Significant Development: Panama’s Bid to Join Mercosur
Panama’s strategic focus is on becoming an ‘Associated State’ of the Southern Common Market (Mercosur), which carries significant implications. This would involve signing a trade agreement with the economic bloc and initiating a consolidation process. Minister of Commerce and Industries (MICI) Julio Moltó underscored that the government’s efforts, under the leadership of President José Raúl Mulino, are aimed at concluding a Free Trade Agreement (FTA) with Mercosur in the next six months before the next meeting of the economic group, as he assured at the installation event for the new board of directors of the Panama Pacific Area Business Association. “The MICI has an exceptional trade negotiations team, which has already been proven. However, we recognize that this is not a task we can undertake alone. We are working closely with the Foreign Ministry to ensure the effectiveness of this process,” said Moltó. He further revealed that rounds of meetings will commence with the ambassadors of the Mercosur member countries to advance the negotiations. The MICI is committed to establishing a conducive framework that ensures Panama reaps the full benefits of this treaty, a testament to our collaborative approach to international trade negotiations. Panama joining Mercosur as an Associated State represents a significant step in enhancing the country’s trade relations.
Parallel Trade Negotiations with China
Concurrently, the Panamanian government is taking proactive steps to resume negotiations for an FTA with the People’s Republic of China, which has been on hold for several years. Moltó reported that a report on the progress made so far is being prepared, signaling renewed optimism for potential trade opportunities. “We are dusting it off. There were five years in which what had been done with China was not touched. I have asked the MICI negotiation team to give us everything that has been done regarding a trade agreement with China, and we are preparing a report for the President of the Republic. This report will play a crucial role in the National Government’s decisions about what will or will not be done with what has been advanced,” Moltó explained, underlining the significance of these upcoming decisions for Panama’s economic future. The effort to resume FTA negotiations with China complements Panama’s broader strategy, including Panama joining Mercosur as an Associated State.
Mercosur Membership Overview
Mercosur, or the Southern Common Market, is a South American trade bloc established to promote free trade and fluid movement of goods, people, and currency among its member countries. The distinctions between being an associate member and a full member involve differences in rights, obligations, and participation in the bloc’s activities. Here’s a detailed breakdown:
Full Member
Membership Rights and Obligations:
Trade Policy: Full members, which include Argentina, Brazil, Paraguay, and Uruguay (with Venezuela suspended), enjoy the benefits of the Common External Tariff (CET) and have a say in setting it. They have a more integrated approach to trade policies and can negotiate in international trade agreements as a bloc.
Decision-Making: Full members participate in all decision-making processes within Mercosur. They have voting rights and influence in shaping the bloc’s policies and strategies.
Regulations and Standards: They must adhere to Mercosur’s common rules and standards, including customs and trade policies.
Economic Integration: Full members are more deeply integrated into the bloc’s economic and political structures. They work towards harmonizing economic policies and regulations.
Political and Economic Integration:
Customs Union: Full members are part of Mercosur’s customs union, which includes a common external tariff and a coordinated trade policy.
Free Trade Area: They benefit from the free movement of goods, services, and factors of production (like labor and capital) among member countries without tariffs or restrictions.
Legislative and Executive Bodies: They are involved in the Mercosur Parliament (Parlasur) and the Mercosur Trade Commission, which handle various legislative and trade issues.
Unleash Your Growth Potential:
Attract Foreign Direct Investment (FDI)
Learn how our proven strategies bring international capital to your organization. Schedule a free consultation today to discuss your unique needs and discover how we can unlock your growth potential.
.
Associate Member
Membership Rights and Obligations:
Trade Policy: Associate members, such as Chile, Bolivia, and others, do not participate in the common external tariff and are not required to adopt Mercosur’s trade policies as fully as full members. They can negotiate trade agreements independently but must align with Mercosur’s trade preferences when trading with member countries.
Decision-Making: Associate members do not have voting rights or a formal role in Mercosur’s decision-making processes. Their participation is limited to observer status in some meetings and working groups.
Regulations and Standards: They are not obliged to adhere to Mercosur’s common rules and standards as strictly as full members. Their alignment is more flexible and often subject to bilateral agreements.
Economic and Political Integration:
Trade Agreements: Associate members benefit from preferential trade agreements with Mercosur but are not part of the customs union. They have access to the Mercosur market but do not participate in setting the standard external tariff or negotiating on behalf of the bloc.
Limited Integration: They must fully participate in the bloc’s political and economic integration processes, such as the Mercosur Parliament or Trade Commission. Their involvement in Mercosur’s internal activities is generally limited.
Conclusion
Full members of Mercosur are deeply integrated into the bloc’s economic, political, and regulatory framework, with significant influence over its policies and decisions. Associate members enjoy preferential trade benefits but do not participate fully in Mercosur’s decision-making processes or internal workings. This structure allows for varying levels of involvement and integration, accommodating countries with different levels of commitment to the bloc’s goals. Panama joining Mercosur as an “Associated State” would grant Panama preferential trade benefits and access to Mercosur’s market without the complete integration and obligations of a full member. As an Associated State, Panama would not participate in Mercosur’s decision-making processes or standard external tariffs. Still, it would benefit from trade preferences and align with Mercosur’s trade policies in bilateral agreements. Concurrently, Panama is also resuming FTA negotiations with China.
Don't Miss Out: Limited Spots Available for Free FDI Strategy Sessions
Foreign Direct Investment can fuel your organization's success. But competition is fierce. Secure your spot today for a free, no-obligation consultation with our FDI experts. Learn how to attract global investment and take your business to the next level.