At last, Venezuela in MERCOSUR

Umberto Mazzei

06/08/2012

Opinión

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The entry of Venezuela into MERCOSUR complements its abandonment of the Andean Pact (Cartagena Agreement). It should have happened in immediate sequence because Venezuela signed its accession in 2006, but was delayed by the obstinacy of the Paraguayan Senators, the same actors that unseated President Lugo in a summary trial without defense and that, due to such undemocratic behavior, were suspended from MERCOSUR.

The Andean Pact has congenital weaknesses, because there cannot be integration between economies that are not complementary but compete among themselves. It is a partnership between oil-producing countries which tend to produce commodities and low-tech products and import capital-intensive goods or high technology ones. The presence of Venezuela was inconsistent, because mountains do not unite but divide. The other Andean members are united by the Pacific Ocean, but Venezuela is on the Atlantic.

MERCOSUR, instead, is an integration agreement between different economies that Venezuela will complement in energy, basic industries and a strategic and political bond. Therefore, Venezuela’s membership can be analyzed from a geographic, economic and political perspective. Several distinguished analysts such as Atilio Boron, Edelcio Vigna, Oscar Laborde, Marcelo Saguier, John Romero, John Karl, Miguel Barrios and Emilio Marin have already written on the subject, so I will try not to be repetitive.

The Economic Perspective

MERCOSUR Trade 2008 – 2011. Goods (€ billions) Source: IREI Geneva, with data form ITC Trade Map
	World		EU 27		China		USA		ALADI
	Exp.	Imp.	Exp.	Imp.	Exp.	Imp.	Exp.	Imp.	Exp.	Imp.
2007	163	129	38	26	18	12	24	24	45	33
2008	189	169	42	32	27	17	26	29	51	41
2009	156	129	32	26	24	14	18	24	40	32
2010	209	192	42	37	35	25	22	34	51	46
2011	249	226	50	43	43	31	27	40	63	55

The table presents trade exchange by MERCOSUR before Venezuela’s membership. Amounts are in Euros because as a reference it is more stable than the Dollar. The figures show its growing importance as a global trade bloc because, unlike the U.S. and Europe, its trade grows and is redirected. One detail that is often omitted is that the ALADI countries are its major trading partners (€ 108 billion). They are followed by the BRICs (€ 103 billion), the European Union (€ 93 billion) and China is the main single partner (€ 74 billion). Intra-bloc trade reached 68.352 million euros and is 16.3% of the bloc's total trade.

MERCOSUR exports cover a wide range of products because of the diversity of the members' economies. With Venezuela’s full partnership the group ceases to have energy security as its weakness, even though there were already offshore oil wells in development in Brazil. With Venezuela's entry, MERCOSUR's GDP rises to € 2,230.7 billion and it is now the fourth largest trading bloc after the EU, NAFTA and ASEAN. Here are its members' main features.

Brazil (€ 1,808.3 billion GDP) is a country of very good scientific and technological development, with a large domestic market, but its different levels of development, and marked cultural and economic differences between a prosperous South and poor and unequal North, involves a risk of disintegration. In the US there are textbooks that propagate the lie that the Amazon was entrusted to them by the UN for protection ...

Argentina (€ 343 billion GDP) is a country with very high scientific knowledge and good technological level, which make it outstanding in some areas. It has a mid-market with good purchasing power because of a consistent level of national development. Cultural differences between the capital and the provinces are complementary. The cause of past economic troubles problems were ideological and political mistakes supported by something of an "oligarchic culture" (tilinguería), obsessed with status symbols and shared by broad sectors of the middle class.

Uruguay (€ 40 billion GDP) is the only Latin American country that did not became independent from Spain, but from Brazil. Its economic and cultural identity is very close to Argentina and its development level is equally smooth. It is characterized by the quality of the labor sector and by its social spending. Its main export market is MERCOSUR, although it has complaints over Brazil's protectionism.

Paraguay (€ 18 billion GDP) is a tragic country. As from its Jesuit past it had industries that made it the most autonomous Latin American country, until the Triple Alliance War (1865), that left the country in ruins. In the 1930’s there was the Chaco War imposed by foreign oil ambition. Paraguay has a very unequal revenue distribution, but is culturally homogeneous. Its economy is based on agriculture and it has income from electrical power (Itaipu and Yacyretá). Most of its exports go to MERCOSUR and it imports a lot, keeping a very unfavorable trade balance with the US.

Venezuela (€ 292 billion GDP) is the only American country that was never involved in a war with its neighbors. Its economy is anchored on its oil industry and it has an industrial capacity for exploitation to an intermediate level of its mineral resources. Membership in MERCOSUR will translate into lower food prices and new opportunities in technology and management. Venezuela is likely now to apply WTO countervailing duties to curb imports of subsidized U.S. grain in order to favor un-subsidized imports from its new partners.

The geopolitical perspective

MERCOSUR is formally an economic integration agreement, but economics tend to also involve political issues and even military ones. Venezuela's entry brings novelties in geographical, economic and political strategy. We will cite the most obvious ones:

Geographic.
A) It expands MERCOSUR borders from Antarctica to the Caribbean and from the Atlantic to the Andes;

B) The integration project itself now covers a huge land mass that contains all imaginable resources, an El Dorado, with plenty of navigable rivers and sea coast;

C) With Venezuela, the bloc now contains watersheds and water resources of the three great rivers of South America: Amazon, Orinoco and Parana.

Economics.
A) MERCOSUR becomes the other center of economic gravity in America. After NAFTA there was ALCA which was intended to underwrite the rest of the Americas as vassals to international corporations, but it failed. In Washington it was then decided to engage countries one by one, with a network of identical deals dubbed Free Trade Agreements. MERCOSUR and ALBA kept out, with the exception of Nicaragua, which signed the CAFTA. Venezuela kicks off a tendency for MERCOSUR to harbor all the other independent countries.

B) The financial capacity and technical expertise of its partners can now develop projects that combine bloc entrepreneurial partnerships. For Venezuela, it presents the possibility of developing the potential of its agricultural sector and improving its food sovereignty.

C) It confirms a policy orientation different to the Washington Consensus. MERCOSUR governments have the political legitimacy (except for the Paraguayan usurper) to carry out policies that combine, with different nuances, nationalism and social awareness, with private initiative.

Political and strategic
A) It is no secret that the neoliberal propaganda machine seeks to discredit and isolate the Venezuelan government, as was the case of the Paraguayan senators responsible for the Coup, that denied Venezuela entry into Mercosur because they claimed it did not have a democratic government. It is the refrain sung in circles upset with Hugo Chavez’ art of captivating the masses. Full partnership of Venezuela in MERCOSUR prevents isolation and makes Regime Change very difficult by other than electoral means.

B) The economic, cultural and even linguistic differences between the North and South of Brazil could be exploited for separatist movements. There are already writings which say Amazonia is run from Washington. It is not "conspiracy theory", Kosovo, Libya, Syria are concrete and recent examples of armed revolts inspired and supported by Washington and its partners. Venezuela’s membership makes that possibility more remote and allows for collaboration in developing the north of Brazil.

C) The proliferation of U.S. bases in Central America, the Caribbean and South America is indeed intended to make possible a military intervention in South America in general, but the obvious target is Brazil, it is enough to look at their location to see where the range converges. If we add the reactivation of the Fourth Fleet of the U.S. Navy, just as Brazil struck oil at sea, the suspicion is confirmed. Venezuela's entry will allow for a strategy of greater collaboration on deterrent capacity, coverage and projection.

Conclusion

With Venezuela, MERCOSUR grows and gains strength as the only American option to counterbalance the power of Multinational Corporations that rule in Washington, London and other capitals. A growing MERCOSUR offers the possibility of applying its own policies, aimed at economic development, but also at political and social progress and military stability in the region. In order to develop and consolidate such a network of common interests in 4 years, it is necessary for Venezuela to keep its present integration policy. Unfortunately, the opposition has reacted in a negative way; by what can be read in the press, it seems inclined to dissociate from MERCOSUR and instead sign a Free Trade Agreement (FTA) with the U.S.

Geneva, 05/08/2012

- Umberto Mazzei has a PhD in political science from the University of Florence. He has taught international economics at universities in Colombia, Venezuela and Guatemala. He is Director of the Institute of International Economic Relations in Geneva.

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