A modest snicker went through the international financial community two
years ago when Argentina, Brazil, Paraguay and Uruguay announced they
would form a common market, called Mercosur, by the end of 1994.
Could these nations with histories of military coups, hyperinflation,
corruption and vast amounts of foreign debt actually coordinate their
Byzantine tax, customs, fiscal and monetary policies?
At the time, Felix Peña, a specialist in international law, was
working for the interamerican development bank in Washington. When he
announcement he was returning to his native Argentina to work on the project,,
" I was told I was mad."
Now it does not seem like such a crazy idea. A week ago, the presidents
of the four countries signed an agreement that spell out a complex timetable
for harmonizing tariff, tax and economic policies so that Mercosur, shorthand
for the Southern Cone Common Market, should begin by early 1995.
"Without a doubt there will be a Mercosur," said the 64 years
old Peña, who speak fluent English with a strong Irish brogue.
(He was raised by his Irish mother and Argentine father in a province
of the country where there is a large population of Irish immigrants).
"The whole region is in a great process of deregulation."
Mr. Peña, who has been one of the chief architects of Mercosur
in his role as a senior official in the Argentine Foreign Ministry, has
no doubt why such an agreement is good for Argentina.
A country of 32 million, Argentina offers a small domestic market for
foreign investors. But under Mercosur, building a plant in Argentina would
also provide tariff-free access to Brazil and its population of 150 million.
"We needed to change the magnitude of production in order to attract
capital here," Mr. Peña said. "Once Mercosur is in place,
a manufacturer knows he has a market of almost 200 millions people with
an economy of $ 500 billion a year."
Many bankers in Buenos Aires are warning that Brazil's political instability
- as well as its slowness to deregulate its economy and control inflation-
could fracture Mercosur.
But Mr. Peña takes a plainly optimistic view.
"You have the International Monetary Fund and the banks helping
the Brazilian Government," he said.
"Maybe in the short term you can see some problems, but looking
at the long term, Brazil is changing."