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ESTABLISHMENT AND FUNCTIONS
The Latin American Integration Association (ALADI) was established after the signature of a new juridical instrument created by the 1980 Montevideo Treaty in Montevideo, Uruguay, on August 12, 1980 by the Ministers of Foreign Affairs of 11 Latin American states, namely, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela. The 1980 Montevideo Treaty undertakes to further the process of economic integration begun in 1960 with the establishment of the Latin American Free Trade Association (ALALC) by the Montevideo Treaty of 1960.
The organization aims to pursue the integration process in the region leading to its harmonious and balanced socioeconomic development. In particular, the organization's duties include the promotion and regulation of reciprocal trade, development of economic complementarity, and support of actions for economic cooperation to encourage market expansion. Member countries have established an area of economic preferences, comprising a regional tariff preference, regional and partial scope agreements, and created conditions favoring the participation of countries at a relatively less advanced stage of economic development in the economic integration process, based on principles of non-reciprocity and community cooperation.
An Agreement establishing a Multilateral Compensation and Reciprocal Credit Mechanism (Mecanismo de Compensación de Saldos y Créditos Recíprocos) was signed by the Central Banks of the member countries of the Latin American Free Trade Association (ALALC) in 1965 and came into operation on June 1, 1966. The Dominican Republic joined in 1973. A new Reciprocal Payments and Credit Agreement was signed on August 25, 1982, adjusted to ALADI's new guidelines but maintaining the general features of the previous pact.
The main features of the Agreement are:
After May 1, 1991 a transitory financing mechanism of the credits due to the multilateral compensation balances (Automatic Payment Program) was incorporated in the Agreement. This mechanism attempts to foresee occasional liquidity difficulties that the Central Banks of member countries might face at the closing of the multilateral compensation periods. This mechanism is multilateral and automatic and consists in postponing the payment of obligations derived from the situations described above for a period of four months.
The Santo Domingo Agreement, another credit mechanism designed to help finance intra-regional trade, was signed by the Central Banks of the member countries of ALALC and the Dominican Republic in 1969. The Agreement, which was modified and broadened in scope on September 22, 1981, consists of credit lines provided by the member Central Banks up to a joint total close to US$700 million. These resources are allocated into three mechanisms aimed at relieving temporary illiquidity experienced by members resulting from: (1) deficits in the payments clearance of intra-regional trade; (2) deficits in the overall balance of payments of the respective country; and (3) deficits caused by natural disasters. The support mechanisms of this Agreement were last used in 1984. The Banco Central de Reserva del Perú is the agent bank of both systems.
11 member countries: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela
There are 15 observer countries: China, Costa Rica, Cuba, Dominican Republic, El Salvador, Guatemala, Honduras, Italy, Nicaragua, Panama, Portugal, Romania, Russian Federation, Spain and Switzerland
There are 8 observer organizations: Inter-American Development Bank (IaDB), UN Economic Commission for Latin America and the Caribbean (ECLAC), the Organization of American States (OAS), the UN Development Programme (UNDP), the European Communities (EC), Latin American Economic System (SELA), Andean Development Corporation (CAF), and Inter-American Institute for Cooperation on Agriculture (IICA).
The Council of Ministers of Foreign Affairs is the highest organ of the Association and is responsible for the adoption of its top policy guidelines. It is composed of the Ministers of Foreign Affairs of the eleven member countries, except when a Minister other than the Foreign Minister is in charge of ALADI's affairs in a particular country.
The Evaluation and Convergence Conference is composed of plenipotentiaries of member countries. The Conference examines the operation of the integration process, evaluates results of preferential arrangements, and recommends studies to be undertaken by the Secretariat.
The Committee of Representatives is composed of a Permanent Representative of each member country and his Deputy, and is the permanent political body of the Association. The Committee promotes the conclusion of agreements, adopts measures necessary to implement and regulate the Treaty, and convenes the Council and the Conference.
The Secretariat, headed by a Secretary-General who is elected by the Council for a renewable three-year term, carries out ALADI's technical and administrative tasks. The Secretary-General participates in the work of the Council of Ministers, the Conference, and the Committee.