Throughout their history, Argentina and Brazil have competed for supremacy in South America, however, their relations have not always been in a state of tension. Argentina and Brazil have undertaken a number of attempts at sub regional political coordination and economic integration.
Between 1979 and 1982, a discussion for closer integration took place within political elites and the civil society. In 1980, it was thought that the solution to easing the tensions between Argentina and Brazil was found: the signature of the Tripartite Agreement. Agreements on double-taxation and mutual investments were concluded, but the integrationist projects failed started during those years. No discussion regarding a free trade agreement or customs union was ever put forward. The Tripartite Agreement and the accords of 1980 have been regarded as the nucleus of what would be Mercosur. The agreement developed closer relations between civil societies, but did not amount to political or economic integration.
During the 1980s, long term factors, both at the national and international level, provided a favorable climate for Argentine-Brazilian understanding. Nuclear rapprochement between Argentina and Brazil represented a major breakthrough in the two southern countries' unreceptive relationship. The two regional giants had been nuclear rivals since the 1950s when both governments launched parallel nuclear programs. In 1980, discussions led to the signing of the Agreement on Cooperation for the Development and Application, encouraging cooperation and trust on nuclear matters between Argentina and Brazil. In the end, it was differences in the style of military rule and the transition of democracy in the two countries that created discrepancies, generated compatibility of interests, and eventually resulted in the decision to integrate.
Brazil and Argentina started conversations for greater regional cooperation that were formalized at Declaração de Iguaçu in 1985. On July 29, 1986, in Buenos Aires, Presidents Raul Alfonsin of Argentina and Jose Sarney of Brazil formally signed the Argentina-Brazil Integration and Economics Cooperation Program or PICE (Portuguese: Programa de Integração e Cooperação Econômica Argentina-Brasil, Spanish: Programa de Integración y Cooperación Económica Argentina-Brasil). This was the climax of a process that marked a break with previous attempts at regional integration in Latin America.
The objective of PICE was to create a common economic area. Within ten years this area would be gradually establish, through step by step negotiations of Additional Protocols, to the Partial Reach Agreement. By this Agreement, both countries engaged in facilitating the creation of necessary conditions to establish a common market, promote economic complementation, and stimulate investments.
The first step in the creation of a Common Market was taken on March 26, 1991, when Argentina, Brazil, Paraguay and Uruguay signed the Asunción Treaty in Asunción, Paraguay. Under the Treaty, the nations agreed to form a Customs Union named Southern Common Market, commonly known as Mercosur. This union created an integrated regional market whose members were committed to "strengthening the economic integration process by making the most efficient use of available resources, preserving the environment, improving physical links, coordinating macroeconomic policies and complementing the different sectors of the economy, based on the principles of gradualism, flexibility and balance."
The Treaty of Asunción, usually referred as the "Treaty Framework," provided the underlying elements for the creation of the Common Market. The implications of such agreement were the following:
• Free movement of goods, services, and factors of production, by means of the elimination of customs duties and non-tariff restrictions.
• The establishment of a Common External Tariff (CET) and the undertaking of a common trade policy, as well as coordination of positions in economic, trade, regional and international forums.
• The coordination of macroeconomic policies among member countries in the areas of: foreign trade, agriculture, industry, fiscal and monetary issues, foreign exchange and capital, services, customs, transport and communications.
• The commitment to harmonize legislation on the relevant matters in order to strengthen the integration process.
After the Treaty of Asunción, the next step in the integration process happened when the Protocol of Ouro Preto was signed on December 16, 1994. This Protocol amended the Treaty of Asunción with regard to the institutional structures of the economic bloc, transforming Mercosur from a Free Trade Area to a Customs Union.
Encyclopedia of Latin America History and Culture. 2nd ed. Vol. 6. New York City: Charles Scribners & Sons, 2008.
Gardini, Gian Luca. The Origins of Mercosur: Democracy and Regionalization in South America. New York: Palgrave Macmillan, 2010.