degree of integration before and after the initiation of Mercosur . Part of the strong motivation that leads a country into joining a Free Trade Area is the benefit that a bigger market can provide such as a maximization of scale economies, competition and cheaper goods for customers. The incremental trade flows between country-members is a significant gain for these countries. But becoming integrated may make a country more vulnerable, if a partner becomes involved in a crisis then such country will be more susceptive to also having a crisis as well. By adopting the LOP its possible to measure if before Argentina crisis these countries had a convergence in prices and if these prices diverged after the crisis. As mentioned previously, in consideration of price convergence as a tool to measure economic integration, when taking into consideration general data about Mercosur, as an example of a FTA and the Argentinian crisis (background). It is possible to define a problem question which is: How does a countries crisis affect its economic integrated FTA’s partners? Hence, this thesis wants to check what happened with the economic integration between Mercosur after the Argentinian crisis.

The Common Market of the South (Mercado Comun del Sur – Mercosur) is a South American answer to the new world reality which points towards regionalization in terms of consolidated economic blocs, and globalization, expressed through an increasing internationalization of national economies. The very first antecedents of Latin American integration are from the sixties, when the Latin American Association of Free Trade (Associacion Latino Americana de Livre Comércio – ALALC) was created. This was later

analysing some facts, as for example trade growth and investments between countries, we may say that Mercosur is positive. It is known that in a medium or long perspective, by taking off protectionism barriers and other impediments to integration we are contributing to the creation of an environment capable to bring benefits to the economy, society and culture. A huge advantage, if we compare old protectionist bureaucratic systems. However, Mercosur has recently been highly impacted by the The Argentinian crisis. This free trade bloc that once was an example to NAFTA is now still working but maybe not as well as before. The trade between countries probably decreased and these changes in Mercosur caused relative prices changes. The Argentinian crisis had also a huge impact on the worldwide economy, due to the fact that a lot of foreign investment was in the country and a lot of multinational companies suffered by this crisis. As an example, we have the Spanish Bank Santander that had a huge loss and closed it doors in Argentina. We may say that the situation in Latin America is very delicate. Uruguay is already paying the price for a close regional tie. Devaluation in Brazil and recession in Argentina have forced a contraction in their neighbour’s GDP. The recession has been complicated by a bank crisis directly linked with the country's erstwhile status as a safe dollar haven for wealthy Argentines. The collapse in Argentina, on which Uruguay depended for most of its tourism,

The new governments (Menem in Argentina) and (Collor in Brazil) introduced a significant change in the treaty in 1990, signing the Buenos Aires Agreement which determined that Mercosur should be established by December 31, 1994. It also introduced a mechanism, which progressively reduced tariffs so as to liberalize the bilateral trade. While, on the one hand, the anticipated integration time had been drastically reduced, the governments of the two countries allowed trade to take control of the process so that the commercial aspects became priority, and the common development alternatives became secondary concerns. Paraguay and Uruguay finally decided to join Brazil and Argentina and signed the Asunción Treaty on March 26, 1991, which contained the same precepts as

Some topics in this essay:
Basel Committee”, Russian Brazilian, Force Co-operative, Weisbrot Debugnai, Nowadays Argentina, Free Trade, According Espiell, Galicia Brazil, ALADI Mercosur, Brazil Argentina, economic integration, argentinian crisis, latin american, free trade, financial integration, buenos aires, percent gdp, brazil argentina, integration process, institutional structure mercosur, december 31 1994, buenos aires agreement, central government's, tariff reduction program, fiscal monetary austerity,