Negotiations between the European Union and MERCOSUR aim to establish the first free trade agreement ever between two customs unions. Among the potential obstacles are compliance with World Trade Organization rules, treatment of “sensitive” products, and competition from the proposed Free Trade Area of the Americas. This analysis reviews the economic background on both sides, the motivation, and the prospects for success, along with the agreement’s potential impact on the largest third party, the United States.

The integration process as developed in MERCOSUR has been largely a success, albeit led (and often aggravated) by Brazil. Three cases illustrate Brazil’s dominant role: the dispute over the automobile regime that began in 1995, the import-financing conflict of 1997, and the recent negotiations over the Free Trade Area of the Americas. Brazil’s behavior pattern does not threaten MERCOSUR’s stability, however, or the all-but-irreversible progress of regional integration.

MERCOSUR’s success as an economic bloc suggests that it could serve as a stimulus or even a model for security integration. Improved military ties among the MERCOSUR nations have grown out of a sequence of developments, from political rapprochement to economic convergence and improved civilian state control. Yet increased cooperation has not led to a regional defense system. Case studies reveal that national considerations have inhibited most MERCOSUR members from accepting the idea of a regional security alliance.

In many Latin American countries, corruption and administrative inefficiency have emerged as significant threats to democracy and governability. This case study employs McCubbins and Schwartz’s U.S.-centered model of “fire alarm” and “police patrol” oversight to analyze how effectively Chile’s Congress has conducted its oversight functions. Chile’s experience with authoritarian rule, the weakening of Congress, and changes in the relationships between citizens and state institutions have undermined its tradition of fire alarm oversight, forcing Congress to rely on less-effective police patrol activities.

The decisive victory of Alberto Fujimori and his congressional list in 1995 did not reflect a delegative view of democracy among the Peruvian electorate. Instead of uncritically supporting their reelected president, as a delegative model would predict, Peruvians have rejected the illiberal and possibly unconstitutional policies of his second administration. Relying on public opinion poll data, this study argues that the same issues that facilitated Fujimori’s 1995 landslide will probably work against him in 2000.