The benefits of access to Mercosur as a dual resident in Paraguay

What is Mercosur?

Mercosur is an economic and political bloc made up of Argentina, Brazil, Paraguay, and Uruguay. The bloc’s name is a Spanish portmanteau of “Mercado Común del Sur” which means “Common Market of the South”. It is also referred to as “Mercosul” in Portuguese-speaking countries, such as Brazil, and as the “Southern Common Market” in English-speaking countries.

The founding countries of Mercosur – Argentina, Brazil, Paraguay, and Uruguay – are full members, while Venezuela was briefly made a full member in 2012 before being suspended indefinitely in 2016 for failure to comply with the group’s democratic principles. Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname are associate members of Mercosur, and as such receive tariff reductions when trading with Mercosur’s full members, although they do not have free access to the founding countries markets, or to full voting rights. Meanwhile, New Zealand and Mexico act as honorary “observer members”. Several other Latin American countries have expressed an interest in joining the bloc, and Bolivia was actually invited to become a full member in 2012, although its candidacy has been held up due to ongoing opposition from Brazil’s Congress.

Mercosur was launched in 1991, after representatives from the four founding countries signed the Treaty of Asunción in Paraguay’s capital city. The Treaty called for the “free movement of goods, services, and factors of production between [founding] countries,” which entailed the elimination of customs duties, the implementation of a common external tariff of 35% on select external imports, and the adoption of a common trade policy toward foreign countries and blocs. Three years later, the group signed the Protocol of Ouro Preto, formalizing Mercosur’s status as a customs union.

The idea among Mercosur’s members was to form a common market, similar to the European Union across the Atlantic, to increase business and investment opportunities for its regional industries, encourage development and improve local relations, particularly between the sparring giants of Argentina and Brazil. The bloc even considered adopting a common currency, although this has yet to move forward.

History & structure

As far as its initial goals are concerned, the bloc was and continues to be a huge success. Trade within the group increased tenfold in the ‘90s, and jumped from $4 billion in 1990 to more than $41 billion by 2010. In October 2021, Argentina and Brazil agreed to a 10% reduction in the bloc’s tariff to help bolster further economic growth among member countries. This regional dynamism has attracted comparatively greater levels of investment than elsewhere on the continent – World Bank data suggests that FDI inflows in Mercosur since 1991 have not been seen to the same degree in countries like Chile, Colombia, Mexico, or Peru. The World Bank recently estimated the combined gross domestic product (GDP) of the four founding countries at $1.9 trillion, making the economic bloc one of the largest in the world. By comparison, the second-largest trade group in Latin America – the Pacific Alliance, made up of Chile, Colombia, Mexico and Peru – has a combined GDP of approximately $1.8 trillion.

In its first decade, Mercosur sealed economic cooperation agreements with Bolivia, Chile, Israel, and Peru, while in 2004 the group’s members signed a preferential trade agreement with India. Mercosur’s most recent free trade agreement (FTA), with Egypt, took effect in 2017, and negotiations with Canada and South Korea remain underway. A deal with the EU has so far proven to be elusive, but talks are underway, and Mercosur reached a comprehensive trade deal with the EU in 2019 which eliminates tariffs on roughly 90% of Mercosur’s exports to the EU, and allows companies in both blocs to bid for government contracts.

Despite initial criticism – some of it from within the founding countries themselves – Mercosur has earned a reputation as the most successful regional integration arrangement to be formed by so-called “less developed” countries. Over a very short period, historically speaking, the bloc has grown into a near-complete customs union status and its trade, both domestic and international, has grown impressively too, embracing both regionalism and global openness at once.

The bloc’s main decision-making body is the Common Market Council, which provides a regional forum for aligning foreign and economic policies, and is led by the foreign and economy ministers from each member state. Decisions are made by consensus, with the group’s presidency rotating every six months by alphabetical order. Mercosur’s other major bodies include the Common Market Group, which coordinates macroeconomic policies, a parliament known as Parlasur which serves an advisory role, a trade commission, and the Structural Convergence Fund, whose purpose is to coordinate regional infrastructure projects. Mercosur’s crest is displayed on member countries’ passports, and residents of the bloc are authorized to live and work anywhere within it – which has significant implications for dual residents in Paraguay.

Benefits for permanent residents

Obtaining permanent residency in Paraguay leads to certain travel advantages in the South American region. Paraguayan residency card-holders can visit all four Mercosur member countries – most of South America – visa-free. A Paraguayan ID card acts as an acceptable stand-in for a passport, not unlike EU-wide ID cards in Europe.

Once you become a Paraguayan citizen – which can be achieved after as little as three years as a resident – you’ll have access to even more rights, including a passport that allows for visa-free or visa-on-arrival travel privileges throughout most of Latin America. A Paraguayan passport means you can reside and work in any Mercosur state indefinitely. As well as the right to free movement, residence and employment throughout the bloc, Mercosur citizens are entitled to the unimpeded transport of goods, services and money, as well as equal rights, social security systems and labour laws throughout the bloc.

In addition, Mercosur recently concluded an agreement with the so-called “CAN Countries” – the Andean Community composed of Columbia, Bolivia, Ecuador and Peru – and Chile, establishing that their territories are an “area of free residence with the right to work”. This scenario is especially attractive for dual residents in Paraguay, whose residency laws do not stipulate a full-time or even part-time physical presence in the country itself.

Belonging to a Mercosur member state also presents a series of business opportunities for foreign investors and entrepreneurs. Mercosur is a global economic power whose combined GDP makes up more than 80% of that of the entire South American continent. Paraguayan residents can take advantage of huge nearby markets in Brazil or Argentina, while avoiding the high rates of social inequality and criminality, soaring inflation and pollution which can often affect those neighbouring countries.

Many other promising markets are accessible too. Mercosur has free trade agreements with major Latin American countries such as Mexico or Cuba, with Asian and Middle Eastern countries like India, Israel, Egypt and Palestine, and with the Customs Union of Southern Africa (a lucrative commercial group made up of South Africa, Namibia, Botswana, Lesotho and Swaziland), among many others.

As we have seen, dual residents in Paraguay can and should take advantage of their adopted country’s status as a founder and full member of Mercosur. With dual residency, you will be able to move freely through most of South America, living and working without the need for a visa or a passport. Digital nomads who are interested in seeing the sights in Brazil, Argentina and Uruguay can do so at their leisure, without having to worry about their status in Paraguay being revoked. Dual residents will also have a licence to conduct business in what is quickly becoming a commercial hotspot and free trade, with a wide range of international partners, markets and industries.

In addition to being a Mercosur member, Paraguay has an attractive tax regime, a welcoming population, a wide range of natural beauty and an extremely reasonable cost of living, making it a can’t-miss destination for foreigners looking to establish themselves in an exciting new region. Becoming a dual resident in Paraguay is not only appealing but relatively straightforward and inexpensive, especially with the aid of a dedicated team of professionals. Get in touch with Strategicasa today to find out more about dual residency in Paraguay, and how it can be leveraged to get to know the fascinating Mercosur trading bloc.