this paper formed part of a conference "mercosur: in search of a new agenda" held in the getulio vargas foundation in rio de janeiro in june 2003. the purpose of the conference was to was to examine future directions for mercosur in light of emerging political dynamics pointing to renewed interest in deepening the initiative after a turbulent 1999-2002. the papers and the conference were supported by the integration and regional programs department of the inter-american development bank through its special initiative on trade and integration. the department is grateful for the collaboration of the foundation and in particular to professor renato flores. this paper is based on the conclusion that mercosur suffers from an "institutional deficit". this deficit is associated to lack of credibility on the project, inefficient rules production system, fragile mechanisms that "oblige" country members to the compliance with agreed rules, and to the impacts, of this group of characteristics,...