Ciao Bella

Giorno 24

Well this is long overdue, but better late than never I suppose. I’ve been very sluggish in getting this ball rolling. I haven’t been in the writing mood where I just need to document this shit stuff. Its almost like taking pictures. Sometimes the camera just can’t fully capture what your eyes can and all you can do is surrender yourself to the moment and take it in.

Well in a unnecessary metaphor, that is how my time here in Florence has been. There has been so much that has already happened and so much going on, even getting the time to write is a commodity. I’ve probably walked more than I ever have in my life, spent the most money I ever have in my life and started one of the most interesting times of my life.

My first trip was to Cinque Terre and Pisa. As my family has always told me, if you go to Pisa, go to the tower, take a look around, and leave. It’s no Rome trust me. And the crazy thing is, after all the architects had accomplished back then you’d think they would’ve mastered the level and or checking out the land before building over huge deposits of water, hence why everything at the tower is out of plumb. Then on the other hand they could’ve just been drunk and not cared so then again if that was the case, well played gentlemen you inadvertently created one of the most well known monuments in Italy. Cinque Terre was as expected, a smaller, less populated and a uniquely beautiful version of the Amalfi Coast. Cinque Terre was the epitome of a small Italian coastal town smack up on unbelievable cliffs that reminded me of the images in Jurassic Park of the Galápagos Islands.

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My second trip was to San Marino, Riccione and the Misano World Circuit, now known as MWC Marco Simoncelli, named after the amazing young rider that died recently. I went to see the MotoGP on Sunday and to see my dude Valentino “il Dottore” Rossi 9x World Champion ride again. Although he didn’t race like he did last time I saw him in Indianapolis, it was awesome being there on home turf. I don’t know what it is about it but hearing the bikes and watching them fly around the circuit is just awesome. Loved every minute and made me want to ride so bad.

That definitely is a huge craving I’ve had since I got here. I’ve wanted to ride anything on two wheels, even a bicycle and its so frustrating.

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So, now to everyday matters, old business. Life in Florence is interesting. I’ve never seen such a diverse population in my life, between tourists, immigrants living here now and street vendors, it’s ridiculous. I’d say even more diverse than New York City. There are literally like 15 different languages being spoken in Florence at any given time. The ambulances are so goddamn annoying, there are condom dispensers built into buildings like vending machines, I’m convinced the street vendors are being forced to sell the same annoying useless shit because nobody in their right mind would be selling the same shit the guy next to him is, like where’s the competitive advantage chief? I want to know who the hell is the supplier of all this nonsense because they’re making a killing, like where do you get roses every morning? I don’t see a big warehouse full of roses anywhere around here. And there are small closet like stores with random stuff from floss to your latest edition of Playboy, toilet paper, or fine Italian cheese or wine; I’ve now labeled these as 7/11s because I have yet to find one without an Indian employee. They formally have no name, simply “Cold drinks, beer, whiskey, aqua, pasta, wine, cigarettes” is always somewhere on their windows. So, 7/11 it is. There’s your shutout Singh.

I was lucky with my roommates, we are all different. And not to sound corny but I like that because you always need a dude with a third nut or something that’s gonna be the wild card and do we have some wild cards. With the apartment, not so lucky, great location, however too far from the rest of civilization, I call our apartment the IKEA apartment because it is the most bush league Mickey Mouse household I’ve ever had the pleasure of living in. Pot has a hole in it, faucet just falls off, fans don’t work, get replaced and last a week, broken again, shower has a door but instead someone decided a metal quarter inch cable with a shower curtain is much more chic, none of the appliances in the kitchen work and for some reason we have more security on the inside of the house when we’re home than when we leave because there are approximately 5-7 different dead bolts or chains, whatever.

Nightlife is pretty sweet. We’ve made some great friends and met some wild people that ill always remember. And a lot of people that one day I’d love to treat the same way they’ve treated us. It’s interesting how all the places split up the week, there’s never one solid place you can usually go and it’ll be good. You always have to know where the flow is.

School is school, always will be. Reading writing etc. classes are all good and interesting. I’m starting to notice some of the classes are overlapping now and it’s interesting to see how you can bring something from one class to connect to the other and seem outlandishly smart. Unfortunately I have a couple classes that are filled with airheads that either talk but never say anything or nobody answers the teachers questions and create the worst, most painful pauses when nobody raises their hand and I’m always that guy because nobody wants to put themselves out there. Like c’mon who cares if you’re wrong, you seem like more of a douche sitting there looking at the teacher like you just shit your pants or awkwardly avoiding eye contact like you just saw your ex. I feel like I developed that mentality thanks to BC High, literally never gave a shit about what people would think by answering the question and avoiding the painful silence of stupidity.

Nonetheless, anywho, comunque, hopefully ill be traveling a lot more soon. I have intentions of going to Munich for Oktoberfest, Croatia, London, Prague, Barcelona, Paris, Brussels, Berlin, Amsterdam, and hopefully Copenhagen along with a couple domestic visits to family and friends. If anyone wants to come or meet up let me now, I’ll shoot you my tentative calendar. I know it’s ambitions but how many more times may I have the opportunity to do it? I don’t know maybe ill have ten more chances but I’m sure as hell going to make sure I don’t regret it.

Thank you for reading if you’ve made it this far. Tip my hat to you, thank you, grazie.

Ill be posting again soon.

Cheers & Ciao Bella.
M

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Being outside the Bubble

Firstly, Happy Monday.

Over the past week I’ve been reading and hearing a lot of material on this Quantitative Easing by Bernanke etc. How his talk was interpreted was a mess so the Fed’s president spoke to clarify things on how QE would be approached, blah blah blah. And more about how Bernanke was trying to take some of the juice out of the Equity market so it wouldn’t take off without the economy.

Now, 2-3 weeks later, many see exactly what many feared. With the Fed acting the way it is with it’s policies, analysts have found a trend in the last few bubbles. The attached picture explains it perfectly. Whenever the Fed has kept its rates lower than the Nominal GDP, there’s been a bubble. And yes, that is exactly the position we are in now. Image

Many now fear that this bubble whether seen or unseen will either happen now because it has been noticed, thus putting investor confidence in the toilet or will be triggered in a more financial fashion, rather than the Red Scare. However, it’s very interesting. Would now be a great time to buy gold? Markets have been somewhat bullish, the fear of a bubble is setting in unless the Fed changes something, and gold is at record lows.So? Buy gold? I mean, if I could, I would, at least a sufficient amount to maybe collateralize what I have invested in equities? Or go all in and become a millionaire if things go my way. But then again isnt that the whole game?

 

Who knows, just some food for thought. Enjoy your July 4th’s.

 

Cheers.

The Fed. Stocks & Bonds

Buon Pomeriggio.

I recently read this article on bonds and stocks by Michael A. Gayed on MarketWatch.com and found it pretty damn interesting.
Link : http://www.marketwatch.com/story/the-biggest-risk-to-stocks-2013-05-29

A lot of what I’m about to say is going to be reiterating his thoughts, but I though I’d share them with you/ summarize to make it a little bit easier in lay man’s terms.

 

So this smart guy knows that when bond yields go up, stocks start hurtin’. His point is that after last week, after Bernanke’s talk about the Fed’s position and the volatility in Japan this recent confidence and stability is only an illusion. I like the way he’s looking at what the Fed is doing. Gayed stresses that the Fed is simple “confusing and conquering.” By this he means, say something that can be interpreted 100 different ways, say something confident but not too confident, but nonetheless whatever you do don’t get excited.

Now why would he and the Fed do this? The Fed is worried that stocks are gonna start taking off and forgetting about the still struggling economy. By sending mixed messages, the Fed is taking some of the umph out of the somewhat rising stocks. Gayed puts it perfectly saying “they may be able to stop the advance in U.S. averages from getting too far ahead of itself.”

Additionally Gayed also adds that the Fed should really cut down on talks about tapering if they don’t want to deflate the momentum the housing market has recently experienced over the last few quarters.

The position Gayed takes on this is a position I like. Why else would the Fed come out like this? I mean, I’d like to think they aren’t just a bunch of confusing fools and actually have a reasoning for their ways. Additionally, this stock and bond relationship is highlighted perfectly in reference to whats going on now. Preferably, I’d obviously like to see a nice balance, in tandem with the economy. But I think it’s smart that the Fed is doing what their doing so that the market doesn’t trip on its shoelaces once people realize the economy isn’t so great.

 

Enjoy the rest of your day!

 

Arrivaderci.

Globalization Theory

Buon Giorno.

Recently got out of the daily 9AM trade floor meeting. I was so tempted to bring up this little theory that I’ve developed over the past couple months; patents pending. However, in a room full of geniuses, I didn’t say anything in-case someone found it utterly stupid for “the intern” to put his two cents in, especially if my little idea was already known.

 

However, during the last couple weeks of school, on April 29th. I went to a talk at Brown University that involved a couple former Latin American Presidents. One was Ernesto Zedillo Ponce de León, a Mexican economist and former president of Mexico from December 1, 1994 to November 30, 2000.

Approximately a month before, I had given a presentation on the reality of Brazil as an emerging market among the BRICs and if it was actually leading the BRICs, aka fulfilling the economic prophecies. My findings led me to an article that helped me formulate my presentation. It, among other sources, pointed out that Brazil was underperforming and it’s as simple as that. It was not leading the BRICs and had under-preformed during the last few quarters.

So the question is, why? Well, my theory or as I call it, phenomenon, is that of globalization’s impact on emerging markets. The world is no longer flat. We know in a matter of seconds what is going on with the Nikkei over in Asia and milliseconds whats going on with the FTSE in London. Between the critics, the analysts, the media and speed that information travels today every move is speculated and known instantly. The connectivity is truly unbelievable between markets. With this integration of markets, an emerging economy is killed by it’s own hype. The analysts, speculators and media kill the potential of these emerging economies. Former President Zedillo coined the concept perfectly during his talk, labeling this mentality as a form of complacency. He related it to Mexico’s potential and arguing that outlets and economists (WSJ, Bloomberg, FinancialTimes, etc) tell the world that Mexico and the BRICs are going to be growing economies and have endless potential, so the country grows a little and figures because everyone in the financial world is saying they’re going to be good, that there’s nothing to do but sit back and let it happen. This is the complacency factor and phenomenon that globalization has caused and that the world economies have never seen. Never in our history have markets been so connected and information been so readily available; therefore causing this hype. I mean, I think it’s rather simple.

Now to relate this back to the meeting this morning, the fact that emerging markets currencies all haven’t been returning as much as people have hoped for other than the MXN Peso was brought up and questioned. Other, all very plausible factors were also thrown into discussion but I was surprised nobody had addressed anything close to my idea and it left me wondering if it would be relevant or worthy of consideration. Even if so, I don’t think there would be a way to quantify it’s (globalization/complacency theory) impact, which poses a problem were it to be taken into account.

 

Nonetheless, I would be very interested to see if anyone talks about this or if this becomes a big deal as markets integrate more and more.

 

Thoughts?

 

Arrivaderci.

 

Silver Linings Playbook

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Just finished watching this movie. First half hour was so bizarre. I was like damn this dude is out of his tree and so is his Dad. Mom seems to be the only normal one. 

Jennifer Lawrence is amazing in this. Love Jennifer Lawrence in the first place but loved her part in this. It was like a chick flick with an honest comedic side. I loved the quick honest dialogue. I wish I could talk like that to everyone. Honest, blunt, no filter. It would make life so much easier.

I wouldn’t mind running into Jennifer Lawrence either. But anywho, two thumbs up, would definitely watch it again. So good I had to write about it. Brad & Jen killed it. Amen.

 

Arrivaderci

Let us Share – Banco Compartamos

Banco Compartamos was formed in 1990 as a private organization to aid the poor in rural areas of Chiapas and Oaxaca, Mexico, by providing microloans to the low income population of the region. In 2001, Carlos Danel and Carlos Labarthe, known as “the two Charlies,” took the organization private, and then in 2007 took Compartamos public in an IPO valued at $1.56 billion. Compartamos executives received $150 million of the $450 million in proceeds. Banco Compartamos became one of Mexico’s most successful banks, with an average return on equity of at least 40 percent.

However, after the IPO many criticized that Compartamos no longer benefitted the people but more so worked for its shareholders, a disservice to the world of microfinance. Many in this field saw such a successful and model microfinancing bank completely sell out to the world of big banks. There was also a worry in Compartamos’ social mission being lost.  With the 27.1 price to earnings ratio Compartamos had after the IPO, it was harder to reduce rates if need be in the future, and this indicated high profit expectations which meant tending to the needs of the shareholders was going to be high on the priority list. This new dimension to the company is exactly what made others believe Compartamos had lost their way and was taking the wrong path. This IPO also meant rapid growth in the front office, which meant spending more money to catch up the back office with management info systems, a huge fear in the world of microfinancing.

In weighing their options, the two Charlies considered a private sale of the company, but saw that a private sale had biggest threat to company because it would threaten the current mission and strategy if it were to be under new management. Another option was to continue looking for private investors, which is not only time consuming but demands higher returns and raises less capital than a public offering. Therefore a public offering seemed to be the only viable option under a couple conditions. Some of the conditions ran along the lines of no more than 30% of shares could be sold and no single investor could own more than 10%, to avoid one investor becoming too powerful. With enough leverage, the two Charlies could still run the company their way with their mission.

The IPO proved to be very successful, bringing in $1.56 billion in capital, selling at around $40 per share. Such a figure could have never been raised by non-commercial investors. However, this money had now made an almost impossible goal of 1 million clients, attainable now. A goal that they had set back “in the NGO days,” was a reason they saw themselves still on the right path. The capital now allowed them to expand to more clients and allowed them to offer different products other than their GDI. Among these two were many other opportunities of expansion. The cost of setting up a bank prior to the IPO was around $50,000, to build a new branch now that complied with banking standards cost around $200,000. So even though the new capital allowed expansion, it was almost relatively the same. The two Charlies also mention advice that made them consider what they had done from Luis Velazco saying, “Strategy drives finance and not the other way around.” Velazco’s words resonated in them as they wondered if their method of financing was really a medium to carry out their mission and strategy or not.

As the CEO of Compartamos I would have been against the IPO. I would have been against it because I believe it has distracted the company. It has brought another dimension that needs attention and thus removing administrative attention from their mission and purpose. The company had clearly been successful up until that point, with ridiculous returns on investment; I don’t see how hard it actually would have been to find more investors. The IPO simply juiced up all their operations but when their goal is to reach 1 million clients and the cost of a new branch is amplified four fold then they’re relatively in the same place. In addition to all the regulations, standards, quarterly reports and critizing by the financial world of Wall Street they must deal with now. If anything I believe if the company’s purpose is to provide low income financing, it should do that and grow at its own pace, especially if it has been so successful thus far. If the two Charlies had other ambitions, they should have made a separate company or entity to run alongside their private bank. Running the same programs but for profit and then going public would have been the more rational thing, as long as they kept one of the entities fully dedicated to its purpose of microfinancing.

The Achilles Heel

During the hectic month of December 2001, Argentina defaulted. Over that month, the economy was reduced to barter, mobs looted bank buildings, and the country went through five presidents in eleven days. After President Néstor Kirchner took office in 2003, Argentina began renegotiating it’s the debt in Dubai. The Argentines put a unique offer on the table with the conditions that the creditors would forgive past-due interest, and the old bonds would be swapped for new ones worth 35 cents on the dollar.  In exchange, the new bonds would include a GDP “kicker,” pronounced “keek-ker” by the Argentinians. This “kicker” promised the creditors additional payments equal to 1/20th of the dollar value of all GDP growth above an initial threshold of 4.2% per year.

The creditors rejected the offer, preferring a “haircut” of 40% on the face value of the debt, no interest-forgiveness, and none of this “kicker” business.  In response, Kirchner told them, the IMF, and the U.S. Treasury that the bondholders could take his “haircut” or nothing. On March 1st, 2005, the president finally repudiated their bonds. In 1998, Argentina’s debt burden came to 38% of GDP, interest payments on the foreign portion totaled 29% of exports, and the deficit came to 1.2% of GDP.  Yet investors pounded the poor country, taking out their money and rolling over the debt at higher interest rates, in addition to rising interest expenses, leading to bigger deficits and even higher interest expenses.

By pulling the plug on Argentina and rejecting the “haircut,” creditors fanned the flames of anti-market, anti-U.S. sentiment across Latin America, which brought Hugo Chavez to power in Venezuela and led to the failure of the Washington-backed Free Trade Area of the Americas. These long term results, a possible warning to Germany and the EU. However, Greece and Argentina are two different economies. Argentina is a food producer and, therefore, has an inflow of dollars to the country given the state of world affairs. That is not the case for Greece, at this point, which is primarily an import dependent economy.

Despite the differences, Argentina has some lessons for Greek policymakers. Unfortunately, none of them are easy and if Greece decides to exit the Eurozone, it could face some unpopular choices to prevent the collapse of the banking system. With the crisis picking up steam in Argentina, between March 2001 and July 2002, unpopular capital controls that only allowed withdrawals of $1200 to $1500 per month were imposed to keep the financial system solvent. The government went further. Wary of massive personal and corporate bankruptcies, it decided to devalue bank deposits at a rate of ARS 1.4 per dollar while keeping bank debt at 1 to 1 with the US dollar. This transition left banks in a fragile state and forced the government to step in and compensate them with some $8 billion in sovereign bonds.

In the end, long-term confidence in the financial system was lost. If Greece chose the same road, the move would obviously lead to social unrest similar to what was seen in Argentina. The economy would also take a dive, possibly contracting by 7% – 8% in the first few years. Greece is also more exposed to the negative effects of a rapid devaluation than Argentina was before the crisis. “The country is a net importer with more than 30% of its GDP worth of imports compared to only 12% in Argentina in 2001” (Financial Times). The move to devalue could outweigh the benefits of any domestic oriented growth in stark contrast to Argentina that managed to export its way out of its mess.

In addition to a heavy-handed policy to force foreign-owned “strategic” industries into local hands over the last 10 years, the contentious debt restructuring has negatively affected foreign direct investment. “FDI inflows to Argentina dropped to just USD 12bn from 2002 – 2010 from USD 76bn in 1992 – 2001”, according to the World Bank. If Greece decides to re-denominate claims into devalued drachmas, Greece may be able to avoid Argentina’s holdout drama. Most of the country’s debt has been issued under the Greek law. “In Argentina’s case, the bonds were mostly issued under New York, not Argentine, law – a move designed to give comfort to investors and reduce the interest rates demanded – which allowed creditors to sue in the US,” said former Secretary of Finance Marx. Additionally, like Argentina, Greece’s bonds do not have a collective action clause forcing creditors to participate in a restructuring if it is supported by a majority of creditors. However with most of its debt under local law, Athens could change the law forcing any untendered bonds to adhere to a deal supported by a majority.

One area where Greece trumps Argentina is the spillover impact of a crisis on its neighbors. When Argentina went through its crisis, the only countries affected were major trading partner Brazil and Uruguay. Rather than being chaotic for Greece alone, a default would affect the Eurozone, challenging the solvency of the regions banks. “Banks are not only exposed directly to the peripheral Eurozone countries such as Greece, but also indirectly via their lending to banks that hold significant peripheral claims,” said Richard McGuire, a senior fixed income strategist at Rabobank.

The quality of the crisis and supports the notion that for all the logical arguments in favor of a Greek exit, the repercussions of such a development will be felt throughout the system in ways likely to be as painful as they are hard to determine. Lastly, one can only hope Greece has leaders who look beyond short-term political costs and decide what is truly best for society.

 

 

 

 

Work Cited

Agustoni, Clara, and Christopher De Vrieze. “Latin Lessons: What Greece Can Learn from             Argentina.” Financial Times. Debtwire, 8 Dec. 2011. Web. 25 Mar. 2013.

Brazil: Leading the BRICs?

The longtime football powerhouse may soon be known for more than just its football. Brazil’s triumph in World Trade Organization has put it at the forefront of powerful developing economies. Between their victories using the World Trade Organization compulsory licensing to break patents, fighting agricultural subsidies in more developed countries, and its diplomatic negations with Iran, Brazil has proven itself to no longer be a country to be slept on. However the underlying question remains as to whether these developments will prove to be beneficial in their long term economy. Some of these developments however, have antagonized the United States and European Union along with potentially scaring away future businesses. That being said, although the success has put them on many countries radars, being on the bad side of the US and European Union can make things very difficult. In addition, using the WTO compulsory licensing due to a trivial price difference will have deterred companies from wanting to invest in Brazil with the fear that they may end up like Merck Pharmaceuticals.

Financially and from a business perspective, Merck was making a financially sound decision in asking a higher price from a country that was more financially capable. In addition, Brazil’s tariffs were much higher thus forcing Merck to offer a higher price. However, Merck was selling to other developing countries for less such as Thailand for 65 cents and to Brazil for $1.10, double. In 2007, Brazil offered that a single annual purchase as a compromise to save some of the company’s marketing expenses but Merck refused to retain higher profit margins. Therefore not only was Merck Pharmaceuticals offering deceptive pricing but also bringing a question of ethics to the table. This enraged Brazilian President Lula to the point where he announced that “From an ethical point of view the price difference is grotesque, and from a political point of view, it represents a lack of respect, as though a sick Brazilian is inferior.” This strong statement perfectly represented the Brazilian government’s point of view. It also showed that Brazil was not going to be pushed around by some foreign pharmaceutical company and that it held its people to a higher priority even though Merck had a large amount invested in Brazil. Therefore even though it may have hurt its reputation among potentially interested investors, many companies will overlook the quarrel with Merck because of what Brazil’s economy has to offer. Additionally, Brazil’s actions will be seen lesser because it was compulsory and an extreme case. Although the financial aspect and numbers being argued were in the bigger scheme, trivial, Brazil’s actions were more motivated more by principle and nationalism rather than simply breaking a patent for a drug they could afford. I believe Brazil made the right decision in the greater picture as Merck’s pricing was to a certain extent discriminatory towards Brazilians.

Brazil’s capitalism is a very controlled capitalism. The government holds a key role not only by owning many of the larger firms but serves as the primary source of capital, thus making it extremely influential in its economy’s direction. A key component of Brazil’s success has been its political and macroeconomic stability. Sizeable improvements in their public debt, reduction of poverty, rising standard of living, and industrial policies have brought it the success it holds today. These advancements have made Brazil an agricultural powerhouse and have been supplying commodities to China since 2003. Brazil’s weaknesses only lie in its infrastructure, as high interest rates bar entrepreneurial Brazilians from economic opportunity. Additionally Brazil has been labeled as on of the harder countries between the BRICs to work in due to all the red tape foreign and domestic companies need to cross to bring business to Brazil. These issues are issues found in any developing country and can be fixed with the right leadership.

With the World Cup coming in 2014 and the Olympics in 2016 Brazil’s future has only been looking brighter. With victories not only on the international economic podium but also politically, Brazil has put itself at the forefront of the BRICs. With the right leadership, and the right direction, Brazil has the opportunity to have the brightest future among the four biggest developing economies.

 

 

 

Work Cited

Daemmrich, Arthur A., and Aldo Musacchio. Brazil: Leading the BRICs? Boston: Harvard

Business School, 2011. Print.

 

 

The Southern Common Market

Mercosur also known as Mercosul, or in English, “southern common market” like the European Union and other commercial pacts or agreements, has had an immensely positive influence on the South American economies. From domestic increases in trade within South America to increasing overall employment between member nations and educational integration, Mercosur undoubtedly impacted South American economies for the better. Politically, it has also proved to be an asset for all South American nations as a medium of exerting political pressure.

Economically, Mercosur has been an enormous helper in spurring internal trade between South American countries. Merchandise trade in Mercosur member countries grew from $10 billion at the cusp of the bloc’s beginning in 1991 to $88 billion in 2010 (Eurostat, PDF). In 2010, Eurostat also reported that Mercosur accounted for 16% of the member’s trade. Exports from the bloc are very diverse, and include a variety from agricultural and industrial to energy. The trade agreements allow access to goods that may be rich in another countries but lacking in theirs. As an example, Venezuela’s introduction to the bloc allowed to buy cheaper foods in exchange for its oil. Another method by which the trade bloc has benefitted its members is by its lending and debt management. During Paraguay’s crisis, Brazil and Argentina offered to relieve its debt by renegotiating its terms. It would be undermining to say that the trade bloc is irrelevant due to its incentives to trade locally in South America. However, although it is irrefutable that the agreement has increased internal economic fluidity, South American exports continue to be the money maker among all South American countries. Nonetheless this claim does not disapprove the fact that intra-Mercosur trade accounted for approximately 16% of its member countries trade.

Where there is economic power, there is political power as well. As a unified economic zone, the South American member countries can dictate as a whole who they offer incentives to. In its recent history Mercosur has denied the United States free trade incentives. Whereas, during the same time engaged in economic talks with China for incentives and tariff breaks. This is a powerful bargaining chip especially when Mercosur includes some of the world’s largest emerging markets. Mercosur also led to the failure of the U.S. led Free Trade Agreement of the Americas which would have united the entire region under one economic agreement and granting the U.S. special deals with South American resources. In this respect, Mercosur is again undoubtedly relevant as an economic agreement. Amongst its economic power it has also been a vessel for other dimensions of politics. In 2007, the Mercosur members pledged to increase focus on human rights and democracy during a summit. American political scientist Riordan Roett, professor and Director of the Western Hemisphere Program at Johns Hopkins University was quoted saying that since Venezuela signed the Protocol of Adhesion in 2006. “Mercosur is no longer about trade” (Mercosur: South America’s Fractious Trade Bloc, Klonsky).

An agreement that spurs economic growth, power and overall advancement is in no way irrelevant. It’s only potential soft spot is that it does not account for as much of South America’s economic activity in the same manner that South Americas exports do. Nonetheless, it does account for 16% which is a considerable amount. In an area with so much potential, not having such an agreement would be illogical. It would hinder the growth of not only the more powerful economies but also the lesser.

 

 

 

 

 

 

Works Cited

EU BILATERAL TRADE AND TRADE WITH THE WORLD. N.p.: EUROSTAT, 29 Nov. 2012.             PDF.

Klonsky, Joanna. “Mercosur: South America’s Fractious Trade Bloc.” Council on Foreign Relations. Ed. Stephanie Hanson and Brianna Lee. Council on Foreign Relations, 31 July      2012. Web. 04 Mar.2013.