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Decree No. 5969, November 21 2006

Original Language Title: Decreto nÂș 5.969, de 21 de Novembro de 2006

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DECREE NO. 5,969 OF November 21, 2006.

Promulgate the Decision No 18/05, of the Council of the Common Market of Mercosur, which has on the Integration and Health of the Fund for the Structural Convergence and Institutional Strengthening of Mercosur-FOCEM, adopted in Asuncion, on June 19, 2005.

THE PRESIDENT OF THE REPUBLIC, in the use of the assignment that gives it the art. 84, inciso IV, of the Constitution, and

Considering that the National Congress has approved, by means of the Legislative Decree no 407 of September 12, 2006, the text of the Decision No 18/05, of the Council of the Common Market of Mercosur, which provides on the Integration and Functioning of the Fund for Structural Convergence and Institutional Strengthening of the Mercosur-FOCEM, adopted in Asuncion, on June 19, 2005;

DECRETA:

Art. 1st Decision No 18/05, of the Council of the Common Market of Mercosur, which has on Integration and the Operation of the Fund for Structural Convergence and Institutional Strengthening of Mercosur-FOCEM, adopted in Asuncion, on June 19, 2005, appended by copy to the present Decree, will be executed and fulfilled as entirely as in it if contains.

Art. 2nd Are subject to the approval of the National Congress any acts that may result in revision of the said Decision or that carries charges or commitments engraved to the national heritage, pursuant to art. 49, inciso I, of the Constitution.

Art. 3rd This Decree shall come into force on the date of its publication.

Brasilia, November 21- 2006; 185th of the Independence and 118th of the Republic.

LUIZ INACIO LULA DA SILVA

Celso Luiz Nunes Amorim

This text does not replace the published in the DOU of 11/22/2006

MERCOSUL/CMC/No 18/05

INTEGRATION AND OPERATION OF THE BACKGROUND FOR

STRUCTURAL CONVERGENCE AND STRENGTHENING OF THE INSTITUTIONAL STRUCTURE OF MERCOSUR

HAVING IN VISTA: The Treaty of Asuncion, the Black Gold Protocol, the Decisions in the 1 1 / 03, 27/03, 3/04, 19/04 and 45/04 of the Council of the Common Market.

CONSIDERING:

That the Treaty of Asuncion signed by the States Parties creates the Common Market of the South (MERCOSUR);

Which, in order to ensure the consolidation of the convergence process for the Common Market, is required boost the integration process by reinforcing the principle of solidarity;

Which is priority to develop actions aimed at promoting the competitiveness of States Parties and structural convergence;

That the benefits resulting from the widening of markets will not be able to be fully harnished by the smaller economies while subsistering asymmetry conditions;

That the States Parties have decided to establish the Fund for the Structural Convergence Of MERCOSUR (FOCEM), in order to promote structural convergence, develop competitiveness, favour social cohesion, in particular the smaller economies, and strengthen the institutional structure of MERCOSUR.

The COUNCIL OF THE COMMON MARKET

DECIDE:

Objectives from the FOCEM

Art. 1-The Fund for Structural Convergence Of MERCOSUR (FOCEM), created by the CMC Decision in 45/04, is meant to finance programs to promote structural convergence; develop competitiveness; promote social cohesion, in particular of the smaller economies and less-developed regions, and support the functioning of the institutional structure and the strengthening of the integration process.

Art. 2-Based on the provisions of the previous article the following programs will be developed:

I. Structural Convergence Program

II. Competitiveness Development Programme

III. Social Cohesion Programme

IV. Program of Strengthening the Institutional Structure and the Process of Integration.

Art. 3-Program I projects should contribute to the development and structural adjustment of the smaller economies and less developed regions, including the improvement of the border integration systems and communication systems in general.

Program II projects are expected to contribute to competitiveness within the framework of MERCOSUR, including productive and labor reorganization processes that facilitate the creation of intra-MERCOSUR trade and integration projects of productive chains and of strengthening public and private institutionality in the aspects linked to the quality of the production (technical standards, certification, conformity assessment, animal and plant sanity, etc.), as well as the research and development of new products and productive processes.

Program III projects are expected to contribute to social development, in particular in border zones, and will be able to include projects of community interest in areas of human health, poverty alleviation and unemployment.

Programme IV projects should aim at the improvement of the institutional structure of MERCOSUR and its eventual development. Once the goals of the projects are met, the structures and activities that come to result will be financed in equal parts by the States Parties.

Conformation of FOCEM

Art. 4-The FOCEM will conform to annual contributions of the States Parties, effected in semi-annual quotas. Such contributions shall be deposited in a financial institution of the States Parties, selected in accordance with the criteria and procedures setting out the FOCEM Regulation, provided for in Articles 19 and 20 of this Decision.

Art. 5-The aports of the States Parties to the FOCEM will have the character of non-refundable contributions.

Art. 6-The total annual amount of the contribution of the States Parties to the FOCEM will be one hundred million dollars and will be integrated as per the following percentages, which have been established in view of the historical average of MERCOSUR's GDP:

- Argentina: 27%

- Brazil: 70%

- Paraguay: 1%

-Uruguay: 2%

Art. 7-A The first semi-annual contribution of the States Parties to the constitution of the FOCEM should be held until ninety days after the completion of the process of incorporation of this Decision to national legal ordinances and the approval of appropriations corresponding budgeting in the four States Parties.

In the first budget year of the FOCEM, the States Parties are expected to integrate 50% percent of their annual contributions, to the execution of pilot projects provided for in article 21. In the second budget year of the Fund, they should integrate 75% percent of their annual contributions. Starting in the third year, they will spend integrating 100% of their annual contributions.

Art. 8-FOCEM will be able to receive contributions from third countries, institutions or international bodies for the development of projects.

Art. 9-The functioning of the FOCEM will only begin after the initial contributions of the four States Parties have been effected. From that time, the States Parties should be in the day with their semi-annual contributions to FOCEM and with the established quotas for the operation of the institutional structure of MERCOSUR, so that their projects are approved.

Distribution of the Features

Art. 10-The resources of the FOCEM earmarked for the financing of the projects of the Programs I, II and III, provided for in Article 2 of this Decision shall be distributed among the States Parties in accordance with the following percentages:

- To the projects presented by Paraguay: 48%;

- To the projects presented by Uruguay: 32%;

- To the projects presented by Argentina: 10%;

- To the projects presented by Brazil: 10%.

The unallocated resources during the budget year will be added to the following year's resources and will be distributed in accordance with the one set out in the preceding paragraph.

The FOCEM should also provide for the resources required for financing the activities within the framework of the Registry of MERCOSUR, provided for in artigo15 of this Decision.

Art. 11-The corresponding States Parties are expected to participate in the financing of their projects approved by the MERCOSUR Common Market Council with equivalent own funds, at a minimum, at 15% percent of the total value of such projects.

Art. 12-For the first four years, the resources of the FOCEM shall be earmarked as a matter of priority for the Programme I of Article 2 of this Decision. It could be intended for, during that period, up to 0.5% of the Fund's resources to Program IV.

Art. 13-For the first four years, the financial resources of the FOCEM earmarked for Programme I projects should be employed as a matter of priority to increase the physical infrastructure allocation of the States Parties, in particular to facilitate the integration process.

As of the fourth year of the effective functioning of FOCEM, States Parties shall conduct a overall assessment of the same and a review of priorities, whose results will be applicable from the fifth year of operation.

Art. 14-The features of FOCEM intended for approved projects will have character of non-refundable contributions. Notwithstanding, alternatives for the granting of refundable loans may be considered.

Procedures and Institutional Aspects

Art. 15-A The regulation of the procedural and institutional aspects of the functioning of the FOCEM should contemplate the following bases:

a) the projects corresponding to the Programs provided for in Article 2 of this Decision shall be submitted by the States Parties to the Commission of Permanent Representatives of MERCOSUR that, assisted by the representatives that each State Party will appropriate, will verify the fulfilment of the requirements establishing themselves for the presentation of projects as well as the eligibility of them;

b) a technical instance within the framework of the MERCOSUR Registry, together with an Ad Hoc Group of experts laid to the provision by the States Parties, it will take charge of the evaluation and monitoring of the implementation of the projects;

c) dictates technical instancia will draw up a FOCEM budget forehead, effectuate the disbursements of resources in favor of the States Parties and analyse the results of the audits external provided for in Article 17 of this Decision. The MERCOSUR Registry will send the reports of its activities, and the budget bulkhead, to the Permanent Representatives Commission of MERCOSUR;

d) the Commission of Permanent Representatives of MERCOSUR will raise the reports received and its own to the MERCOSUR Common Market Group;

e) the MERCOSUR Common Market Group will elevate to the Common Market Council of MERCOSUR the budget blueprint and the projects, accompanied by their report, in accordance with the criteria that establish themselves in the Regulation;

f) the Common Market Council of MERCOSUR will approve the FOCEM budget and the projects to be financed, and allocate the corresponding resources as per the percentages of percentages set out in Article 10 of this Decision;

Art. 16-States Parties benefiting from the transfer of resources shall submit semiannual reports, to the corresponding instance, relating to the state of implementation of each project, in accordance with the specifications establishing themselves in the Regulation of FOCEM.

Art. 17-Projects that are executed will be subject to external audits, accounting and management, on the terms that establish themselves in the FOCEM Regulation.

Art. 18-In the execution of the projects funded by the FOCEM will be given preference to companies and entities based in MERCOSUR.

Regulation of FOCEM

Art. 19-The High-Level Group on Structural Convergence Of MERCOSUR and Financing of the Integration Process will draw up the FOCEM Regulation project until November 30, 2005. The project will be submitted, opportunely, to the consideration of the MERCOSUR Common Market Council, after examination by the MERCOSUR Common Market Group.

Art. 20-The FOCEM Regulation shall regulate all the procedural and institutional aspects of its functioning, in accordance with that set out in this Decision. In particular, it will specify the procedures to be complied with by the MERCOSUR Registry and set the limit of the FOCEM resources that could be intended for the administration of the same.

Art. 21-FOCEM will begin to work through the pilot project methodology with strong impact on the citizens of MERCOSUR. The Regulation will establish transitional procedures for the implementation and evaluation of such projects. This experience will guide the definitive formulation of the procedures and institutional aspects of FOCEM.

Vigence and Incorporation

Art. 22-A This Decision shall take place of ten years from the first contribution effected by one of the States Parties to FOCEM. Met that deadline, the States Parties will assess the effectiveness of the FOCEM programs and the convenience of their continuity.

Art. 23-States Parties should incorporate this Decision to their national legal ordinances.

XXVIII CMC-Assumption, 19 /VI/05