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Historic Antecedents of MERCOSUR and the Challenge of Liberalization
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Historic Antecedents of Mercosur and the Challenge of Liberalization: Shortly after the creation of the European Community, Latin America started its process in working toward regional integration. To remove trade barriers, and ensure the free circulation of goods in 1960, the treaty of Montevideo established the Latin American Free Trade Association (ALALC). Liberalization was starting to flourish; however it proved to be controversial and difficult. The end of 1978 needed a restructuring of the Association. The market liberalization programs starting in the 1970’s (and continuing in the 1980’s in Mexico and 1990’s in Brazil and Argentina) adopted by a number of Latin American countries were meant to improve industrial efficiency which was hampered from developing due to the inward looking Import Substitution Strategies faced by many of the Latin American Governments. Trade reforms were implemented and many of these countries not only joined treaties of regional integration but also engaged in substantial trade liberalization. Privatization and deregulation were measures on the government agendas to increase domestic competitiveness and proceed with the liberalization of trade. Not all agree however with the rapid transition of trade liberalization. In Chile, for instance, one of the first countries to start adopting Neoliberal policies, many of its domestic industries suffered. During liberalization, an effect contrary to stabilization was taking place as more and more firms went to bankruptcy. The costly social effects of such move was taken upon the government, who was unable to meet the with the social burden. The question of how transition should be made is still depending on how fast trade liberalization proceeds.
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