Protocol of Mercosur Public Bids for Tender

The new text of the Protocol of Mercosur Public Bids for Tender (the “Protocol”) was approved at the meeting of the Board of the Common Market held on June 20, 2006 in Cordoba, Republic of Argentina.

Businesses of each Member State shall not discriminate between national offerors and those from other Member States in the qualification process for offerors of goods, services and public bids.

The following are included as Schedules to the Protocol:

(i)           “Positive Lists of Entities” of each of the Member States, i.e. those governmental entities bound by the Protocol;

(ii)           “Negative Lists of Goods” under which certain goods were excluded from the Protocol;

(iii)           “Positive Lists of Services”; and

(iv)           “Positive List of Public Works”.

Public Bids for Tender carried out in accordance with the Protocol shall be by means of:

(i)                 public bids; or

(ii)                 public contract.

As regards public bids for tender in connection with security and national defense, the Protocol does not prevent a Member State from adopting the measures necessary to safeguard its interests.

The rules of origin currently in force within Mercosur are applicable to this Protocol. With regard to dispute resolution, the Olivos Protocol applies within Mercosur.

In connection with antitrust and competition law, and bearing in mind that the Regulations of the Protocol of Antitrust and Competition Law of Mercosur are not yet in force, the rules of each Member State governing this subject shall apply. Likewise, dumping and subsidies are also governed by the domestic laws of each Member State.

In order to be able to supervise public bids for tender within Mercosur, Member States shall prepare an annual report on contracts that have been awarded.

Member States agree to enter into negotiations every two years in order to open up the public bids for tender market within Mercosur.

Notwithstanding the above, if the most favorable offer is made by an offeror of a different Member State, the Argentine Republic may award the contract to the national offeror pursuant to the preferential treatment rules set forth in Schedule VI to the Protocol. These preferential treatment rules shall be applicable for a term of five years from the entry into force of the Protocol and shall diminish gradually. During the first year in force, contracts shall be awarded to the Argentine offeror provided the difference with the Brazilian supplier does not exceed 5% (for Uruguayan and Paraguayan suppliers the difference is 4%).

However, Brazil did not include any restrictions regarding the offer of goods and is the only country granting immediate “national treatment” to businesses of Mercosur interested in the award of a public work. Its positive list of public works includes the following: general construction services for buildings and civil engineering; installation, assembly, maintenance and repair of fixed structures; and building completion services.

The Republic of Paraguay imposed restrictions to the Protocol regarding the Argentine Republic and the Federative Republic of Brazil under which, in the case of Paraguay, the Protocol shall neither be operative with Argentine nor with Brazil until these countries include the entities of state and provincial governments bordering Paraguay.

The entry into force of the Protocol is subject to ratification by the Congresses of the Member States. The Protocol may enter into force and effect bilaterally between the first two Member States approving the same.