In April 1999 after lengthy preparations the project "Economic Law of MERCOSUR” was started under the supervision of Prof. Dr. Jürgen Basedow and Dr. Jürgen Samtleben and with financial support from the "Volkswagen Foundation" in respect of both personnel and material equipment. The project group has finished its work in the meantime, but the subject remains an important focus of research within the Institute’s department on Latin American countries.

MERCOSUR was launched in 1991 when Argentina, Brazil, Paraguay and Uruguay signed the Treaty of Asunción, aimed at establishing the ‘Common Market of the South’ (in Spanish ‘Mercado Común del Sur’, in Portuguese ‘Mercado Comun do Sul’, hence the acronyms MERCOSUR and MERCOSUL). Since that time, Chile, Bolivia, Ecuador, Columbia, Peru and Venezuela have become Associate Members. Venezuela’s application for full membership is currently awaiting ratification by the existing Member States. With the Protocol of Ouro Preto (1994) MERCOSUR was institutionally restructured and became a subject of public international law. As such, MERCOSUR signed an interregional framework cooperation agreement with the European Community in 1995 which institutionalises a dialogue between the two blocks; the accord took effect in 1999. An agreement governing a free trade area (initially envisaged for 2005) has not thus far been reached but remains on the agenda.

At present the creation of a common market remains an unmet goal as MERCOSUR’s progress has been limited thus far to the formation of an imperfect customs union. Market freedoms other than the free movement of goods have only been developed rudimentarily. Regardless of the relatively low level of legal integration, the development of MERCOSUR during the first eight years proved very promising. Commerce between the Member States grew steadily and the MERCOSUR institutions became very active in the field of legislation. However, a serious setback took place in 1999 when the Brazilian currency was heavily devaluated. Intraregional commerce was sent into disequilibrium as Argentinean products became too expensive for Brazil to import while at the same time the cheap commodities from Brazil began to flood the Argentinean market. This economic turbulence led to serious political instability in Argentina and to a de facto bankruptcy of the Argentinean State in December 2001.

Due to the described crisis and other problems, the collapse of MERCOSUR has repeatedly been predicted. However, neither such collapse nor the absorption of MERCOSUR into a Free Trade Area of the Americas (FTAA/ALCA) has taken place. Survival of MERCOSUR can in part be attributed to its dispute resolution system, especially the ad-hoc arbitral procedures which have proved valuable for solving conflicts between Member States and have also made an important contribution to the development of MERCOSUR law. More recently, the political tension between Argentina and Brazil has receded. Argentinean president Kirchner and Brazilian president ‘Lula’ da Silva have repeatedly expressed their wish not only to continue the integration process but also to deepen it. Various steps have been taken in this direction during the last years: Through the Protocol of Olivos (2002) the Permanent Tribunal of Review has been created, which in 2005 delivered its first decision and in 2007 gave its first legal opinion, both of which were very rich in content and contained many references to ECJ jurisprudence. The MERCOSUR Secretary has been changed from a purely administrative organ to a technical advisory organ, employing the services of experts in integration law. Finally, the MERCOSUR Parliament has been inaugurated (May 2007), replacing the Joint Parliamentary Commission. The Parliament has been established in order to guarantee the representation of all parts of society in the integration process, although due to the intergovernmental structure of MERCOSUR it is only vested with advisory functions so far.

A recent conflict between Argentina and Uruguay has given rise to new political tensions in MERCOSUR: Argentina wishes to prevent Uruguay from constructing two paper mills on the banks of the Uruguay River, alleging the breach of the existing border treaty as well as other statutes on environmental protection. Although various attempts to settle the dispute amicably have failed and proceedings before the International Court of Justice are now under way, the crisis is not expected to pose a serious threat to MERCOSUR.

In light of the developments described above, MERCOSUR in no way has to be regarded as another unsuccessful attempt at Latin American integration. Rather, it continues to be an institution of practical importance and a highly interesting object of academic research. All members of the project group have finished and published their doctoral theses, dealing with the following topics: Competition Law (Peter Bischoff-Everding), International Commercial Arbitration (Jan Kleinheisterkamp), Provisional Measures of Protection (Margret Böckel), Transport Law (Georg Pfeifle). For further details: Completed Dissertations on the Law of MERCOSUR.

For a complete listing of the Institute publications on this project: MERCOSUR publication list.