The Common Market of the South (Mercosur) has adopted protectionist policies and caused market distortions over the last decade, the World Trade Organization (WTO) said in a report published on Tuesday.
The trade within the region was dominated by products protected by tariff policies and has led to market distortions. The goods could have been required at lower prices at international market, the WTO said.
The WTO pointed out that about 12.5 percent of Mercosur's goods were imported before the regional trade bloc began to apply a tariff of 12 percent in 1995. The proportion has dropped to 10.4 percent by January 2006.
In Brazil, the part of imports fell from 14.5 percent before the founding of Mercosur to 8.8 percent in 2006.
Mercosur was running against WTO norms on regional trade, the WTO said in the report.
In a related development, Jose Augusto de Castro, deputy head of Brazil's foreign trade association, said on Tuesday that Mercosur was experiencing a teenage identity crisis.
As an organization of 15 years old, "Mercosur does not know if it wants to be a customs union or a free trade area," he said.
The businessman also criticized Brazil and Argentina, saying the two countries, instead of creating complementary economies, seemed committed to a competition based on who can send the most industrialized products to the other.
Mercosur consists of Argentina, Brazil, Paraguay and Uruguay.