DP climbed from $650 billion to $990 billion, and direct foreign investment soared from $2.6 billion to $20.24 billion.”(Merco Press 2006)It is the fourth largest integrated market after the European Union (EU), the North American Free Trade Agreement (NAFTA) and ASEAN. Despite the setbacks like devaluation in Brazil and the Argentine crisis hindering the sustained growth of the sector, the bloc continued to move forward. However, the trading block has to face crucial tests with in connection with the Free Trade Area of the Americas (FTAA). .
MERCOSUR the “Common Market of the Southern Cone’ was formed by the Treaty of Asuncion and consists of Argentina, Brazil, Paraguay and Uruguay with Chile and Bolivia becoming associate members. “Its purpose is to establish a common market which would include the free movement of goods, services and factors of production, the elimination of customs duties and non-tariff restrictions, the establishment of a common external tariff and the adoption of a common trade policy, the coordination of positions in regional and international economic and commercial for a and the coordination of macro economic and sectoral policies amongst the member states in the areas of foreign trade, agriculture, industry, fiscal and monetary matters, foreign exchange and capital, services, customs, transport and communications and any other means that may have been agreed upon” (Malcolm Rowat, et al. 1997)
There were several factors connected with the member countries which have stood in the way of the growth of MERCOSUR. While there was a possibility for building up regional integration for the clustering less developed smaller countries around a more developed and larger neighboring country, this advantage could not be taken by MERCOSUR. .This was because the slow economic growth of Brazil is the largest economy in MERCOSUR which was supposed to be the engine for growth. “The development of the region is, therefore, constricted by the inability of Brazil’s economy to unfold its growth potential. Responsibility for the slow progress of regional integration has to be assigned to the lack of dynamics of the leading economy”.