Question

Research and analyze MERCOSUR, a regional trade area encompassing Brazil, Argentina, Paraguay, Uruguay. Venezuela, although a full member, had it’s membership suspended in late 2016; associate countries are Bolivia, Chile, Colombia, Ecuador, Guyana, Peru and Suriname. One of the discussion within MERCOSUR member countries is to adopt a single common currency to become a common market much like the European Union. What issues should they consider before they accept or reject a common currency? Should associate countries be included in this endeavor or only include current member countries? Why or why not? Minimum word count: 600 words

Answer 1

MERCOSUR,as a regional organisation was signed in 1992.It is a limited successful,but have a high potential organisation.It frequently faces economic and political crisis.

          In order to understand isues of commom currency in to become a common market,at first we need to understand,advantages and disadvantages of having common currency,as E.U.Advantages to have comon currency,they will have a stable exchane rate i.e.member of MERCOSUR,while having transaction will not have to worry about fluctuation in currency.Fluction of exchange rate is a big concerned while transaction.This will also encourage to have a better trade relation among member countries or with other countries.There will also be less transaction costs,as their will be a single currency,other currency will not need to change while passing through member countries of MECOSUR.These,will also help in keeping competitive sense among the member nation. Disadvantages of having common currency-it is certain taht the individual nation cannot control their respective monetary policy,as it will affect the economy of all the member country.There will be a problem among the member that the respective countries are not developing at their respective pact that it should be like in case of Britain.Some country may developed while some may not.MERCOSUR,being a less succesful organisation,if ang country breakup from the organisation,its domestic currency would depreciate rapidly and it will led to loss in every respect of that country,like financial crisis.

                 The associate countries should also be concerned as the economic condition of one country is not same with another country as,a central bank have to be estblished which will formulate policy looking into the overall coundition and,as it not be possible forming policy looking into one individual nations,all the concerned countries should be included.