Integration processes in North America and Latin America. Mercosur

Plan of the lecture:

1. The role and activities of the MERCOSUR.

2. Structure the MERCOSUR institutions.

3. Modern problems MERCOSUR faces today

Questions for knowledge control:

1. Integration processes in North America

2. Integration processes in Latin America

3. MERCOSUR and current issues of IR

The recent institutional developments in the Common Market of the South (Mercosur) rise interesting questions regarding integration attempts in South America. Although Mercosur was originally devised as a clear cut intergovernmental, trade oriented international organization, the creation of the Mercosur Parliament and the Permanent Tribunal of Revision may suggest that the Member States have taken the first step towards supranationalism.

The first objective of this paper is to discern whether Mercosur is really heading towards supranationalism, or whether the Member States are merely creating powerless institutions to prevent the paralysis of integration process. The second objective is to study whether supranationalism is a better solution to Mercosur´s institutional demands, or whether the flexibility of intergovernmentalism may still afford this organization a more suitable institutional structure.

The first chapter will focus on Mercosur as an intergovernmental organization, its current institutional structure and the attributions of its organs. The discussion will be centered on the reasons for adopting and maintaining this structure, and how internal and external politics affect the institutional development of Mercosur.

The second chapter will consist on an analysis of the new institutions of Mercosur: the Mercosur Parliament and the Permanent Tribunal of Revision. This section will focus on the nature of these organs and the attributions given to them, in order to establish whether they have or should have been empowered with certain elements of supranationalism or decision-making authority.

The third chapter will discuss whether supranationalism is a better choice for Mercosur. It will address the possible advantages that supranationalism might bring to the regional bloc, and the current approaches towards institutional development of Mercosur.

This paper will help understand how Mercosur will evolve in near future, whether the new institutions will be able to keep the pace of the regional development, and finally, whether Mercosur will be able fulfill its role in the integration process in South America.

MERCOSUR AS AN INTERGOVERNMENTAL REGIONAL ORGANIZATION

A) INTERGOVERNMENTAL NATURE OF MERCOSUR

Intergovernmental institutions in an International Organization are those composed by representatives of the Member States and where the decision-making takes place by consensus, which implies that each country holds veto power1. In these types of structures, there is no grant of sovereignty to the International Organization. When national Parliaments ratify any decision by the regional decision-making organ, then it becomes binding on the State.

Supranational institutions2 are the ones where decisions are reached by a certain simple or qualified majority. States loose their veto power and are bound by the decision made by the bloc, even if they disagree. The officials that compose supranational organs no longer represent their countries, but instead work for the organization.

In these cases, the relinquishing of sovereignty might be broader than initially expected by the States, as it gives shape to new supranational institutions hierarchically superior to the governmental ones, in efficiency and regulatory power3. They may reduce the risk of possible paralysis, as there is no veto power

At the moment, Mercosur is an intergovernmental organization. Its whole institutional structure rests on the consensual decision-making of the Member States, represented by their executive powers. The original reason for the adoption of this structure at the beginning of the 90s appears to have been its flexibility, as pointed out by Roberto Lavagna4. This left the political negotiation in the hands of the principal actors of the region, the presidents of each Member State5.

The governments of Member States have maintained broad freedom of action, without having to comply with the interests and decisions of any autonomous communitary bureaucracy, detached from the administration and/or internal policy-making process of each country. 6

B) INSTITUTIONAL STRUCTURE OF MERCOSUR

Mercosur was created by the Treaty of Asunción7, entered into by Argentina, Brazil, Paraguay and Uruguay on March 26th 1991. Venezuela joined the organization as a full member in 20068. The Asuncion Treaty originally provided for the creation of two organs with decision-making capacity: the Common Market Council (CMC), and the Common Marked Group (GMC, in Spanish); to which the Ouro Preto Protocol (1994) added the Mercosur Commerce Commission (CCM, in Spanish). They are the permanent intergovernmental decision-making organs of Mercosur, hence they have capacity to issue binding rules, only by consensus.

The CMC9 is the superior organ of Mercosur, and has been given the task of political leadership and decision-making. It is composed by the Ministers of Economy and Foreign Affairs of each Member State, and meets twice a year, although it can call for meetings as many times as it deems necessary. The second meeting includes the Presidents of the Member States. It issues Decisions, which are binding, and Declarations.

The GMC executes Decisions of the CMC, as provided by art. 13 of the Asunción Treaty. The CMG is coordinated by the Ministers of Foreign Affairs, Ministers of Economy and Presidents of the respective Central Banks of the Member States. Its main task is to propose measures in order to achieve the Liberation of Commerce Program, coordination of macroeconomic policies, and negotiation of agreements with third states and other organizations. In order to fulfill its busy agenda, the CMG can form specialized workgroups. The CMG decisions are expressed by Resolutions.

The third organ with decision-making power was not created by the Treaty of Asuncion, but comes from later CMC Decisions 13/93 and 9/94, and was institutionalized by the Ouro Preto Protocol: the Mercosur Commerce Commission. Its task is to deal with issues related to commercial relations between the Member States, and implement common commercial policies. The MCC issues Directives, and is coordinated by Ministers of Foreign Affairs of the Member States.

The Ouro Preto Protocol added two consultive institutions without decision-making power: the Economic and Social Consultive Forum (FCES, in Spanish), and the Joint Parliamentary Commission (CPC, in Spanish), recently replaced by the Mercosur Parliament, a new institution that will be studied in depth later in this paper.

The former CPC had been severely criticized for its little relevance in the structure10. Its original role was to facilitate the legislative acceptance of Mercosur norms that needed Parliamentary ratifications from the Member States. This little relevance led to the creation of the Mercosur Parliament. However, it will be seen that the new Parliament has little more power than its predecessor, which brings several problems and minimizes its relevance in the structure.

The case of FCES is different, as it is the only institution of Mercosur that includes representatives of the private sector in its composition. Its main objective is to follow up, analyze and evaluate the social and economic impact of Mercosur´s integration policies by issuing Recommendations. The FCES is also seen as controversial, and many see it as an attempt of national governments to establish a weightless institution that will appear to allow participation of the civil society. In practice, FCES has been a vehicle for communication ex post facto, more than an active agent in the building of a regional agenda. Moreover, the main channel by which the private sector acts, even regionally, has been through each national government.

Another institution created by the Asunción Treaty, although without any decision-making authority, is the Administrative Secretariat (art. 15), located in Montevideo, which originally had only duties of logistic activities and was responsible for the Archive of Mercosur official documents. The Ouro Preto Protocol gave the Secretariat broader responsibilities and a budget. The most significant attributions were awarded by Res. 30/2002 CMG, where it changed the name to Administrative Secretariat of Mercosur, where it became a technical organ with full operational capabilities.

Finally11, a new organ that would appear to fill the role of a cuasi-judicial power: the Permanent Tribunal of Revision. This organ was created by the Olivos Protocol in 2002, and is intended to guarantee the correct, uniform and systematic interpretation, application and enforcement of the fundamental legal instruments of the integration process and normative framework of Mercosur.

The main concern about the decision-making process in Mercosur is that the relevant organs are composed by Ministers and public officials of their respective states; hence they will have a tendency to act without articulation and take positions for the benefit of their Administrations instead of the Organization. The possibilities of furthering integration through the work of these organs can be compromised with this structure. As Bouzas12 holds, these organs are too conservative, with little initiative and political capacity, due to its hierarchical dependence of its members.

C) THE REASON BEHIND INTERGOVERNMENTALISM: PRESIDENTIALISM

When analyzing the intergovernmental structure of Mercosur, it should be borne in mind that presidents have played a central role in Mercosur since the beginning of the integration, as well as during the different crises in the region. This has led several authors to hold that Mercosur is an extreme type of intergovernmental structure, which they call “interpresidentialism”13. This has allowed domestic Governments more flexibility in intra-Mercosur relations, in a region characterized by tension due to strong economic and social crises. Interpresidentialism has led to a political way of dealing with issues, instead of legal.

De Almeida Madeiros14 explains that, contrary to the Parliamentary traditions of the European Union, the Member States of Mercosur find themselves linked to Presidentialist traditions. Democratic representation exists then in the hypertrophy of the executives, and leaves very little room for legislative intervention. These characteristics and traditions are the ones that have shaped the Mercosur integration.

The role of Member States´ Presidents has been of vital importance through Mercosur´s history, especially in dispute settlement, moments of crises, and also in setting the strategic objectives of the bloc; thus keeping for themselves the sum of political and decision-making power necessary to give impulse to Mercosur when they see fit. Clear examples are the political alliance between Alfonsin15 and Sarney16 when Mercosur was created, or the economic coordination between Menem17 and Collor de Melo18, without any democratic instance or debate over the role of Mercosur in these countries.

In this sense, Damián Paikin believes that parliamentary participation, and even inclusion of other sectors of the civil society, have not originally been impeded by the institutional framework of Mercosur19. Instead, they have been blocked by each country´s political history. Presidentialism is, especially in Argentina and Brazil, a distinctive character of their political composition, history and needs. Through institutional weakness and strong leadership, these countries have been able to pursue short term goals and generate relative consensus that would have otherwise been very costly to achieve.

However. this apparent success can only be explained by the relative size of Mercosur and the asymmetries between the Member States. Mercosur has only been composed by four members20, two of them being of little economic and political weight. The progress of Mercosur has been left to the ability of Argentina and Brazil to agree in economic strategy and foreign policy. Veto power has not really been an issue until now, as sensitive issues have been dealt with by negotiation between the two bigger Members. The inclusion of new Member States21 has brought concerns regarding the way of doing politics between Member States and the relative weight of veto power in Mercosur.

D) THE POLITICS DRIVING MERCOSUR

The development of the institutional structure of Mercosur has been characterized by gradualism, as new organs have been created only as the process has required them22. The Ouro Preto Protocol (1994) introduced no substantial changes in the institutional scheme, and defined Mercosur´s organs as purely intergovernmental. This scheme was devised as a transitory structure, as art. 47 provided for the revision of the structure in future instruments.

This revision started in the year 2000, where the Member States decided to take integration a step further, issuing a document called “Relaunching Mercosur”, followed by the restructuring of the Administrative Secretariat, the creation of a new Dispute Resolution System and a Parliament

Since then, Mercosur has become a political organization. This has created the need to implement substantial changes in the Mercosur infrastructure. Struggles between internal and external political interests have shaped the institutional development of Mercosur.

Mercosur v. Andean Community

On December 8th 2004, presidents or representatives from twelve South American nations signed the Cuzco Declaration, a two-page statement of intent, announcing the foundation of the Union of South American Nations (Unasur)23. The idea behind Unasur is that the potential ability of the entire region to function as a bloc would not only enhance internal trade relations, but would also improve the region’s negotiating position before other regional blocs and world economic powers.

It was decided that Unasur would not create new institutions, but would instead use the existing ones belonging to the two regional organizations that currently function in South America24: the Andean Community (CAN) and Mercosur. These organizations were originally based on liberalization of trade, as was the tendency 20 years ago. However, they have parted ideologically and currently hold certain trade policies that could be deemed irreconcilable for the time being.

Mercosur is an organization with a weak institutional structure, and currently follows a protectionist view of trade. The Member States have certain mistrust towards developed countries, especially after the failure to reach an agreement at the Doha Rounds and the importance of agriculture for these countries. Argentina and Brazil have reached a high degree of cooperation based in the ideological coincidence of their “left-center” governments. This has been accompanied by the inclusion of Venezuela in Mercosur25, with the leadership of socialist Hugo Chavez. Bolivia has already requested full membership to Mercosur, and it is expected that Ecuador, led by left wing leader Correa will follow suit.

On the other hand, the CAN is more advanced institutionally26. Free trade has almost been fully achieved between its members, and its institutions have been working for a long period of time. Colombia is the big partner of the bloc, regionally active and economically healthy. Chile has just become Associate Member, but a request for full membership is unlikely. CAN appears to stand for free trade oriented policies; the member countries believe that liberalization of trade and the conclusion of free trade agreements with the world’s developed countries will ultimately benefit the region.

In this context, Mercosur cannot be seen only as a trade related organization only relevant among its Member States, but should also be considered as the potential institutional instrument for political and ideological integration in South America. This will help explain the institutional steps taken in the last few years as a potential an attempt of institutional harmonization with Andean Community, as well as the possible implications of a flexible system versus a rigid structure of integration.

Smaller v. bigger states

As held by Monica Hirst27, the idea of a supranational structure in Mercosur is defended by the smaller States. The bigger States, especially Brazil, have been closer to the idea of maintaining the intergovernmental structure, having a “light institutionalism”. Their main concern is loosing degrees of relative sovereignty in areas where the communitary aquis would naturally have a growing influence. The intergovernmental structure benefits the bigger states, as the asymmetries between the bigger and smaller states are remarkable. In a system where negotiation is the means of institutional development, the bigger states will always impose their will.

The smaller states prefer the idea of supranationalism in Mercosur, as they have less power of negotiation, thus would benefit from stronger institutionalization. A reliable structure with autonomous bureaucracy dependent on the organization would suggest that the Member States would be in a similar position within the organization. In the current institutional structure the bigger States rely on their negotiating ability and relative size in order to shape agreements in accordance to their short term political needs.

In the long run, as characterized by Mario Midon28, this dichotomy in institutional models becomes into two irreconcilable positions. The institutional evolution of the Organization will depend on the strength of the smaller states to push for gradual supranational elements.

The private sector v. public sector

Roberto Lavagna29 explains that having intergovernmental institutions is not an issue of gradualism or maturity, but one of convenience. In the case of Mercosur, the author singles out several political and economic interests behind each model of integration, which imply certain advantages and disadvantages.

Lavagna holds that it is in the interest of the private sector to have a more stable structure and greater legal certainty over which to establish their investments. These are the sectors that might push towards a greater degree of supranationality. Other interested sectors are the State’s own bureaucracies which might be linked to the integration process and see in these institutions a way to enhance their autonomy and political power.

The intergovernmental system is defended by state sectors; also academic and social actors that believe that in negotiation there can be a greater protection for the more vulnerable sectors and a better distribution of the costs and benefits of integration. In this intergovernmental structure, a country can attend short term needs more easily, and negotiate with another actor and obtain a certain benefit thus balancing the process30.

This is relevant in the context of regional integration in South America, as the state and social actors prevail in Mercosur, while the influence of the private (especially foreign) sector in more powerful in the Andean Community.

D) FINAL REMARKS

As seen so far, Mercosur is an intergovernmental organization, originally trade related. Its decision-making organs are composed by Ministers and officials of the Member States, and institutional development has been based on negotiation and consensus. This structure has suited the Member States, and can be explained by the overwhelming role of Executive Powers of the region.

The launching of the Union of South American Nations has created the need for Mercosur to bridge institutional gaps with the Andean Community. Political discrepancies between the blocs have caused an increase in membership of Mercosur, which could make negotiation more difficult and increase the burden of consensus in decision-making.

The influences of internal and external political actors attempt to give impulse to the institutional development of Mercosur. The demands of the smaller States of the bloc and the pressures of the private sector have created the need for Mercosur to become a political organization in order to avoid paralysis, and develop new institutions that could bring stability and legitimacy to the bloc.

In this context, Mercosur has created new institutions in order to cope with new internal and external demands, and at the same time maintain the presidentialist approach towards integration.

NEW INSTITUTIONS: THE PARLIAMENT AND THE PERMANENT TRIBUNAL

The Mercosur Parliament and the Permanent Tribunal of Revision respond to a need for deeper institutionalization of the regional organization, as well as a shift in the goals of the Governments involved. This change in the ideological and political views of the Member States has led to the belief that Mercosur can be an instrument for political integration.

The new institutions of Mercosur are the first attempt of the organization to have permanent legislative and judicial bodies. The goals pursued by their creation were to legitimize and deepen the integration process, as well as to harmonize and develop the legal framework of Mercosur. It should be noted that both institutions share two main characteristics: they are permanent and have their own bureaucracy, which distinguishes them from other Mercosur institutions.

On the downside, none of them have been expressly granted decision-making power31. The advisory status of these institutions might undermine their role in the balance of power of the organization, and could limit their function in the harmonization and development process of the Mercosur. Moreover, the attributions given to these institutions may not be enough to allow them to fulfill their natural tasks as legislative/judicial bodies of a regional organization.

The attributions of the Parliament and the Permanent Tribunal will help understand how much Mercosur has departed from the intergovenmental system, and how much pressure political groups have been able to exercise against the presidentialist scheme.

A) THE MERCOSUR PARLIAMENT

In a regional integration process, government institutions must consider opening the door to new instances of decision-making which in the past belonged solely to the State. This can provoke an imbalance in the internal structure and foundation of legitimate grant of power. This is the reason why academics32 bring up the idea of a potential democratic deficit33 in the core of Mercosur and concentration of power in the national executive powers.

The existence of this democratic deficit responds to the low participation of the legislative powers in the regional decision-making process. According to Gerardo Caetano34, the institutionalization of integration appears to bare great difficulties to reflect the separation of powers present in each Member State. This has happened because of the “executive oriented” argument that prioritizes celerity in the decision-making process over form and legitimacy of the process.

The fact that a great portion of Mercosur norms have not yet been transposed can be seen as Parliamentary inefficiency, but also as an answer to the lack of consultation procedures with the Executive at the time of decision-making. Non transposition can be interpreted as a political means for the Congresses to take a stand.

The response to this has been the creation of the Mercosur Parliament35, an institution that is meant to bring legitimacy to the decision-making process. The Parliament is part of the institutional structure of the organization, and substitutes the former Joint Parliamentary Commission. It was created by CMC Decision 23/2005, and had its first session on May 7th 2007.

In principle, the Parliament represents the peoples of Mercosur, and its main tasks are the promotion and protection of democracy, freedom and peace. It is expected to play a key role in the development, harmonization and transposition of norms in Mercosur36.

It has been entrusted with the duty to give impulse to sustainable development with social justice, to guarantee participation of the different actors of the civil society in the integration process and encourage the formation of a collective consciousness of civic and communitary values. The creation of the Parliament is expected to contribute to and strengthen the Latin-American integration through the deepening and broadening of Mercosur institutions.37

Structure and Composition

The Mercosur Parliament consists of a sole chamber, and is currently composed by 18 representatives of each one of the Member States38, 72 in total, who have voting power. Venezuela also has 18 representatives, but will not have voting power until its incorporation to the bloc is ratified by the Congresses of Brazil and Paraguay.

This structure will be maintained until December 31st 2010, when each Member State will have to call for special elections in order to choose the new representatives. Starting January 1st 2011, all Mercosur Parliament representatives will be directly elected by the citizens of the Member States. The requirements to become a Mercosur Representative will be the same as the ones established in each Member State for domestic Congressmen, and will be elected by direct, universal and secret vote. The status of Mercosur Parliament Representative will be incompatible with any other elective position.

Still, it is of concern that the basis for the system of regional elections has not been provided for. This is of substantial relevance, as the reason behind the creation of a Parliament was an alleged democratic deficit. The question is then, how to guarantee autonomous representation without duplicating the composition of the domestic Parliaments. Moreover, a budget will have to be assigned to finance campaigns in order to guarantee independent representatives of Mercosur. This may give rise criticisms among domestic politicians and citizens, as they might find it hard to justify more budgetary strains to justify an institution that does have proper decision-making authority.

Finally, it will not be until 2014 that the Parliament will adopt a system of proportional representation. Brazil will have 36 representatives, Argentina will have 32, and the rest will have 18. This is important, as the countries have agreed on proportional representation, usually a sensitive issue, and especially on a region with broad asymmetries between the countries involved.

Attributions of Parliament39

The Parliament is intended to play a significant role in normative harmonization, development, and regional balance of power. The attributionss given to the Parliament define the capacity of this institution to achieve its goals. For instance, in the Andean Community, the Parliament plays no significant role, as it has only power to issue recommendations40.

On the other hand, a successful Parliamentary experience has been the European Parliament. Bearing in mind the historical background and differences in organizational infrastructure, it is worth making a comparative analysis between the Mercosur and the European Parliament’s legislative, supervisory, budgetary and civic attributions.

Legislative Attributions

The main legislative attributions of the Mercosur Parliament are the faculty to propose draft norms41 to the CMC, and the Mandatory Consultation Procedure42.

The Mercosur Parliament can propose drafts of norms to the CMC, which will have to report on their treatment and consideration. The CMC is not bound to give treatment or draft a norm based on these proposals.

The Mandatory Consultation Procedure consists of a duty imposed on the decision-making organs to submit their projects of decisions or resolutions to the Parliament, which will have a 90 day period to issue a written opinion.

Should the Mercosur norm be issued in accordance to the recommendations of the Parliament, such norm will have to be submitted within 45 days to each domestic Parliaments. Then each Parliament will have to give treatment to the norm by a special procedure (to be established by each domestic Parliament) within 180 days.

The mandatory consultation procedure and the faculty to propose draft norms will certainly give the Mercosur normative framework a hint of legitimacy and the domestic special procedures for transposition of Communitary norms. It may allow Mercosur law to develop faster and more smoothly.

However, the recommendations issued by the Mercosur Parliament will not be binding on the decision-making organs or the domestic Parliaments; hence the nature of Parliament is merely advisory. The decision-making organs can choose not to follow the Parliament’s recommendations or proposals. This diminishes the role of Parliament, and brings new no answers to the questions on democratic deficit.

In the European Union, the ordinary procedure for adopting legislative acts is codecision43, where the Parliament is put on an equal footing with the Council of the European Union. On sensitive issues (such as taxation or industrial policy), a special procedure takes place, where the Parliament has merely an advisory role.

This system could not be fully duplicated for Mercosur. In an intergovernmental organization where communitary norms need to be transposed in order to be binding, the creation of a legal body with division of powers at the regional level would just duplicate the functions of the domestic Parliaments44.

It would have been advisable that the Member States had included a grant of sovereignty to the Parliament, at least in non-sensitive issues. When democratic representation is guaranteed, there should be no reason to demand transposition in certain areas. This could create a system with supranational elements and allow a relevant participation of the Parliament in the decision-making process in Mercosur.

Supervisory Attributions

The supervisory attributions refer to the right of control of Parliament over other organs and institutions of Mercosur. The Parliament can request written reports and opinions to decision-making organs, and such requests must be replied within 180 days. It receives bi-annual work-plans and reports from the pro-tempore Presidency. It can issue declarations, recommendations and reports on the integration process, and act for the preservation of democracy in the Member States. It can also request non-binding Advisory Opinions to the Permanent Tribunal of Revision45.

More importantly, the Parliament can receive petitions from individuals regarding acts or omissions from Mercosur organs. The petitions can be examined, and eventually channeled to the competent decision-making organ46. No decision or sanction can be imposed by the Parliament, though.

Again, the lack of decision-making authority compromises the role of the regional Parliament as a counter-balance of Power. In the European experience, the Parliament has major supervisory power47 over the activities of the European Union. It can receive direct petitions of citizens and make the necessary inquiries; it has a right of recourse before the European Court of Justice, and has major oversight power over the Commission and Council.

In order to be effective, the Mercosur Parliament should have decision-making authority, power to approve or reject the projects and results of the other Mercosur organs, power to make inquiries in case of petitions by individuals, and a codecision procedure in order to exercise true influence in the organization.

Budgetary Attributions

The budgetary attributions of the Parliament are merely informative48. It has no saying it its planning or execution. The Parliament receives a yearly report on the execution of the budget by the Administrative Secretariat. It cannot approve or reject such report. The Parliament prepares and approves its own budget, and reports to the CMC.

In the EU49, the Parliament and the Council together constitute the budgetary authority, which decides each year on its expenditure and revenues. On certain cases of compulsory expenditure, the last word is held by the Council.

Budgetary issues are not of great concern at the moment, as Mercosur has a reduced bureaucracy and a small institutional framework. However, when the infrastructure of the organization expands, budgetary strains will become more relevant, and so will the questionings on the execution of the budget. In this scenario, Parliamentary co-decision on the budget would be of great benefit for the development of the Regional integration and institutional development.

Civic attributions

One of the goals of the Parliament is the promotion and protection of democracy, freedom and peace. In order to do so, it has been provided that Parliament will draft and publish annual reports on promotion and protection of Human Rights in the Member States.

The Parliament will also organize meetings with the Economic and Social Consultive Forum in order to exchange information and discuss the development of Mercosur, will have open meetings with representative entities of the civil society and productive sectors, and will develop work projects with the Parliaments of the Member States and other South American States50.

Does Parliament have enough Power?

The creation of a directly elected Parliament in should be deemed as a step forward in the development of the institutional structure of the organization. However, its permanent composition and autonomy are con accompanied by the authority that this institution would require to fulfill its tasks as a proper regional legislative power.

With regards to the representative composition of Parliament, there is uncertainty on how the system of regional elections will be structured, how to guarantee proper representation, as well as the determination of a budget in order to finance campaigns. These issues expose the lack of proper regulation of Parliament composition, which compromises the goal of legitimacy that gave impulse to its creation.

With regards to its legislative and supervisory attributions, the lack of decision-making power leads to the conclusion that the Parliament will have no inherence in sensitive issues. Moreover, the absence of a co-decision procedure and proper supervisory authority over the decision-making organs indicates that the Parliament will hardly play a part in internal balance of powers. However, its declarations, recommendations and reports may bring more legitimacy to the system in non-sensitive decisions, and help improve the rate of transposition of Mercosur norms.

B) THE PERMANENT TRIBUNAL OF REVISION

The Permanent Tribunal of Revision is the head of the system of dispute resolution of Mercosur, the last and only instance of appeals for reviewing awards in inter-State claims51. It is intended to guarantee the consistent and systematic interpretation, application and enforcement of the fundamental legal instruments of the integration process and normative framework of Mercosur52. It is composed by five permanent “Arbitrators”53, one for each Member State and the fifth chosen by consensus.

The Tribunal has also been given the attribution to issue advisory opinions54 when requested by authorized organs of Mercosur or the Member States jointly; and preliminary rulings55 when requested by the domestic Supreme Courts of the Member States. The Permanent Tribunal can decide on the extent of a Mercosur rule when there is a possible conflict with another domestic or communitary rule. These decisions will not be binding56 either to Mercosur organs, Member States or domestic Supreme Courts.

The narrow attributions given to the Permanent Tribunal contrast with the powers granted to other regional Courts. In fact, the Superior Tribunal of the Andean Community can pass judgment on four different types of actions57: Action of Annulment, Action for Breach of Communitary law, Preliminary Rulings, and Recourse for Omissions o Inactivity (of communitary organs). This allows the Andean Tribunal to have a significant supervisory role in Balance of Powers of the Regional Organization, and to substantially contribute to the harmonization of communitary norms. It is an overall approach that appears to be far more comprehensive than the system established by the Olivos Protocol.

This should not undermine the relevance of the establishment of the Permanent Tribunal. It can help unify interpretation of Mercosur norms in inter-state disputes, and may attempt to harmonize the application of Mercosur norms through the persuasiveness of its advisory opinions and preliminary rulings. However, the attributions given to the Permanent Tribunal must be studied in detail in order to establish whether they are broad enough to allow this new institution of Mercosur to fulfill its duties.

Dispute Resolution

The current dispute settlement system of Mercosur was established by the Olivos Protocol in 200258. It is a flexible system of Arbitration that seeks to find amicable solutions for inter-state controversies. Only States can be parties to a dispute. To that end, it sets a procedure of mandatory direct negotiations between the parties, and a second instance of negotiations with the intervention of the Common Market Council59. Should these fail, an Ad hoc Arbitral Tribunal is conformed in order to settle the dispute by issuing an arbitral award60, and may eventually authorize the adoption compensatory measures by the injured State in case of non compliance by the loosing party.

The last instance of the system is the Permanent Tribunal of Revision, which fills the role of an appellate body, with capacity to review questions of legal interpretation61. This function is of great importance for the harmonization of the Mercosur normative framework by unifying interpretation and avoiding conflicting awards.

The system resembles the Andean Community’s mechanism inter-state dispute settlement, which also establishes the right of a State to sue another Member State for “breach of communitary law”62. In this system, a Member State first files a complaint to the General Secretariat, and should the breach be verified, the State can file a suit against the non complying party at the Superior Tribunal of the Andean Community63. The distinctive character of the Andean system is that it gives also standing to the General Secretariat and to individuals64.

By giving standing to autonomous organs, a Regional Organization ensures its own representation before the Tribunal. This is of importance, especially in politically sensitive issues where States would not find it convenient or advisable to sue a fellow Member State. Such a system favors the principles of rule of law and legal certainty..

The case of individuals before the Tribunal is also relevan. When a Member State breaches a communitary norm, it may affect the rights of individuals from a different State. In such cases, these individuals are left in the uncomfortable position of depending on their own States to claim before the Tribunal.

This could explain the recent failures of the Mercosur Dispute Resolution system.. When the only remedy available for a breach of communitary norms is an inter-state dispute, a Member State may choose to bear the political cost of non compliance of an award, especially when the injured party is a smaller State of the bloc65. The lack of standing of Mercosur organs shuts any possibility of a coordinated political sanction. The lack of standing of individuals forecloses the possibility of suing for damages. This has discredited the dispute resolution system of Mercosur, and has pushed Member States to seek relief in other forums66.

Harmonization by Preliminary Rulings

As held by Ricardo Vigil Toledo67, current President of the Justice Tribunal of the Andean Community, the preliminary ruling is a key instrument in the jurisdictional mechanism of a communitary system.

The preliminary ruling system within an integration process works as a cooperation mechanism between a national and a communitary judge, where the latter interprets objectively a communitary norm, and the former applies such norm to the individual case68. The function of the communitary Tribunal is to interpret the legal norm in an objective technical manner, and find its meaning and reach. This system aims to safeguard the uniform application of the law by all judges in the territories of the Member States.

Furthermore, as explained in the majority vote of the Permanent Tribunal’s first Advisory Opinion, the request for Preliminary Rulings (mistakenly named Advisory Opinions69) should be mandatory on the Supreme Courts of the Member States, and optional to lower domestic courts70. A Court of last instance should be obliged to consult to the Permanent Tribunal in cases where a communitary and a domestic norm come into conflict. Although with minor differences, this is the prevailing system in the European Union and the Andean Community.

Unfortunately, this is not the case in Mercosur. The Preliminary Rulings71 system is merely facultative on the Supreme Courts of the Member States; they can simply decide not to consult. This is not a minor detail, as Supreme Courts are the sovereign jurisdictional organ of each Member State, and might be reluctant to relinquish, even in appearance, such sovereignty. This could paralyze the system, leading to a “prisoner’s dilemma” where one Court will not consult unless the other ones do it first.

The Protocol on Preliminary Rulings also establishes that only the Supreme Courts of the Member States are empowered to request the opinion of the Permanent Tribunal72. In practical terms, this means that the lower domestic courts cannot resort to the preliminary rulings system. This is an important flaw, as it makes the system more burdensome and less predictable. It entails the risk that a Supreme Court might decide not to request a preliminary ruling, thus foreclosing the instance.

The Permanent Tribunal has also taken the time to criticize the lack of bindingness of the Preliminary Rulings73. The opinions of the Permanent Tribunal are not binding either to the requesting Supreme Court or to the Supreme Courts of the other Member States. This works clearly against the consistent and systematic interpretation of Mercosur norms. This should not undermine the persuasive power of these opinions, and the high likelihood that Supreme Courts will follow the interpretation rendered by the Permanent Tribunal. However, the objective of the system is not to persuade, but to guarantee the consistent and systematic interpretation of communitary norms in all Member States74.

Advisory Opinions and Exercise of Control

As stated above, Mercosur or its organs have no standing under the communitary dispute resolution system. Hence, the possibilities for the Permanent Tribunal to play a significant role in the internal balance of powers of the organization become very limited.

The Andean system, on the other hand, has established an effective mechanism which provides for two different types of binding actions before the Andean Tribunal in its supervisory role: the Action of Annulment, and the Recourse for Inactivity or Omission of communitary organs.

The Action for Annulment75 can be brought against the Andean Council, Commission or Secretariat, for acts which are contrary to primary norms of the system or when these organs have exceeded their powers. Member States, other decision-making organs and individuals have standing to bring this action. Through this system, the Andean Tribunal plays a major role in inter-organ disputes, and guarantees the coherence between primary and secondary norms.

The Recourse for Inactivity or Omission76 can be pursued when a decision-making organ of the organization refrains from acting in cases where it has the obligation to do so. This would be of great relevance in an intergovernmental system like Mercosur, where consensus is needed. This recourse allows Member States to give impulse to issues that require treatment, but are paralyzed because of an impossibility to reach such consensus.

In case of the Permanent Tribunal, the only instance of supervision is a request for an Advisory Opinions. The power to issue Advisory Opinions has been established by the Olivos Protocol, and regulated by the CMC Decision 37/03. Only decision-making organs, the Member States jointly77, or the Parliament78 are authorized to request Advisory Opinions.

A main shortcoming of the system of Advisory Opinions is their limited application. Inter-organ disputes are quite unlikely to take place in Mercosur, as decision-making organs respond to the Member States and act by consensus. In case of Member State requests for advisory opinions, the requirement of consensus has been imposed; they can only request for Advisory Opinions acting jointly. This makes little sense in an intergovernmental consensual organization, as it forecloses the possibility for States to ask for individual Opinions or exercise pressure on Mercosur organs. Advisory Opinions have only been established to create a veil of legitimacy to non sensitive issues.

Another major flaw is their lack of bindingness. This was pointed out by Dr. Wilfredo Fernandez79 in his dissenting opinion on the first Advisory Opinion issued by the Permanent Tribunal80. His argument was based on the institutional relevance of a declaration of inapplicability of a Mercosur secondary norm. Being the declaration of inapplicability an internal issue of Mercosur that affects the institutional relationship between the decision-making organs, the Tribunal’s opinion should be binding.

Holding otherwise would lead to a serious situation where a secondary norm which was deemed inapplicable by the Permanent Tribunal, and could at the same time be applied and executed by the decision-making organs of Mercosur81. Moreover, he held that such bindingness should be determined by the Permanent Tribunal itself, as it is the organ with the exclusive authority to interpret and apply Mercosur norms. 82

This would be consistent with several Mercosur norms which expressly vest the Permanent Tribunal with the duty to ensure the consistent and systematic interpretation, application and enforcement of the Mercosur legal framework83.

Advisory Opinions could gain certain relevance the case of a request by the Mercosur Parliament, an autonomous body with limited supervisory attributions. However, this may still bring questions on the effectiveness of the Advisory Opinions, which will not be binding on either the requesting organ or any Mercosur institution84.

Does the Permanent Tribunal have enough Power?

Clearly, the Permanent Tribunal of Revision has not been given enough powers to function as a proper regional Judicial Power. The dispute resolution system is inadequate for the needs of a regional organization, as it does not give standing to Mercosur organs or individuals. This leads to the inefficiency of the system, as there will be no defense of the rule of law and no possibility of awarding damages to individuals. Sensitive issues will ultimately be decided by the negotiating power of the parties under dispute.

The Permanent Tribunal’s role in the harmonization of the regional legal framework is also very limited. As requests for Preliminary Rulings are not mandatory to the domestic Supreme Courts, they might eventually choose not to consult. Moreover, the possibility of consultation for lower Courts has been foreclosed. The effectiveness of this system lays only in the good will of the domestic Supreme Courts.

Finally, the Tribunal’s supervisory attributions are close to irrelevant. The intergovernmental structure of Mercosur will prevent any inter-organ dispute, and the fact that Member States cannot individually request for an Advisory Opinions, confirms that Mercosur will only move by consensus.

C) A ROAD TO SUPRANATIONALISM?

The creation of a regional Parliament and a Permanent Tribunal would generally be considered a big step towards deep institutionalization. The existence of new Legislative and a Judicial Powers in any regional organization are certainly not a small matter.

In the case of Mercosur, however, one can deduce by the powers given to these bodies that the Member States have aimed to satisfy political actors, rather than create a reliable institutional framework. They have maintained the flexible intergovernmental structure based on negotiation and relative power. There has been no real commitment from the Member States to make a substantive institutional development.

This does not imply the failure of the new institutions. Partial success in their tasks may be achieved by the persuasiveness of their decisions; the Parliament, because of its potential representative composition; and the Permanent Tribunal because of the academic qualifications and independence of its members. Nonetheless, they will still depend on the willingness of the decision-making organs to abide by their non-binding recommendations or opinions.

The Parliament and Permanent Tribunal might then play a secondary role in the balance of powers in the organization. They may also play an important role in the development and harmonization of the normative framework of Mercosur. The extent of these roles yet remains to be seen.

The Permanent Tribunal has hinted that it could rule on its own authority to issue binding Advisory Opinions (today a minority view). Moreover, the Parliament still has to draft its own Rules of Procedure, which might shape the attributions given to it by the Constitutive Protocol. The relationship between the Tribunal and the Parliament could be of interest, as the latter has the faculty to request Advisory Opinions.

In short, the Member States did not intend to give any substantial power or decision-making authority to these new institutions. Nevertheless, their creation has brought a supranational dimension to the Organization.

IS SUPRANATIONALISM SUITABLE FOR MERCOSUR?

As explained so far, the two major partners of Mercosur have traditionally rejected the idea of relinquishing sovereignty in favor of the regional organization. Institutional development has been moved forward by pressures from the smaller states and the private sector, together with new ideological views on regional integration.

These political struggles have led to the creation of a Parliament and a Permanent Tribunal without sufficient attributions to successfully fulfill their natural tasks in the regional organization. Their creation brings, however, a supranational dimension to regional system, even if it does not result in binding inputs or rights of control.

According to Edward Best85, unless there is a meaningful supranational system in other respects, there may be a mismatch with negative consequences for the overall legitimacy of the regional arrangements. Effective supranational action has to be seen as one level within a multi-level system of governance. It can only be meaningful in practice as an organic complement to the state (and sub-state) level of political organization..

The effectiveness of supranational action depends directly on the degree of interdependence between actors at the two levels86. Some areas of shared interest could be the subject to supranational institutions, while cooperation at an intergovernmental stage could apply to others. This balance could justify the coexistence of intergovernmental organs, together with other supranational institutions, thus providing the necessary flexibility for the system. There should be no need to establish supranational institutions in all areas of regional integration.

Mercosur has yet to establish a multi-level system of governance to support the Parliament and the Pernmanent Tribunal. The circumstance that has prevented the Member States from adopting such supranational elements, is the belief that the intergovernmental structure will provide more short and mid-term advantages than the supranational approach.

A) ADVANTAGES OF SUPRANATIONALISM

The overall advantage of supranationalism is the achievement of credible commitments87. A regional organization can pursue supranational elements as means to enhance the credibility of its Member States relationships, either with the regional organization itself, with other Member States, with third countries, the private international market or their own citizens.

The incorporation of supranational institutions may help advance in domestic and regional interests in areas where there are clear added benefits for all Member States in the long run. A supranational structure may guarantee that everyone plays by the rules, especially in cases where there might be a predictable temptation to cheat in response to short term pressures. In such cases, pooling and delegation88 of sovereignty may become a fundamental structure for building mutual confidence.

This mutual confidence can be fundamental when Member States want to abandon the veto system, creating majority based mechanisms, abandoning the requirement of consensus and reducing the possibilities of paralysis of decision-making organs.

Mutual confidence is also relevant in cases of delegation to “non majoritarian” independent bodies, usually technical or regulatory agencies. In these types of bodies, agreed policies can be maintained for fixed periods of time in order to preserve policy continuity against the changing preferences of Member States. Policy continuity is a necessary condition for policy credibility89.

In the internal relationship between the Member States, the grant of sovereignty is a way to assure that other governments will accept agreed legislation or enforcement, to signal their own credibility, or to lock in future decisions against domestic opposition. Adopting supranational elements within the system may reduce the transaction costs of future interactions simply by institutionalizing the integrative dynamic and negotiation procedure90.

Supranationalism will also be relevant when it comes to reassuring the smaller countries, as their interests will be systematically included in the agenda of the organization instead of being left to the wonderings of the intergovernmental decision-making structure. In this way, the weight of development shifts from relative power of negotiation to a strong legal-institutional system of monitoring and enforcement. This would in turn reassure domestic and foreign investors, as the private sector values credibility and long term stability.

Finally, similar ideological positions can be more easily pursued through supranationalism. Decisions by supranational organs are expected to be shaped by the historical background of the Member States, their relationship, the existence of perceived common external threats, the provision of mutual support, the nature of the relationship between their economies and the existence of regional social links91.

Nonetheless, as advantageous as supranationalism might seem in the long run, it should always be adopted with due consideration of the political characteristics of the region. It must allow the institutional structure to be dynamic enough to satisfy the needs of the political leaders in turn. The question is, in the case of Mercosur, how broad or narrow should a supranational structure be in order to successfully balance the flexibility of intergovernmentalism with the reliability of supranationalism..

B) CURRENT APPROACHES TO INSTITUTIONAL DEVELOPMENT

Most specialists agree that it is necessary to at least review the institutional structure of Mercosur92. It is hard to argue that maintaining a purely intergovernmental structure is beneficial for the integration process, even though Brazil is its main upholder. As Felix Peña93 says, it is easy to visualize that the current rules of Mercosur are not enough to sustain the process in today’s global and regional competitive world, quite distinct from the dynamics of the two previous decades.

However, proposals differ notably, mostly in the degree of depth in integration that they propose, and can be divided in two groups94: deepening of the integration process (there are pessimistic and optimistic views), and the reformists, with a more radical and original standpoint, who start with a certain pessimism about the current state of affairs.

The deepening of current institutions of Mercosur

The holders of this position are authors such a Bouzas and Soltz95, who that insist in pointing out that any advance towards deeper institutional reform has to be, in any case, gradual. In current state of affairs, the proposals for radical reform seem unfit or inefficient to improve the quality of institutional progress of Mercosur. A more effective approach would be to take smaller steps that may allow a more solid improvement in the institutional framework, more believable and accessible. They also bring attention to the fact that it would not be realistic to propose a structural change in the intergovernmental system of Mercosur, as the reforms in practice would not mean a new institutional architecture, but a political choice for introducing chances that respond to the shortcomings perceived by the Member States.

These two authors are not inclined for a new institutional structure at a supranational level, but instead they suggest the creation of mechanisms that could lead to establish credibility and efficiency in the process of integration, improving the quality and technical support of the current decision-making organs of Mercosur.

Felix Peña96 is of the same idea, as he believes a more realistic approach should be taken in the integration process, especially when taking new methodological approaches. He holds that there is hardly any other credible way to advance in Mercosur. This does not exclude the possibilities of adapting to new circumstances. These adaptations are necessary and have the objectives of achieving more transparency, representation and social legitimacy. But differs from the approach taken by Bouzas, as he believes that the necessary steps should be the strengthening the Administrative Secretariat.

In this line of thought, Gonzalez Oldekop97 holds that a new institutional framework of Mercosur is necessary, but does not need to be as deep as the European model, as neither the amount of commerce nor the degree of integration justify such step. However, she believes that if a more advanced stage in integration should be desired, such as a full customs union, certain degree of supranationalism would be necessary. At least two characters of supranationalism should be given to the executive organ of Mercosur: independence and stability of its members. This independent organ should be able to effectively control the application of communitary law by the Member States.

Institutional reform of Mercosur

This is the more creative approach towards advancing the integration process. Defenders of this idea hold that a process of integration such as Mercosur takes only into account the economic aspects, in detriment of the vast options of legitimizing the civil societies of its Member States. According to Iris Laredo98, this presents a dichotomy: on one hand an hegemonic, elitist integration process with a tendency towards maintaining the established structures of power, and on the other hand communitary, inclusive and active integration. To achieve the latter, what these authors propose is that both top decision-making organs, the CMC, CMG and MCC be composed by officials chosen by the Member States, but independent of their Governments; that is, a supranational model of integration.

With regards to democracy in Mercosur, the ideal structure would include a Mercosur Parliament with proper legislative authority by a co-decision procedure, and supervisory authority in order to ensure balance of powers. This would avoid superposition with domestic Parliaments, and would guarantee the effectiveness and continuity of the deliberative institution. It would also give true legitimacy to the decision-making process and may have a chance of solving the democratic deficit in Mercosur.

Also in this line of thought, the creation of a proper Court of Justice of Mercosur would be necessary. This in order to have an institution in charge of control of legality in defense of the rule of law principle, and in charge of harmonizing and producing consistent interpretation and application of communitary law in the different Member States. The Permanent Tribunal of Revision has no sufficient attributions to fulfill this role, as the lack of standing of Mercosur organs and individuals, and the lack of bindingness of its Advisory Opinions prevent this organ to take part in the balance of powers of the organization.

C) THE APPROACH OF MEMBER STATES TO INSTITUTIONAL DEVELOPMENT

The official position of Mercosur regarding its new institutional development was first revealed in the Brasilia Declaration, “Towards a global and participative reform of the Mercosur institutions”, signed December 3rd 200499. It stressed the importance of the creation of the Mercosur Parliament, acknowledging implicitly and explicitly that this new institution would further the debate on integration issues, and would reach a greater part of the political and civil society. This suggested that the Parliament was necessary so that the integration process is no longer perceived as elitist, and that the good will of the Member States would truthfully result in reforms and innovations. It stated that the creation of the Mercosur Parliament is just a part of a broader institutional reform.

The Brasilia Declaration reflected the ideas of those who propose a deepening of the current Mercosur institutions, as it inclined towards an improvement in the transparency, rationalization and democratization of the decision-making process, rather that proposing the creation of any decision-making autonomous institutions. It did not propose any departure from the intergovernmental structure. On the other hand, it appeared to embrace some of the criticisms of the most radical reformists, as the document pointed out the need for consultive organs to have a more effective role in the decision-making process.

In response to these criticisms, the Common Market Council created the “High Level Group for Institutional Reform100” in order to asses the shortcomings of the current system, and propose institutional reforms. By Decision 29/2006, the CMC instructed the High Level Group to focus their priorities on:

a) The restructuring of the decision-making organs of Mercosur, including their competences and subordinated organs;

b) The improvement of the system of transposition, validity and application of Mercosur norms; c) The possible creation of new organs for the implementation of common policies;

d) The optimization the functions and attributions of the Administrative Secretariat, according to the needs of the integration process;

e) The