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MERCOSUR means Southern Common Market. MERCOSUR was founded on March 26th, 1991. It was a Regional Trade Agreement among four countries - Argentina, Brazil, Paraguay and Uruguay. Some South American countries are promoting MERCOSUR to pool resources so that they can counter other global economic powers like NAFTA(North American Free Trade Agreement), Free Trade Area of the Americas (FTAA), European Union etc. members of MERCOSUR promotes free trade among member countries. In 1991, Argentina, Brazil, Paraguay and Uruguay, founding members of MERCOSUR had combined population of 200 million and GDP of $851 billion. This provides member colunrtries very huge resource pool and big market, which makes Mercosur most influential economic power after NAFTA and EU in terms of how much they can influence international trade..

Venezuela applied for membership many years ago. Finally in July 2004, Mercosur accepted Venezuela as associate member. .

Benefits for venezuela as a result of membership in MERCOSUR: Mercosur promotes free trade among member countries. Combined GDP of Mercosur countries exceeds 1 trillion mark. Only member countries combined GDP stands out ar $1.3 trillion. Along with associated nations, combined GDP crosses $2 trillion. So, Mercosur as a group has powerful representation in international market. Members of Mercosur are commited to have common foreign trade policy ans economic policy so that they can have upper hand in international trade.

Historically, Venezuela’s economy has been heavily dependent on Oil. Venezuela possesses huge oil resertve and all economic policies have been concentrating on oil industry only. Other industries and social issues did not get due importance in government economic policies and they went on back stage.

Mercosur will have widening effect on venezuela’s economy. As a member of Mercosur, Venezuela will have access to larger market. Mercosur members are committed to free goods movement among member countries. Venezuelan integration to the Mercosur would provide Venezuela greater bargaining power in international trade.

Membership of Mercosur will provide Venezuela the opportunity to have economic and technological collaboration with other south American countries. Government will have more opportunity and resources to concentrate on industries other than Oil industry. With the help of other Mercosur members, Venezuela can boost other industries which will result in higher GDP and higher per capita income. Higher per capita income will increase purchasing power of the citizens which will create bigger domestic market.

Drawbacks for venezuela as a result of membership in MERCOSUR: Membership of Mercosur will open new doors of opportunities for Venezuela. At the same time,. It is a source of threat for Venezuela. Venezuela is not a founding member of Mercosur. Mercosur promotes free trade among member countries. As a member, Venezuela will have to open its door for strong competitors like Brazil who is more efficient. In Venezuela, thrust has been given on Oil industry only and other industries are not competitive. Strong competition coming from other copuntries will have negative impact on other industries, specially small industries and they may not survive the competition.

Moreover, Venezuela is not a founding member of Mercosur. Founding members have strong hold on Mercosur and they will infleunce the policies of Mercosur. Mercosur does not have adequate measures to protect intellectual property rights and government procurements. Also, Venezuela is a trade partnetr of Columbia. In G-3 negotiation with Mexico, Venezuela and Columbia negotiated as a single country. Venezuela’s membership of Mercosur may affect its trade relationship with its long time partner Columbia.

Benefits of our business – Software Service

Mercosur promotes free trade among member countries. As a member of Mercosur, Venezuela has to open its door for free trade. Historically, government economic policies has been concentrating on Oil industry only and other industries could not develop properly in Venezuela. To protect other industries from more efficient competitors, government will have to provide support to those industries by means of economic and fiscal policies. To sustain in competitive market, domestic companies has to lower cost and increase productivity.

Information Technology is able to help the businesses to lower cost and standardize the business process Specially ERPs like SAP provide businesses opportunity to follow best business practices and optimize the processes. Also, when businesses tries to lower its cost of running business, they outsource periphery business (including IT). So, membership of Mercosur opens door to tremendous opportunities for Software Service business in Venezuela.

Mercosur member countries are improving banking system. Venezuela is also building a new regional bank who will lend to the countries who are not willing to take loan from IMPF due to the conditions IMF imposes on the borrowers. The revamping of banking system will enable the businesses to borrow at lower cost which will fuel growth. Lower cost of capital will make more and more projects viable and will attract more companies to enter the market. Rapid growth of economy will provide more opportunities to Software Service industry. As an early entrant in Venezuelan market, my company will have first mover advantage. By the time other companies enter the market, my company will have loyal customer base, brand value and experience of doing business in Mercosur member countries.

Doing business in Venezuela will allow my company to do business in other Mercosur member countries as well due to free trade policy of Mercosur. Access to the market of fast growing economy like Brazil and other Mercosur member countries will help my software service company grow faster.

Drawbacks:

Mercosur does nlot have adequeate measures to protect Intellectual Propety Rights. Software service business is a knowledge business which relies heavily on human capital and IPR. Venezuela, as a member of Mercosur, will promote free trade. Other companies may have unauthorized access to intellectual property my company possesses. Due to lack of adequate laws, it may be impossible to protect Intellectual propertie, which is backbone of a software industry.

Another problem a software company may face in Venezuela is lack of skilled manpower. Till date there has not been any attempt to build skilled manpower base for software industry. When new software service ;providers will enter the market, they will face same problem – lack of skilled manpower. That will promote poaching. To retain trained manpower, my company will have to pay higher salary. There may be a case that in spite of ;paying highert salary one can not retain skilled manpower as there will be scarcity of such trained manpower. Software service industry depends on human capital. Lack of human capital may mark a question mark on the existence of the company itself.

The success of software service business in Venezuela depends on how government is trying to protect industries from competition. In Venezuela., other than oil industry, no other industry could grow properly. When Venezuela opens its door for competitors, domestic companies may not compete at all with more efficient and develooped competitors. If goverbment policies and support can protect the companies and help them in becoming competitive, my company will find opportunities. But if government fails to protect domestic companies from competition or domestic companies do not try their best to compete, sjurvival of many of them will be endangered. That will affect my company adversely.

What adjustments will need to be made to your business as a result of this?

As a member of Mercosur, Venezuela will be open for free trade. This will open door for my company to do business in other Mercosur member countries and grow. Also in domestic market, government will try to boost other industries, which will provide more opportunities for my company. With growth, more skilled man power will be required. With time, many competitors will also enter the market and lack of skilled manpower will be a bottleneck. First of all, we will have to have along term plan in place to secure supply of enough skilled software professional. We can not rely on government to generate enough skilled manpower and so we will have to develop in house training centers where we can train employees. We can also collaborate with educational institutes to generate more employable manpower.

Our next biggest challenge will be to protect intellectual property. As Mercosur does not have enough measures to protect IPR, we will have to find ways how we can protect our intellectual property.

In Venezuela, other than oil industry, other industries has not witnessed enough growth. There will be more opportunities in other member countries. With revamping of banking system, cost of capital is expected to come lower which will make more projects viable. To grab this opportunity, we can collaborate with companies from member countries and register our presence in member countries as well where growth is faster presently.

References

Vilma E. Petrásh. (1996)."Venezuela And Mercosur:The Conquest Of The South Or; Are We Being Conquered By The South". Retrieved on September 16th , 2009. From:

Introduction of Venezuela. Retrieved on September 16th , 2009. From: venezuela/index.htm

think- Retrieved on September 16th , 2009.

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