTAA negotiations and the parallel Doha Round of global trade talks. It takes stock of the impasses in Mercosur and examines the challenges faced by the FTAA: US protectionism, the divergent positions of the USA and Brazil, the need to accommodate the demands of the small economies, the loss of legitimacy of the neoliberal model, anti-FTAA sentiment among vast segments of civil society throughout the hemisphere, and the election of populist leaders in several Latin American countries. The article discusses five Mercosur/FTAA scenarios and argues that Mercosur's best strategy for survival is to stick to its original goal of becoming a common market.