South-American Integration Processes under the EU Framework

LIST OF CONTENTS

Dedicatory and Acknowledgements

Abstract

List of Tables

List of Figures

List of Acronyms

I. INTRODUCTION
1.1 Introduction
1.2 Methodology
1.3 Remarks

II. SOUTH AMERICAN INTEGRATION FRAMEWORK DEVELOPMENT
2.1 Political Framework Development towards the South-American Union of Nations

III. SOUTH AMERICAN INTEGRATION UNDER THE EU FRAMEWORK
3.1 "New Regionalism" and the functional approach of South American integration.
3.2. South American- and EU- Integration Structures and Policies
3.2.1 A Supranational Executive Body
3.2.2 Supranational judicial functions
3.2.3 Supranational legislative functions
3.2.4 Common Currency and Supranational Monetary Institution
3.2.5 A Common Foreign and Security Policy
3.2.6 A Common Social and Development Policy

IV. GAME THEORY AND SOUTH AMERICAN INTEGRATION CASE STUDIES
4.1 Game Theory
4.1.1 Fundamentals of Game Theory
4.1.2 Limitations of Game Theory
4.2 Case Studies
4.2.1 Case Study 1: Political Integration, the creation of the South American Energy Council (2007)
4.2.2 Case 2: Economical Integration, the Ecuadorian safeguards settlement (2009)

V. CONCLUSIONS AND FINAL COMMENTS

REFERENCES

APPENDIXES
Appendix A: South American figures
Appendix B: Game Theory Glossary
Appendix C: Combined priorities

DISCLAIM

Acknowledgements

Gratitude is one of the most curious virtues of human nature, claimed so many times and forgotten as many as claimed. In the following lines, I will present some of the people to whom I owe my gratefulness; and I say 'some' because, a list with all of them, will be an impossible task, by sure.

In first place, I must say Thanks to my family and my beloved beings in my home country, to whom I impose my absence, Thanks for your patience, your time and your understanding, especially for every time I could not join you in a conversation, a little shared moment or in those instants that make the life worthy enough. For all those reasons, thank you.

Thanks again, to all my friends that helped me to have a nice time in Bremen, to Patricia and Arend, for offering me a place to stay when I arrived to Bremen; to Frau Seutter, whose hospitality went beyond the value of the rent that I paid; to Frau Fuchs, for her nice German lessons and her always kind attitude. To all of them with whom I shared a dinner, or a simple walk in the park, especially to those that gave me their time, so I did manage to do my own things. To all of them, thank you.

Last, but not least, thanks to my lecturers, especially Prof. Dr. Lehmann and Prof. Dr. Wolf, their time and advises were beyond their obligations. I am really proud of the time we shared and the lessons I have learnt. For that and without doubts, thank you very much.

Abstract

This Master Thesis presents a review of the South American integration in the global context and questions the determinant factors of its success and failures (Chapter I). It also presents South American integration development in a regional context; and how it faced stagnation by changing its objectives; and by replicating and amplifying successful experiences in the integration process (Chapter II). To analyze the South American Integration development, it is compared with six dimensions of the EU Framework: three supranational institutions and three common policies (Chapter III). As a deeper analysis of those six dimensions could diffuse the comparison, this Master Thesis stresses the differences in one of those dimensions: supranational executive bodies. Using the Game Theory, a shared-decision model with two players that have different priorities for the same decision, it points out the important role of the exertion of supranational executive power to foster the integration process (Chapter IV). The conclusions summarize the analysis and propose new fields in the integration process analysis for the Game Theory technique.

International Graduate Center Master in European Studies

LEON LI, Jaime Martín leonli@rocketmail.com

SOUTH AMERICAN INTEGRATION PROCESSES UNDER THE EU-FRAMEWORK

LIST OF TABLES

Table 3.1. Institutional structures of South America and the Caribbean and the EU
Table 3.2 Stages of the Monetary and Economic Union
Table 3.3 Stages of the Euro Introduction

Table 4.1 Case Study 1, Scenarios for the South American Energy Council
Table 4.2 Case Study 1 - Players' Priorities
Table 4.3 Case Study 1 - Players' Payoffs
Table 4.4 Combined Payoff Matrix for the South American Energy Council
Table 4.5 Case Study 2, Scenarios for the Ecuadorian safeguards (2009)
Table 4.6 Case Study 2 -Players' Priorities
Table 4.7 Case Study 2 - Players' Payoffs
Table 4.8 Combined Payoffs Settlement of safeguards

Table A1. South American Surface, Population, GDP and Exports (2007)
Table A2. South American GDP 1998 - 2007 (Millions US$)
Table A3. South American GDP per habitant 1998 - 2007 (US$/hab)

Table C.1 Priorities for Player 1, Case Study 1: South American Energy Council
Table C.2 Priorities for Player 2, Case Study 1: South American Energy Council
Table C.3 Priorities for Player 1, Case Study 2: the Ecuadorian safeguards settlement
Table C.4 Priorities for Player 2, Case Study 2: the Ecuadorian safeguards settlement

LIST OF FIGURES

Fig. 2.1 The Latin American Free Trade Association - LAFTA (1960)
Fig. 2.2 The Andean Pact (Later the Andean Community)
Fig. 2.3 The Southern Common Market (MERCOSUR)
Fig. 2.4 The South American Union of Nations (UNASUR)

Fig. 3.1 South American Integration and Development Axis
Fig. 3.2 Overlapping of regional and sub-regional integration processes
Fig. 3.3 Net Inward and Outward of FDI in Latin America (1992 - 2008) Billions US$
Fig. 3.4 Net Inward of FDI in Latin America by sub-regions (1992 - 2008) Billions US$
Fig. 3.5 Six dimensions that define an integrated regional bloc
Fig. 3.6 DPSIR Framework for the European social participation in integration process
Fig. 3.7 DPSIR Framework for the South American social participation

Fig. 4.1 Individual selections
Fig. 4.2 Interacting selections.
Fig. 4.3 South American gas reserves in 2004 (expressed in TCF) and estimated demand in 2010 (expressed in MMm3/d)
Fig. 4.4A Proposal of Game Theory with several decisions: Assumptions and Analysis
Fig. 4.4B Proposal of Game Theory with several decisions: Scenario descriptions

Fig. A.1 South American Surface (2007)
Fig. A.2 South American Population (2007)
Fig. A.3 South American GDP (2007)
Fig. A.4 South American Exports (2007)
Fig. A.5 South American GDP 1998-2007 (Billions US$)
Fig. A6. South American GDP per habitant 1998 - 2007 (US$/hab)

LIST OF ACRONYMS

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I. INTRODUCTION

1.1. INTRODUCTION

After the Second World War, the political and economical block that today we call European Union started when six countries sought to ensure the peace among them. Belgium, France, Germany, Italy, Luxemburg and the Netherlands put their heavy industries under a common management, with the Coal and Steel Treaty, so no one could build weapons or develop its war industry without the others knowing it. This experience led to the Treaty of Rome in 1957 and 50 years later the ideas of people, goods and service freedoms continue spreading around, and the European Union has become one of the best examples of economical, political and cultural integration, and a reference around the world to encourage other regions to group.

Therefore, among others, the Latin America Free Trade Association (LAFTA) appeared in 1960, the Association of Southeast Asian Nations (ASEAN), in 1967; the North American Free Trade Area (NAFTA), in 1991; and the Common Market for Eastern and Southern Africa (COMESA) in 1993. In the case of South America^[1], in spite of their good intentions, the huge asymmetries between LAFTA members caused the apparition of sub-regional blocs: the Andeans Community (CAN) founded in 1969, and now grouping Bolivia, Colombia, Ecuador, and Peru; and the Southern Common Market (MERCOSUR) founded in 1991, between Argentina, Brazil, Paraguay and Uruguay. Nowadays, after more than 40 years of integration processes, there are still strong problems inside both sub-regional blocs. CAN Member States have several diplomatic discussions regarding their political models; and Peru, Ecuador and Colombia have or are negotiating independent Free Trade Agreements with external blocs, including USA and the EU. In the other side, MERCOSUR's main players -Argentina and Brazil- have commercial disputes at the World Trade Organization, surrounding their own sub-regional bodies^[2]. Nevertheless, these two sub-regional associations were the basis for the South American Community of Nations (CSN on Spanish) in 2004, and from that point, the present attempt to unify South-America: the South American Union of Nations (UNASUR, 2008), with the participation of Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Surinam, Uruguay and Venezuela. The integration levels in political and economical affairs in this latter group are expected to change the way international relations will be conduit in the future of South-America.

This new regional bloc has an extension of 17 658 Km² and 383 million inhabitants (2007)^[3]. With a general GDP of $2348 953 (2007) and a GDP per capita of $6126(2007), it is one of the regions with more perspectives of development, but it is also one of the regions with the highest degrees of economic asymmetry. While in 2007 Chile, Venezuela and Brazil had a GDP per capita (2007) of $9865, $8601 and $6819, there were other countries like Paraguay and Bolivia, with a GDP per capita (2007) of $1669 and $1342. These asymmetries have leaded to strong disagreements between South American countries during previous integration process. An example that just pooling economies is not the whole solution for development is the case of Paraguay, in the middle of MERCOSUR and with barely a quarter of the MERCOSUR's GDP $6642 (2007).

"Integration" will not always mean international governmental organizations where Member States have decided to transfer competitions and empowerment of supranational institutions; in this Master Thesis, the South American integration processes will be defined as "(...)the creation and maintenance of intense and diverse patrons of interaction between previously autonomous units."^[4] Furthermore, "Integration" in the context of the South American reality included two concepts: "Regionalism" and "Regionalization". The first is related to the wave of thinking, the interaction projects and the political initiatives (the processes) and the second, to the institutions or the agreements that represent the integration (the result).^[5] This Master Thesis tries to be oriented to describe the processes more than the institutions or the agreements; nevertheless, it is not possible to present the first without the second and vice versa.

What kind of integration can be expected in South America? What kind of goals, challenges and success can South-American Nations find in their way to a social, political and economical integration? Whereas the EU is -since its very beginning- a supranational initiative, South American regional and sub-regional blocs are characterised for being mostly, the result of intergovernmental agreements. Will this difference be determinant in the integration processes? In this thesis of Master in European Studies, the South American integration -processes and institutions- will be review under the framework of six dimensions that give the EU its character of integrated regional bloc and are advocated to deep the South America Integration. Three of them related to structural bodies: executive, judicial and legislative; and the other three related to the policies that defines a Union: Monetary Policy, Foreign and Security Policy; and, Social and Development Policy. In order to do not miss the main emphasis, the description and analysis of the executive supranational body will be deeper than the corresponding to judicial and legislative bodies and the three common policies. In addition, two cases of the South American Integration will be modeled, to present the best possible scenarios to foster the integration. By the comparison of the structures and policies, and by the scenario modeling; this Master Thesis attempts to demonstrate that the lack of supranational authority and law enforcement power will play a determinant role in the success or failure in the South American integration process.

1.2. METHODOLOGY

The analysis in this thesis can be divided in two sections, the descriptive part (Chapter III) and the analysis of Case Study (Chapter IV). The information for the descriptive part is mostly from published books, research papers, journals and case studies, the information for the Case Study comes mostly from News and Newspaper articles. The technique used in the analysis of the Case Studies is the Theory Game: a shared-decision model with two players that have different priorities for the same decision. The methodology for that is described more widely in section 4.1 Fundamentals of Game Theory.

1.3. REMARKS

- This Master Thesis presents the South American integration as a whole, and the UNASUR as the present meeting point of the Andean Community and MERCOSUR. Therefore, wherever South American Integration is mentioned, it is not limited to UNASUR, CAN or MERCOSUR analysis, because they coexist and overlap each other at the same time. Instead, time framework and integration approaches are considerations that need to be undeniably included.

- To write about the integration processes in South America is to review almost 40 years of history and political agreements and disagreements of twelve countries and the influence that they received from external factors, like Central-, North America and Europe. Nowadays, the remaining sub-regional blocs face the opportunity to pool agreements in a new attempt, together with the risk of breaking-off of the Treaties, by the influence of external agreements of Member States with third parties around the world. For reasons of space, and to focus in the present regional integration process, those external agreements, like the NAFTA or the negotiations between the CAN and the EU, and their influence in the South American regional integration process are not going to be covered in this Master Thesis. That does not mean that their influence is negligible, rather than that, in some cases, like the Free Trade Agreements between the USA and Colombia, or Peru, it means the risk of the end of the CAN as a sub-regional economic bloc.
- In addition, a commercial developments analysis of the South American integration process requires a separate review of each commercial category and each bilateral agreement and therefore, a deeper description of those topics is not included.
- Other issues that are not going to be covered in this Master Thesis are those integration processes or commercial agreements that are not part or do not lead to the South American Union of Nations, like the "Bolivarian Alternative for Our Americas " (on Spanish ALBA) or the "Commercial Agreement of the Peoples" (on Spanish TCP). Their own dynamic and priorities are quite interesting; nevertheless going deeper in these issues could mean to reduce attention in the main topics of this Master Thesis.
- This Master Thesis uses study cases to describe two facets of the South American Integration process under the Two-Person Model of the Game Theory. The model used in this Master Thesis is characterised for the intersection of two players with mutual influence and different priorities. Game Theory is a useful analysis tool with many applications in mathematics, economics and political fields; nevertheless, as a model, it is a simplification of the reality and therefore, some details like the simplicity of its initial assumptions, the deep of the analysis, outsider players and feedback, are limited, further details of these limitations are presented in section 4.2. The analysis of a play of a Game, under the Game Theory can also be made by a mathematical approach. That mathematical approach is not going to be considered in this Master Thesis in order to keep the focus in the integration process.

II. SOUTH AMERICAN INTEGRATION FRAMEWORK DEVELOPMENT

2.1. POLITICAL FRAMEWORK DEVELOPMENT TOWARD THE SOUTH-AMERICAN UNION OF NATIONS (UNASUR)

The Latin American Free Trade Association - LAFTA (1960)

Fig. 2.1 The Latin American Free Trade Association - LAFTA (1960)

illustration not visible in this excerpt

Source: According to section 2.1. Elaboration León Li, J.M.

The attempts to have cooperation and commerce agreements between South American countries are not from recent data. The roots of the actual integration process could been tracked from 1960, with the Montevideo Treaty, between Argentina, Brazil, Chile, México, Paraguay, Peru and Uruguay, and the latter inclusion of Colombia (1961), Ecuador (1962), Venezuela (1966) and Bolivia (1967). The Treaty of Montevideo (1960) established the Latin American Free Trade Association (LAFTA, or ALALC in Spanish), with its headquarters in Montevideo and settled a period of 12 years to perfect the conditions of the Free Trade Area (FTA). The LAFTA had two main bodies, the "Conference" for the high-level decisions, and the "Committee" that acted as a technical secretariat and guardian of the Treaty. As a technical institution, the Committee was limited to enforce the Conference's decisions. Those institutional bodies were related to the governments of the Member States, without provisions to guarantee political independence from them; therefore, the Treaty of Montevideo (1960) started intergovernmental association rather than supranational institutions. That characteristic suffered several changes in the following institutions, increasing or decreasing its degree of independence from national governments, but remained in all the Latin American integration processes.

The name of Latin America Free Trade Association stresses clearly the commercial nature of the agreement; nevertheless, it included provisions to allow protection to "Relatively Less Developed Countries" by temporal customs measures and the promotion of special programs to leverage the productivity of certain industries.

Regarding the decision making process, whereas the European Union was built on Unanimity decisions, the Treaty of Montevideo (1960) provisioned that, during the first two years of the LAFTA, the high political decisions of the Conference shall be based on voting with at least two-thirds of approval and no oppositions. The conference shall also decide a definitive voting system after that period. The decision of not using the Unanimity criterion could be explained by the differences in the number of Member States (at that time the European Economic Community had only six members) and the pressure of the aim of having a region-wide Free Trade Area.

That aim of a Latin America Free Trade Area can also be found in the "Punta Del Este Declaration" (April, 1967), a meeting sponsored for the Organization of American States, that commitment the governments of Latin America, with the support of the USA to launch a region wide Latin America Common Market (LACM) in 1970. The goal was to turn all Latin America in a single economy no later than 1985, but the negotiations stagnated in August 1967, during the annual meeting of the LAFTA's Council of Ministers. In addition to the fact of the strong differences between Latin American countries, the concern was that economic integration could increase, rather than resolve existing inequalities.^[6] The integration goal of the Treaty of Montevideo (1960) faced different attitudes towards a Common Market, conflicts between the interests of each exporting country, and failures in the treaty itself. The main failures of the Treaty of Montevideo (1960) were i) the lack of mechanisms to bring about a common tariff, and ii) and lack of an adequate distribution of the benefits among its members. Nevertheless, the LAFTA introduced positive measures, like the Multilateral Compensation and Reciprocal Credit Mechanism, a bilateral line of credits between each pair of Central Banks. The agreement was signed by the central banks of member countries in 1965 and began operating in June 1966.^[7] After almost a decade of the creation of LAFTA, the gravitational force of the Brazilian-Argentinean commercial axis, the differences in infrastructure, and the political momentum of protectionism, created the conditions for a new sub-regional bloc, the Andean Pact.

The Andean Pact (1969)

Fig. 2.2 The Andean Pact (Later the Andean Community)

illustration not visible in this excerpt

Source: According to section 2.1. Elaboration León Li, J.M.

Comparing the intercommunity trade at the beginnings of the EU or MERCOSUR with the real commercial relations between the Member States of the Andean Pact in 1968 (30% in the EU, 10% in MERCOSUR and less than 2% of the LAFTA internal trade)^[8] ; it is possible to realize that the Andean Pact was more a political project than the result of a real commercial gravitation. In 1968, the intra-LAFTA trade amounted for only 11 per cent of the total trade of its Member States, (barely higher than in 1960 when the Treaty was signed), and Brazil-Argentina counting for three quarters of the total internal trade^[9]. These economical differences between, and the lack of adequate infrastructure, drove Bolivia, Chile, Colombia, Ecuador and Peru to set up a closer sub-regional bloc known first as the Andean Pact and later as the Andean Community.

To establish this sub-regional bloc, these countries signed in 1969 in Bogotá the Andean Pact Treaty. Their evaluation indicators were"(...), among other factors, its effects on the expansion of global exports for every country, the behaviour of the commercial scale in the sub-region, the development of the Gross Territorial Product, the employment generation and capitals creation." (Art. 2, Andean Pact. 1969) and stress the clearly commercial aim of the Treaty.

The Commission was the maximum body at the decision level; the Board, the executive body; and the Committees were consulting bodies. It is interesting to notice that in this early association is the Andean Pact considered the importance of an independent executive body: "The Board Members (...) will act fasten common interests (...) and will not ask for, or will accept instructions from any government, national or international entity." (Art. 14, Andean Pact. 1969)^[10]. It is also noteworthy the contradiction between declaring an independent executive body, and attaching it to a decision-making body that represent the governments of its members states. That fact shows that since its beginning Member States were reluctant to pool sovereignty or to create real supranational bodies.

The decision-making process of the Andean Pact was based, with some exceptions, as its precedent in LAFTA, on voting with two-thirds majority, and the absences counted only as abstentions. That system allowed fast decisions and leaves no space for extreme negotiations, but leaded to some political unpleasantness. The two-thirds rule was changed with the Andean Community to a decision system based on consensus.

This first stage of South American integration blocs is considered to be influenced by the "Latin American Regionalism", where the integration processes were just an extension of protectionist and nationalist policies.^[11] Therefore, in 1970, the Foreign Direct Investment (FDI) was regulated, restricting its entrance to some industrial sectors, considered enough supplied by national investors.^[12] In addition, there were settled industrial programs to foster the complementarities between national industrial sectors and a minimum common custom was introduced. This "introverted, even autarkic"^[13] restrictive strategy related to the FDI and Transnational Corporations (TNC) caused that Chile -more in favour to FDI- left the Andean Pact in 1976.

The Protocol of Arequipa (1978) prorogued in three years the implementation of the Customs Union and created the concept of Customs Frame, the economical crisis of the middles of the 80's, stagnated the integration process because the Andean Member States adjusted their policies to protect their own economies. By the end of 80's, the intra community trade was only 4% of the total trade and in 1987, the protocol of Quito ruled over the schedules for the Customs Union and provisioned for gradual policies harmonization and economical and social cooperation.^[14] These efforts sought a rapid and comprehensive integration, but the lack of commercial, financial and infrastructural ties did not support that kind of initiatives. In addition, the emphasis on tariff reduction as the principal mechanism of integration was misplaced when non-tariff obstacles accounted for a large share of trade barriers.^[15]

In this context, the 'Strategic Design for the Orientation of the Andean Group', during the Presidents' Summit of Galapagos 1989 presented that "there is a noticeable general trend toward economic opening aimed at, among other things, exposing the productive system to the rigors of competition and inducing increased levels of competitiveness"^[16]. The idea was to leverage the national competitiveness by opening the markets. That summit also established that the most restrictive provisions, should be phased out; and a free trade zone would be in place by December 1993 (1995 for Bolivia and Ecuador), with a small list of exceptions and that, a customs union would be established by December 1997 (1999 for Bolivia and Ecuador).^[17]

This new perspective of market opening in regional integration was in line with the European Common Market (1986), the creation of the European Union (1992), and the "Open Regionalism"^[18] or "Neo (Latin American) Regionalism" thinking, that hold regional integration as a path to world's integration^[19]. This new direction of the integration process brought advances in the development of the Free Trade Area (FTA) and the Customs Union. In addition, FDI regulations were changed to national level. With these changes, the intra community trade rose up to 12% in 1997.^[20] Later, the protocol of Trujillo (1996) defined a new stage.

From the Andean Pact to the Andean Community (1996)

With this new way of understand the regional integration process, it was necessary to change the political structure of the Andean Pact. The Protocol of Trujillo (1996) added nine new institutional bodies and established the Andean Community (CAN). The institutions of the Andean Integration System (AIS) were set up as follows:

- Presidential Council, the highest decision-making level,
- Council of Foreign Ministers, referred to external relations and sub-region issues,
- Andean Community Commission, (formerly "Commission of the Cartagena Agreement"), represents the Andean Community, its decisions are referred to trade and investment,
- Andean Parliament (1979)
- Court of Justice of the Andean Community, (formerly "Court of Justice of the Cartagena Agreement", 1979)
- General Secretariat (formerly "Board of the Cartagena Agreement"), the executive body, that shall act in behalf of the sub-region as a whole and "may not carry out any other activity during his term of office; nor shall he seek or accept instructions from any government, national institution or international organization".(Art. 32, Cartagena Agreement; 1969, modified in 1997)
- Consultative Council on Business, Labour and Cultural Affairs,
- Andean Development Corporation (On Spanish CAF, 1968)
- Latin America Reserve Fund

Other secondary bodies of the Andean Community were the Andean Promotion Fund, the Simon Bolivar University, the Simon Rodriguez Group (1973), the Directorate of the Andean Integration System, the Andean Subregional Association of State Telecommunications Companies (ASETA, 1974), and the Andean Satellite Telecommunications Organization (OATS, 1988)

With the creation of Advisory Councils for Business, Labour and other specific topics, as well with the Andean Parliament and the Andean Community Court of Justice, with its headquarters in Ecuador, and the Simon Rodriguez Group, a forum for social and labour discussions, presented an Andean Community more open to inter cooperation, democratic and impartial. The Andean Community was -indeed- embedded with the 'Neo Regionalism', a wave of thinking that consider the regionalism an option to promote international competitiveness among its members and to increase their negotiation power with industrialized countries, and if the negotiations fail, at least there will be a wider regional market.^[21] That influence can also be observed in its new political objective: "(...) to promote the balanced and harmonious development of the Member Countries under equitable conditions, through economic and social integration and cooperation; to accelerate their growth and the rate of creation of employment; and to facilitate their participation in the regional integration process, looking ahead toward the gradual formation of a Latin American Common Market". (Art. 1, Cartagena Agreement, 1969). Economical and social are instruments for social development, rather than a target by themselves.

The Andean Letter for the Promotion and Protection of Human Rights (2003), the Machu Picchu Declaration for Democracy, Indigenous' Rights and the Fight against Poverty (2001), and later the Additional Protocol to the Cartagena Agreement for "Commitment of the Andean Community for the Democracy" (2000) are examples of the widening of the scope of the Andean Community. This latter Additional Protocol is another sample of the character intergovernmental of the Andean Community, where in case of an interruption of the democratic order in a Member State, the Foreign Affairs Ministers Council will decide about the suspension of that Member State in the Andean Community, but with the prior inter-consulting and agreement of the other Member States. (Art. 3°-4° of the Additional Protocol to the Cartagena Agreement for "Commitment of the Andean Community for the Democracy", 2000)

In the decision making process, as was mentioned before, the voting system was changed to decisions adopted by consensus, i.e. unanimity, or majority with no opposition. The three-quarters system could have allowed faster decisions, but the consensus was aimed to ensure that every state could express its opinion and it could not be over voted.

Nowadays, the Andean Community groups Bolivia, Colombia, Ecuador and Peru, after the withdrawal of Chile in 1976, the accession of Venezuela (1973) and its later withdrawal (2006) due to political disagreements regarding the negotiations of Peru and Colombia towards a Free Trade Area with USA^[22] (its effective retirement will be in 2011); and the interruption of the Free Trade Area of Peru (1992) due to its high commercial unbalance, and the agreement of a progressive plan to rejoin the group (19970 scheduled until 2005. This plan allowed Peru to keep its own tariff system while it was looking for expands its market with bilateral negotiations.^[23]

Regarding the economic integration, the first convergence criteria for the harmonization of macroeconomic policies was approved in 1999; when the III meeting of the Advising Council of Economic Ministers settled a reduction on annual inflation to one digit (Since 2006, the present goal is 5%). In 2001, the V meeting of the Advising Council defined two additional criteria: (i) the Non financial deficit of the public sector shall not exceed 3% of the GDP; and (ii) the balance of the internal and external debt of the public sector shall not exceed 50% of the GDP, but in this latter case, each country shall define its fulfilment schedule, not longer than 2015.^[24]

Since the Cartagena Agreement, the intra-group trade rose up from $143 million (1969) to $ 213 million (1974)^[25] ; to $ 48 billion (2002)^[26] ; and to $ 76 billion (2007).^[27] Nevertheless, some authors underestimate the economic importance of the intra-group trade, like Jovanović (2006) that, qualifies it as 'very little', because that it was only 5% (1974) of the Andean group external trade and refers to the failure to "distribute benefits equally"^[28]. The real importance of the internal trade could be better understood by analyzing its composition: In 2008, the total amount of Peruvian exports were $31,594 million, and $2,711 million (8,6%) of them were to the Andean Community. It could seem 'very little', but disaggregating the Peruvian export composition we found that, from those $31,594 million, $ 23,796 million are Traditional Exports (oil and minerals, mostly managed by TNCs) and the other $ 7,543 million are Non Traditional Exports (NTEs), and then, the $2,711 million of trade from Peru to the Andean Community are 36% of the NTEs, mostly managed by national investors^[29]. Then, the intra group trade becomes a successful instrument to leverage national companies to foreign markets.

Finally, it is necessary to remark that the Andean Community was never intended to be a replacement for the LAFTA, neither in the beginning, when it was the Andean pact, nor with it became the Andean Community. That can be clearly noticed when they consider it itself as a sub region of Latin America. "It is the Commission of the Andean Community’s responsibility (...) To ensure harmonious compliance with the obligations set out in this Agreement and in the Treaty of Montevideo of 1980" (Art. 22, Cartagena Agreement; 1969, modified in 1997).

From the LAFTA to the Latin American Integration Association (LAIA, 1980)

Meanwhile, the LAFTA continued its development and with the Treaty of Montevideo (1980), Member States agreed in a new attempt of regional bloc: the Latin- American Integration Association (LAIA, or ALADI on Spanish). Due of the slow progress in the first attempt of a Free Trade Area in the region, this document was a framework treaty, with the purpose of reach a "regional preferential customs", i.e. bilateral agreements that apply only to the signatory countries and countries that later could officially join the agreements.^[30] It also included special conditions for less developed and landlocked countries.

The results on trade were not as good as they were supposed at the beginning, the LAIA Treaty was qualified of haven "slightly better but still unremarkable results"^[31]. Member States were not too interested and there were few bilateral agreements and fewer attempts to enforce them. One of the reasons this Treaty did not success was probably it own freedom to every kind of multiples kind of agreements and their juxtaposition.^[32] Besides the strong asymmetries existing within LAIA's Member States, a commercial area with multiples member states and multiple customs barriers due to particular bilateral agreements, could bring situations of re-exporting goods, with prejudice to the last country. A chaotic trade situation, where goods exported from a first country to a second one with low custom tariffs, are later re-exported to a third country that has not commercial preferences with the first one. Then the third country is losing the taxes of this trade and probably also the industrial sectors that its customs barriers try to protect are affected, increasing and worsening the economical asymmetries.

The Montevideo Treaty of 1980 established all the headquarters of LAIA political bodies in Montevideo, Uruguay. The Treaty also established the Council of External Ministers, as the main political and decision-making body in the structure of the LAIA, the other political bodies are the Conference of Evaluation and Convergence and the Committee of Representatives; and finally, the executive body of the Treaty is the General Secretariat. The decision system for the high political issues continued remaining on the consensus, with at least two-thirds majority voting, no opposition and considering absences as abstentions. As was mentioned before, that kind of decision-making process avoids situations of hard negotiations and allows faster decisions.

All the other precedent attempts to create a regional or sub-regional blocs were intergovernmental rather than supranational initiatives, and the LAIA process was not the exemption. The Treaty included provisions regarding the character of independence of General Secretariat, as executive body, from any national influence on its decisions, but again, it was attached to the decisions of the main political bodies, which were attached to the interests of its Member States. Furthermore, with the LAIA integration process based, unlike the others, on the signature of bilateral agreements, a General Secretariat becomes a too little institution to manage them, but considering the high political and economical asymmetries of Latin America at that moment, a supranational initiative becomes unthinkable.

Due to its wide scope, whit provisions for cooperation in technical, cultural and environmental, and the multiples bilateral possibilities, the LAIA Treaty was not a commercial success. In spite of that, it reached some achievements in fields of transport and communications integration, and was the basis for other sub-regional integration process attempts, like the MERCOSUR.

The Southern Common Market (MERCOSUR, 1991)

Between 1969 and 1990, the integration processes in Latin America presented several reasons for failure. First, as the process of liberalization was conducted product-by-product, instead of a broader liberalization, there were several exemptions in important fields; second, in most of the Member States remained protective measures, affecting the competitiveness of their national industries; and third, there was little scope for efficiency through the exploitation of economies of scale.^[33] Those economics exemptions were not present in the Integration, Cooperation and Development Treaty (1989) signed into the framework of the Treaty of Asunción (1980) by Argentina and Brazil, where these countries agreed to have a Free Trade Area and a Customs Union in a time framework of ten years.

Fig. 2.3 The Southern Common Market (MERCOSUR)

illustration not visible in this excerpt

Source: According to section 2.1. Elaboration León Li, J.M.

The political structure of the Integration, Cooperation and Development Treaty (1989) provisioned only for an Executive Commission, formed by four ministers from each State Partner and co-presided by the two Presidents, the work of this Commission should be coordinated with the Foreign Affairs Ministers and the Commission could call technical commissions for specific purposes. This structure could work more efficiently than the previous attempts because of its small size, its co-presidency system, and its clearly defined objective: the total suppression of the custom barriers. Two years later, and stemming from the Treaty between Argentina and Brazil, the governments of Argentina, Brazil, Paraguay and Uruguay agreed to create the Southern Common Market -MERCOSUR- with the Treaty of Asunción (March 1991).^[34]

As the other sub-regional attempts, it was included in the framework of the LAIA and since its beginning was intended to be a commercial agreement; in this case, it was much easier due to the commercial trade movements that were already in place. The Treaty of Asunción aimed for the establishment of a common market with free circulation of goods, services, capital and workers from January 1995; the establishment of a customs union and common macroeconomic policies and law harmonization among its members.

After the modifying Protocol of Brasilia (1991), the Protocol of Ouro Preto (December 1994) and the Protocol of Olivos (2002), the MERCOSUR institutional structure was established as follows:

- The Council of the Common Market (on Spanish CMC), consisting of Ministers of Foreign Affairs and Ministers of Economy (1991), as high political body;
- The Common Market Group (1991), as executive body;
- The MERCOSUR Trade Commission (1994), is responsible for the safeguard of the effective application of the common trade policy instruments,
- The MERCOSUR Parliament (2005), replacing the Joint Parliamentary Commission (1994),
- The Commission of the MERCOSUR Permanent Representatives and its President (2003),
- The Permanent court of Review of the MERCOSUR (2002), as a judicial body for the instruments and norms of the integration process;
- The MERCOSUR Secretariat, an administrative body, with limited technical functions.

The modifying Protocol of Ouro Preto included secondary institutional bodies, to foster dialog and consensus among political institutions: the Economic and Social Consultative Forum, an advisory body for civil society that can issue "recommendations"; the Consultation and Political Consensus-Building Forum, to contribute to the consolidation of MERCOSUR political dimensions; and the Administrative Labor Court, a jurisdictional body to resolve administrative complaints of MERCOSUR officials.

The MERCOSUR uses the FONPLATA as financial institutions; FONPLATA (Financial Fund for "de la Plata" Basin Development) was created in 1969 with the "De la Plata Treaty", between Argentina, Bolivia, Brazil, Paraguay and Uruguay

In 1996, Chile was the first country that signed the "Association Agreement", favored by political and economical factors, especially for the high investments of Chile in MERCOSUR. The same year, after hard negotiations, Bolivia -looking for overcome its landlocked situation- signed an Economic Cooperation Agreement with the MERCOSUR, which was looking to use Bolivian energetic resources.^[35] Peru became an associated member in 2003^[36], and Colombia, Ecuador and Venezuela in 2004.^[37] In 2006, this latter country applied to become a full member of the MERCOSUR, the Protocol of Adhesion was issued by the CMC and approved by Argentina and Uruguay Congresses, but still having delays in Brazilian and Paraguayan Congresses.^[38]

The intergovernmental character of the MERCOSUR, expressed in the Council of the Common Market, allows negotiation between governments to solve disagreements, but influences the performance of the technical bodies, like the MERCOSUR Trade Commission; where one of the main problems is that the officials participating in the Technical Committees are unable to make their opinion independent from the mandate of their government.^[39] MERCOSUR continued as an intergovernmental scheme of the previous integration processes, keeping the decision making procedure in the consensus, but with a slight variation, decisions must be done with the presence of all member states. With its intergovernmental character, MERCOSUR had the goal of making the integration scheme more flexible and gradual, without a supranational or autonomous bureaucracy. This can also be found in the conflict resolution procedures, "characterized by the search for diplomatic or negotiated answers, rather than solutions based on rules, with an intergovernmental-type institutional design in which those that negotiated or litigated were the States themselves, with individuals maintaining a marginal function".^[40]

While the the Integration, Cooperation and Development Treaty (1989) was intended to be the basis of a wide cooperation, the MERCOSUR was created as a common market, nevertheless, like the other sub-regional blocs, MERCOSUR widened its scope to democratic affairs. During the negotiations of the Protocol of Ouro Preto, a 'Democratic Clause' was proposed. It was not included in the Protocol but presented in the "Communication of Ouro Preto" (1994) according to that agreement, any interruption in the democratic system of a Member States will mean the suspension of the MERCOSUR membership.^[41] After the attempt of Coup d'etát in Paraguay in April of 1996, This democratic conditionality became part of the "Protocol of Ushuaia for a Democratic Commitment" (1998)^[42] and was signed by MERCOSUR members states and by Bolivia and Chile, associated members since 1996. In that Protocol, they recognize "…the validity of the democratic institutions is an indispensable condition for the existence and development of the integration processes, and that any alteration of the democratic order constitutes an unacceptable obstacle for the continuity of regional integration process".^[43] MERCOSUR Democracy was threatened in 1999, 2002, 2003 and 2005; but that Clause was respected.^[44]

The MERCOSUR can be considered the most successful integration attempt in Latin America but still have failures: the increase in the intra community trade after the Treaty of Asuncion is undeniable, from 10% in 1990 to 25% in 1997, with a reduction to 20% during the crisis in 1999, but the absence of a centralized institutional body (blocked by Brazil) allowed situations like the Brazilian devaluation of 1999, that reduced the competitiveness of the Argentinean industry in 40% threatening a tariff war between Argentina and Brazil;^[45] or the high development of Brazilian and Argentinean industries, under developing Paraguayan and Uruguayan economies. Another failure is the scarce or inefficient progress made in the integration of services and factors of production.^[46] In addition, whereas the EU integration is drove by transnational transactors, national governments, the European Commission and the European Court of Justice; and these institutions are also a product of the integration process, in MERCOSUR the spillover of the integration process relays only in the political will of the governments because there are not supranational institutions, and transnational actors are weak and have low interdependence.^[47]

Other Latin American integration processes in the framework of the LAIA

In the second half of the 20th Century, there were other integration processes related to the UNASUR; the CARICOM and the Group of the Three (G-3) are the most important of them.

The Group of the Three (G-3): In 1994, Colombia, Mexico and Venezuela agreed to have -with some exemptions- a FTA in 2004. This agreement was more political than commercial: Colombia expected to have a bridge to join the NAFTA; Mexico, the most developed country in that group, was looking to present the benefits of the NAFTA; and Venezuela was trying to show signals of political stability. The structure was intergovernmental coordination, and the negotiations were intentionally more commercial than cooperative.^[48] Finally, Venezuela withdrawal of the G-3 in 2006, complaining about the few benefits received and that the FTA between Colombia and USA threatened the Venezuelan industry.^[49] Venezuela could have had reason in the Colombia-USA FTA consequences; nevertheless, they could have decided to leverage their national industry, instead of setting barriers; that decision is an example of how political will of a member state does shape the integration process, even whit an important trade between Member States. The G-3 continued its operations without Venezuela and announced the sought for new members.

The Caribbean Common Market (CARICOM): The first attempt to have a Caribbean Common Market was the West Indian Federation (1958-1962); it failed, but in 1968, the English-speaking countries started the Caribbean Free Trade Area (CARIFTA) that later became the Caribbean Common Market (CARICOM). Guyana and Surinam signed in 1973, among other Caribbean countries, the Treaty of Chaguaramas; it objectives were to promote economical integration, to coordinate foreign policies and to have a functional cooperation among Member States. The structure was also intergovernmental and established different treatment for More Developed Countries (MDC) and Less Developed Countries (LDC). Venezuela signed in 1992 a commercial agreement with CARICOM, and Colombia did the same in 1994. The main issue in both agreements was the trade, and the administrative mechanisms were Joint Councils. The CARICOM, like the others Latin American integration processes, started with protectionist custom barriers and later became a more open sub-regional bloc, but never changed its mainly commercial nature.^[50]

From the South American Community to the South American Union of Nations (UNASUR)

Fig. 2.4 The South American Union of Nations (UNASUR)

illustration not visible in this excerpt

Source: According to section 2.1. Elaboration León Li, J.M.

In 2000, in the framework of the celebrations of 500 anniversary of Brazilian Discovery, the presidents of Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Surinam, Uruguay and Venezuela, met in the First Summit of South American Presidents, and agreed in a "Declaration of Brasilia" in favour of peace, integration, trade, democracy and technology. Pragmatically rather than rhetorically, this new attempt to a regional agreement recognized that the infrastructure was the basis for a deeper integration process. Therefore, it was created the Initiative for the Integration of the South American Regional Infrastructure (on Spanish IIRSA) a technical institution, with the support of the Inter-American Development Bank, and the financial institutions of CAN and MERCOSUR: the Andean Development Fund (CAF) and the Financial Fund for "de la Plata" Basin Development (FONPLATA). The IIRSA received more support and priority in the Second Reunion of South American Presidents (2002) hold in Guayaquil, whit the "Consensus for Integration, Security and Infrastructure for Development" (2002), a commitment for peace and disarmament, democracy and governability, and especially with the necessity of continue the development in infrastructure. Other points of this document were the strategic importance of energy management and the promotion of the investment in the development processes. Both cases present a functional approach, with interdependence and the common infrastructure, rather than an institutional basis for regional integration.

The South American Community of Nations (on Spanish CSN) was approved in the Third Summit of South American Presidents (Cuzco, 2004), establishing six priorities: (i) political harmonization; (ii) convergence of the Free Trade Area among MERCOSUR, CAN, Chile, Surinam and Guyana; (iii) physical, energy management and communications infrastructure integration; (iv) Rural and Agricultural policies harmonization; (v) Technology transfer and cooperation in science, education and culture; and (vi) interaction of companies and civil society in the integration process. This declaration of priorities reveals a political will of continuing the integration processes by functionality: trade policies plus integration infrastructure and private actors.

At that point, the CSN remained as an intergovernmental space for coordination, with the Summit of Presidents as the high decision-making political level, the Foreign Affairs Ministers Council as a coordinating body and different Ministers Councils according to specific topics. In the set up of its priorities included the political dialogue, the infrastructure integration, environment, energy integration, financial instruments, asymmetries, social cohesion and telecommunications. The list of priorities shows that regional integration has geopolitical rather than commercial reasons, and a comparison of the internal trade volume of the CAN (9 000 US$ Million/year) and the MERCOSUR (150 000 US$ Million/year)^[51] can easily confirm it.

After this declaration of political will, the "2005 Summit of the South American Community of Nations" in Brasilia, declared the intention of a South American integration based in the association of the CAN and the MERCOSUR and the other countries not involved in these blocs. Nevertheless, even in the framework of a clear objective of social cohesion, to pool the political will of 12 countries always brings political disagreements. In the case of the CSN, the hardest discussions were regarding the political orientation of the new integration process and -because of the strong trade orientation of its precedents- if the new agreement should be based on the CAN and the MERCOSUR structures, or it was necessary to have a completely new one.^[52] The presidents called a "Strategic Commission for Reflexion" to overcome those disagreements.

That "Strategic Commission for Reflexion" stressed the necessity of integrated institutional solutions to respond the present global circumstances and to have a better competitiveness of the region in the world^[53]. The regionalization process was not anymore an instrument to protect its Member States from the foreign world; it is an instrument to foster their participation in the external trade. This new stage in the integration process is in line the "Open Regionalism" or "Neo Regionalism" wave of thinking in Latin America after the 90's, the traditional freedoms plus coordination and consensus among member states.^[54] Regarding the convergence of the CAN and the MERCOSUR, the Strategic Commission for Reflexion agreed that this new attempt should "(...) include all the achievements and the progresses of the CAN and the MERCOSUR processes, and the experience of Chile, Guyana and Surinam going beyond their convergence. The ultimate objective of this integration is and will be to promote an equitable, harmonic and integral development in South America"^[55] These concepts were used in the Declaration of Cochabamba, in the"2006 Summit of the South American Community of Nations", to define a new model of integration, based in social cohesion, peace and infrastructure integration. Together with the fact that the economic integration became just an item among others, it is noteworthy to remark that this Summit included the concept of South American Citizenship, and the goal of recognition of civilians, political and labour rights from the nationals of a Member State in another Member State.

In 2008, after one and half year of intense negotiations, the twelve South American countries decided to constitute the "South American Union of Nations" (UNASUR) as an entity with international juridical character. (Art. 1, UNASUR Constitutive Treaty). The Treaty defined its political structure with the Council of Heads of State and Government as the decision making level of the organization; The Council of Ministers of Foreign Affairs, as a coordinative body; The Council of Delegates as coordinative-technical body; and The General Secretariat, as an executive body. The Treaty also differentiated in one main objective related to have integration and union among UNASUR's peoples in the cultural, social, economic and political fields; and twenty-one other specific objectives for the integration. As in the "2006 Summit of the South American Community of Nations", to have a common market became just part of the main objective of socio-economic integration whole aim.

With an intergovernmental structure, the decision making process remains by consensus. Some academics affirm that indeed, in the future UNASUR will turn to a supranational structure, and some others proposed that the creation of UNASUR was the right moment to do it^[56], but nowadays, with the high diversity of political aims from its actors, it is hard to expect that change, even when an intergovernmental structure could mean hard negotiations between member states before reaching an agreement. The emplacement of the General Secretariat, below three Councils of states' representatives, is a clear signal of the intergovernmental character of the UNASUR.

The dependence of the political will in the integration process can also be observed in the Policy Implementation clause; which declares that, any member state can delay sine data partially or totally the application of an approved policy, without preventing it from later joining the total or partial implementation of that policy (Art. 13 UNASUR Constitutive Treaty). This dependence of political will is also delaying the negotiations for supranational institutions, like the UNASUR Parliament and the UNASUR Court of Justice, which still are in the deliberative stage.

III. SOUTH AMERICAN INTEGRATION UNDER THE EU FRAMEWORK

3.1. "NEW REGIONALISM" AND THE FUNCTIONAL APPROACH OF SOUTH AMERICAN INTEGRATION

In despite of the initial success and good intentions of the previous attempts of South-American Integration, all of them had faced stagnation due to strong political and economical disagreements. Those disagreements; like the FTAs with USA signed by Peru and Colombia threatening the disintegration of the Andean bloc; the Uruguayans debates about a FTA with USA contradicting MERCOSUR policy of negotiating as a bloc; or the disagreements regarding the Itaipú Dam, with Brazil blocking the creation of a supranational Court of Justice that could pronounce sentence against it. These among other disagreements could be interpreted as failures of the sub-regional integration, and in a process based on political will and external trade, could be its end. In that context, this new regional attempt, changing the commercial aim for a social cohesion, with cultural, economic and technological dimensions, like the the Initiative for the Integration of the South American Regional Infrastructure (2000) or the South American Energy Council (2007), is a "Fleeing-ahead solution" moving from "open regionalism" to a functional approach^[57].

The expected benefits of the "functional approach" can be divided in Economic, Social and Environmental Dimensions:^[58]

- Economic Dimension: Increase in trade of goods and services, by the integration of new sub-regions; fostering of local clusters, as well as new opportunities for private investments; and increase of the competitiveness, by reducing transport, energy or communication costs, and by the accomplishment of infrastructure requirements.
- Social Dimension: Employment and Incomes, present and future, that the new infrastructure can support; and improvement in life quality, by improving the access to basic services to low income sectors in the area of the new infrastructures.
- Environmental Dimension: Related to Natural Resource conservation and to Environment Quality preservation and improvement, by considering environmental factors in the design, construction and use of the new infrastructures.

As mentioned in Chapter II, the Initiative for the Integration of the South American Regional Infrastructure (IIRSA) is the best example of the Functional Approach for South American Integration, by identifying, coordinating and promoting multinational investment projects, it is possible to reach all the benefits above described. Figure 3.1 shows the development axis that IIRSA is promoting.

Fig. 3.1 South American Integration and Development Axis

illustration not visible in this excerpt

Source: IIRSA Technical Coordination Committee

Ibañez (2000) presented five characteristics for the Latin American "New Regionalism" of the 90's: Diversity, defined by the different aims of the different stakeholders; Overlapping, because all Member are part of two or three different sub-regional blocs; Governmental impulse (policy-driven, instead of a Market-led integration; Private participation, in external trade and FDI; and "Open Regionalism", fostering by liberalizations, selective commercial aperture, institutional empowerment and the participation of public and private sectors in the decision-making process.^[59] Almost ten years of this proposal, the "New Regionalism" in the integration process remains, but the "Fleeing ahead solution" defines a functional approach that influences its characteristics. Therefore these characteristics have slight variants:

[...]

^[1] In this Master Thesis, 'Latin America' will refer to all countries in North- Central- and South-America where Spanish and Portuguese are the official or more common languages, and 'South America' will refer to all the countries located to the south of Panamá. (León Li, J.M.)

^[2] World Trade Organization. Disputes by Country: Argentina as complainant against Brazil, dispute DS355 (Anti-Dumping measures on Imports of Certain Resins). Brazil as complainant against Argentina, dispute DS190 (Transitional Safeguard Measures on Certain Imports on Woven Fabric Products of Cotton and Cotton Mixtures) and dispute DS241 (Definitive Anti-Dumping Duties on Poultry).
[http://www.wto.org/english/tratop_e/dispu_e/dispu_by_country_e.htm; Date of Consult: Jul. 8th, 2009 ]

^[3] All the statistical and demographic data of this section corresponding to 2007 are taken from the Secretariat General - CAN, (2008) "La Construcción de la Integración Suramericana", pp. 69-71. SGCAN. Lima. See Appendix A.

^[4] Wallace, William (1990) "The Dynamics of European Integration", Londres: Pinter, p. 9. Cited by Ibañez, J. (2000) "El Nuevo Regionalismo Latinoamericano en los años noventa", Revista Electrónica de Estudios Internacionales #01[http://www.reei.org/reei1/Ibanezag.reei.PDF Date of consult: Jul 8th, 2009]

^[5] Ibañez, J. (2000) "El Nuevo Regionalismo Latinoamericano en los años noventa", Revista Electrónica de Estudios Internacionales #01[http://www.reei.org/reei1/Ibanezag.reei.PDF Date of consult: Jul 8th, 2009]

^[6] Xenias, Anastasia (2005), "Latin America Free Trade Association". Published in "Globalization: Encyclopedia of Trade, Labor and Politics", Vaidya, Ashish K. (Editor), pp. 647-648.

^[7] Bethel, Leslie (1984) "The Cambridge History of Latin America" Vol. VI, Part 1. p. 212. Cambridge.

^[8] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p. 7. SGCAN. Lima.

^[9] Robson, P. (1971)"Planning and Integration in Latin America", Journal of Latin American Studies. Vol. 19, Issue 02. London. p. 192.

^[10] After several modifications, the original numbering and the latter one do not coincide. For the purpose of this quotation I am using the original numbering (1969), in the rest of this Master Thesis I will use the version approved by the Decision 406 of the Andean Community (1997). (León Li, J.M.)

^[11] Canahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22- p.77. Ed. Agencia Española de Cooperación Internacional, Madrid.

^[12] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p.13. SGCAN. Lima.

^[13] Jovanović, Miroslav N. (2006) "The economics of international integration". Edward Elgar Publishing, UK. p.682

^[14] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p.14. SGCAN. Lima.

^[15] Bethel, Leslie (1984) "The Cambridge History of Latin America" Vol. VI, Part 1. pp. 225-226. Cambridge.

^[16] "Strategic Design for the Orientation of the Andean Group" - Andeans Presidents Summit, Galapagos, 1989. SGCAN. Lima.

^[17] Xenias, Anastasia (2005), "Andean Community". Published in "Globalization: Encyclopedia of Trade, Labor and Politics", Vaidya, Ashish K. (Editor). p.454

^[18] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p.14. SGCAN. Lima.

^[19] Canahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22 p.76. Ed. Agencia Española de Cooperación Internacional, Madrid.

^[20] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p.13. SGCAN. Lima.

^[21] Sanahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22- p.77. Ed. Agencia Española de Cooperación Internacional, Madrid

^[22] Malamud, Carlos (2006) "La salida venezolana de la CAN y sus repercusiones sobre la integración regional". Real Instituto Elcano, Madrid [http://www.realinstitutoelcano.org/analisis/

982/982_MalamudVenezuelaCANMercosur.pdf Date of consult Jul. 20th 2009]

^[23] Xenias, Anastasia (2005), "Andean Community". Published in "Globalization: Encyclopedia of Trade, Labor and Politics", Vaidya, Ashish K. (Editor). p.455

^[24] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" p.82. SGCAN. Andean Digital Library. Lima

^[25] Jovanović, Miroslav N. (2006) "The economics of international integration". Edward Elgar Publishing, UK. p.682

^[26] SGCAN, (2004) "Evaluación de la Dimensión Económica del Proceso de Integración Andino" Pag. 22. SGCAN. Lima.

^[27] SGCAN, (2008) "La Construcción de la Integración Suramericana". p. 66. SGCAN. Lima.

^[28] Jovanović, Miroslav N. (2006) "The economics of international integration". Edward Elgar Publishing, UK. p.682

^[29] Campodonico Humberto (2009) "Nuestros vecinos andinos no eran pigmeos", "Diario La República" Official Website,( Apr 29th, 2009) Lima [http://www.larepublica.pe/cristal-de-mira/24/04/2009/nuestros-vecinos-andinos-no-eran-pigmeos; Date of consult: Jul. 12th 2009]

^[30] OAS, (1995) "Final Report of the Interamerican Seminar of Transport Infrastructure as Integration Factor", Washington, D.C. [http://www.oas.org/dsd/publications/Unit/oea33s/ch19.htm#capítulo iii. asociación latinoamericana de integración; Date of consult: Jul. 12th 2009]

^[31] Malamud, Andrés (2005) "Mercosur Turns 15: Between Rising Rhetoric and Declining Achievement", Published in "Cambridge Review of International Affairs" p.422. Center for Research and Studies in Sociology, University Institute of Business, Social Sciences and Technologies, Lisbon

^[32] OAS, (1995) "Final Report of the Interamerican Seminar of Transport Infrastructure as Integration Factor", Washington, D.C. [http://www.oas.org/dsd/publications/Unit/oea33s/ch19.htm#capítulo iii. asociación latinoamericana de integración; Date of consult: Jul. 12th 2009]

^[33] Melo and Dhar (1992) cited by Laird, Sam (1997) "MERCOSUR: Objectives and Achievements" p. 6. The World Bank, Country Department 1: Latin America and the Caribbean Region.

^[34] Laird, Sam (1997) "MERCOSUR: Objectives and Achievements" p. 7. The World Bank, Country Department 1: Latin America and the Caribbean Region.

^[35] Magariños, Gustavo (2001)"MERCOSUR: Una Unión Económica Emergente" published in "Las Américas sin Barreras", Estevadeordal and Robert (Editors) pp. 22-24. Interamerican Development Bank. Washington, USA

^[36] Decision CMC 39/03: Adhesion of Peru. Common Market Council, Montevideo.

^[37] Decision CMC 42/04: Adhesion of Colombia. Common Market Council, Montevideo.
Decision CMC 43/04: Adhesion of Ecuador. Common Market Council, Montevideo.
Decision CMC 44/04: Adhesion of Venezuela. Common Market Council, Montevideo.

^[38] MERCOSUR Noticias (Feb 20th 2009) "Brasil: comisión aprueba ingreso de Venezuela a MERCOSUR [http://www.mercosurnoticias.com/index.php?option=com_content&task=view&id=20771&Itemid=228; Date of consult: Jul. 14th 2009]

^[39] Pena, Celina and Rozemberg, Ricardo (2005) "MERCOSUR: A different approach to Institutional Development". pp. 3-9. Canadian Foundation for the Americas (FOCAL). Ontario, Canada.

^[40] Ibid, 1.

^[41] About MERCOSUR - MERCOSUR Official Website [http://www.mercosur.int/

t_generic.jsp?contentid=655&version=1&channel=secretaria&seccion=2 Date of consult: Jul. 14th 2009]

^[42] Vasconcelos, Alvaro (2007) "European Union and MERCOSUR". Published in "European Union and New Regionalism", Pag 170. Telò, Mario (Editor) Ashgate Publishing. UK.

^[43] Magariños, Gustavo (2001)"MERCOSUR: Una Unión Económica Emergente" published in "Las Américas sin Barreras", Estevadeordal and Robert (Editors) p. 6. Interamerican Development Bank.

^[44] Saccone, Maria A. (2008) "UNASUR: Visiones desde el MERCOSUR", Published in "La Construcción de la Integración Suramericana". p. 31. SGCAN. Lima.

^[45] Bajona, Claustre (2005)"Common Market of the South" Published in "Globalization: Encyclopedia of Trade, Labor and Politics", Vaidya, Ashish K. (Editor). p. 511.

^[46] Malamud, Andrés (2005) "Mercosur Turns 15: Between Rising Rhetoric and Declining Achievement", Published in "Cambridge Review of International Affairs" 01Oct2005, p. 428. Center for Research and Studies in Sociology, University Institute of Business, Social Sciences and Technologies, Lisbon

^[47] Malamud, Andrés (2005) "Mercosur Turns 15: Between Rising Rhetoric and Declining Achievement", Published in "Cambridge Review of International Affairs" 01Oct2005, p. 434. Center for Research and Studies in Sociology, University Institute of Business, Social Sciences and Technologies, Lisbon

^[48] Zuluaga, S. and Lozano, O. (2001) "El Grupo de los 3 (G-3): Las Negociaciones Comerciales entre Colombia, Mexico y Venezuela" published in "Las Américas sin Barreras", Estevadeordal and Robert (Editors) pp. 163-172. Interamerican Development Bank. Washington, USA

^[49] Malamud, Carlos (2006) "La salida venezolana de la CAN y sus repercusiones sobre la integración regional (2a Parte)". Real Instituto Elcano [http://www.realinstitutoelcano.org/

analisis/982/982_MalamudVenezuelaCANMercosur.pdf Date of consult Jul. 20th 2009]

^[50] Gill,Henry (2001) "CARICOM: Un Análisis de tres Negociaciones Comerciales" published in "Las Américas sin Barreras", Estevadeordal and Robert (Editors) pp. 249-252. Interamerican Development Bank. Washington, USA

^[51] Malamud, Carlos (2006) "La salida venezolana de la CAN y sus repercusiones sobre la integración regional (1ª parte)" p.2. Real Instituto Elcano [http://www.realinstitutoelcano.org/analisis/970/970_Malamud.pdf Date of consult: Jul 20th, 2009]

^[52] Sanahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22- p. 97. Ed. Agencia Española de Cooperación Internacional, Madrid

^[53] Strategic Commission for Reflexion (2006) “Un Nuevo Modelo de Integración de América del Sur. Hacia la Unión Suramericana de Naciones”. Cochabamba.

^[54] Sanahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22- p. 77. Ed. Agencia Española de Cooperación Internacional, Madrid

^[55] Cochabamba Declaration, (2006 Summit of the Community of South American Nations). Cochabamba.

^[56] Solón, Pablo (2008) "Reflexiones a mano alzada sobre el futuro de UNASUR" Published in "La Construcción de la Integración Suramericana", pp.12-14 SGCAN. Lima.

^[57] Sanahuja, José Antonio (2007) "Regionalismo e Integración en América Latina: Balance y Perspectivas". Pensamiento Iberoamericano #22- p. 82. Ed. Agencia Española de Cooperación Internacional, Madrid

^[58] Santa Gadea, Duarte (2008) "Integración Suramericana y Globalización: El papel de la Infraestructura" published in "La Construcción de la Integración Suramericana", pp.53 SGCAN. Lima.

^[59] Ibañez, J. (2000) "El Nuevo Regionalismo Latinoamericano en los años noventa", Revista Electrónica de Estudios Internacionales #01 pp.9-10 [http://www.reei.org/reei1/Ibanezag.reei.PDF Date of consult: Jul 8th, 2009]