The South American trade bloc, also known as Mercosul, was created in 1991 by Brazil, Argentina, Uruguay and Paraguay in that country's capital, Assuncao.

Trade is a combined gross domestic product (GDP) of more than $1 trillion in a consumer market of 200 million people.

A key new area is the construction of a social Mercosur modelled on the European Union taking in dimensions of labour, culture, environment and justice.

Speaking at the last summit of the leaders of Mercosur in December 2004, Brazil's President Luiz Inacio Lula da Silva eulogised the bloc's advancement.

"It's gaining reality that Mercosur is more than an option, it's a
destiny. It has come on in all its dimensions and overcome big
rivalries which have inconvenienced our countries in recent years," he said.

Members and interests

Ten per cent of Brazilian exports are from Mercosur. Argentina is Brazil's principal exporter behind only the US. Brazilian investment in Mercosur increased from $3.8 billion in 2002 to$5.3 billion in 2003.

Peru, Chile and Bolivia are already associated members. Joining them now are Colombia, Venezuela and Ecuador. Mexico has declared an interest, as has Panama.

"Mercosur is a dynamic axis for the integration of South America. We have concluded preferential accords with two international partners as a confirmation of a new international commercial geography with India and South Africa. [Known as the G3.]

"We also have on the horizon new non-traditional commercial allies - Morocco and Egypt - and we have had preliminary negotiations with China and South Korea. The objective for 2006 is the reconstruction of Mercosur and the realisation of our original aspirations. We want to create the parliament of Mercosur by December 2006," said President Lula.

Doubts

But on the eve of the unprecedented South America-Arab summit, Argentina is expressing doubts in the market.

Argentina's President Nestor
Kirchner has voiced concerns

"We are worried because in the global context Mercosur is slow. To go forward demands the political will of everyone," says Argentine Foreign Minister Alfredo Chiaradia. President Nestor Kirchner is unsure over his attendance at the summit, Brazil's biggest of the year.

Argentina and Brazil are giants in comparison with their fellow members and their historical bi-lateral relationship is key to the survival and success of the bloc.

The immediate roots of Mercosur date back to the end of the military dictatorships of both countries, first with an agreement signed in Foz do Iguaçu in 1985 to accelerate the integration in the economic and commercial areas.

Common market

In 1990 Brazil and Argentina set in motion a process of integration for a common market between the two by the end of 1994. Paraguay and Uruguay were invited to join leading to the historical treaty of Mercosul signed on 26 March 1991.

This month President Lula began talks to integrate Mercosul with the European Union, despite confronting problems over agriculture and finance services.

Italian Democratic Party leader Massimo D'Alema is due in Brazil at the end of this month with a delegation from the European Parliament to discuss the future integration.

The phrase "new trade geography" coined by President Lula - referring to the increased economic activity between developing countries themselves - first gained currency at the United Nations conference on Trade and Development held in Sao Paulo last year.

The G3

The G3 initiative between Brazil, India and South Africa brings together a population totalling 1.2 billion people.

The India-Brazil-South Africa Dialogue forum met in Cape Town, South Africa, in March.

The G3 met in South Africa to
discuss cooperation

Ministers emphasised that South-South co-operation was an essential and fundamental component of international co-operation for development, especially in terms of global, regional and country-level efforts to achieve Millennium Development Goals.

India, Brazil and South Africa as the founding members of the Group of Like-Minded Mega Diverse Countries, agreed to strengthen co-operation and co-ordination, with an emphasis on multilateral negotiations.

Foreign travel

President Lula has been criticised heavily domestically for the number of his foreign excursions. He took Brazil's largest ever foreign delegation - more than 500 ministers and businessmen went to talks in China last year, for example - but it appears his efforts are about to bear fruit.

The expansion of Mercosur, the creation of the G3 and the South American-Arab summit combined could bring to reality his vision of a new trade geography to balance the powerhouses of, principally, the US, but also the EU and Japan.

Brazil's foreign ministry is investing heavily in the Arab summit,
spending more than half of its annual event budget.

"It is fundamentally a proposal for South-South bi-regional
co-operation. We view this initiative as a new, constructive and complementary effort to ongoing integration processes. It is not meant to confront or oppose any other country or region," according to the official statement of Brazil's foreign ministry.