Analysis of Mercosur Summit
Analysis of Mercosur Summit
by Info on Fri 20 Apr 2007
18 and 19 January, Río de Janeiro, Analysis of the XXXII Mercosur Summit
Presidents Néstor Kirchner (Argentina), Luiz Inacio Lula da Silva (Brasil), Nicanor Duarte (Paraguay) y Tabaré Vázquez (Uruguay) met at the Río de Janeiro summit between 18 & 19 January in order to advance and consolidate the Southern Common Market (Mercosur). The focus was less on institutional strengthening of the block but more on looking for mechanisms to resolve the deep asymmetry in trading relations between nations. The incorporation of new members therefore remained a side issue.
During the summit the belief prevailed that economic and political integration is vital for the region. The decision to preserve and develop the South American Community of Nations was confirmed as the main source of hope for integration. The problem however was that each government focuses on the agreement based on their own interests. There still lacked a common idea of how to build the Community and to what point it should develop.
The countries of Mercosur committed to continue advancing their existing links with Chile, a trade associate, as well as with countries like Ecuador, Perú and Colombia.
The principle advances during the summit were probably concentrated in the debate around asymmetries which affect Paraguay and Uruguay. As a result, it was decided to give $70 million dollars to both countries to carry out the first pilot projects financed by the Fund for Structural Convergence (FOCEM).
Bolivia expressed its interest in becoming a full member of Mercosur, whilst preserving its membership of the Community of Andean Nations and based on a preferential treatment within Mercosur given its economic situation. A working group will analyse the request within six months, a deadline that can be extended for a further six months. The group will examine the modalities for such an incorporation considering the interests of all relevant countries. The Bolivian Foreign Minister David Choquehuenca explained that a process for becoming a member will take at least a year.
Venezuela requested its incorporation into Mercosur as a full member, but still has to comply with certain criteria before the respective protocol allows it to be ratified by the original members. Venezuela must incorporate Mercosur rules into its judicial system and adapt its tariffs and trade policies, in other words adopting the Common External Tariff (AEC) or the customs tax which applies to all members as well to approve the Mercosur Customs Code.
Conflicts in Mercosur
1. The situation in Mercosur at the moment is marked by great tensions. Diplomatic relations between Argentina and Uruguay are at their lowest ebb. The crisis has now lasted two years, and has led to almost non-existent contact between Presidents Kirchner and Tabaré Vásquez. Argentinian environmentalists ‘ with the support of their government have been protesting in the border areas with road blocks to try and stop the installation of paper plants financed by Finnish and Spanish companies Botnia and Ence on River Uruguay.
2. In the Summit, it was confirmed that Uruguay plans to sign a Free Trade Agreement with the US after having agreed in January a Trade and Investment Agreement (TIFA). The signals by Montevideo with Washington are considered by other members of Mercosur as very dangerous for the stability of the block as the eventual signing of a Free Trade Agreement would undermine a project of integration of South America. This has been evident in signings of other Free Trade Agreements across the continent. The visit by George Bush to Montevideo added to the uncertainty.
3. Uruguay and Paraguay threatened to leave the block and sign FTAs with the US in order to win markets outside the region. Brazil made efforts to keep Uruguay in the community by offering to compensate for the regional trade imbalances which are equal to $1 billion dollars. Brazil proposed allowing the installation of factories in Uruguayan territory that use up to 80% of imported parts yet would be allowed as exports to the community as if they were entirely national products, i.e. without having to pay customs taxes.
4. Argentina opposed the measure as it would imply the acceptance of maquiladores (sweat shop factories) within spitting distance of Buenos Aires, with potentially harmful consequences for its industries. Lula asked Argentina to be “generous” with smaller members of the block, but the Argentinean Industrial Union accused Brazil of being the principal cause of asymmetries in the region. According to the argentinean industries, “the principal asymmetries in Mercosur are based on the policies of Brazil in areas of national and state subsidies as well as in a series of trade barriers which close access to their market.”
Summit frictions
At the summit, President Evo Morales responded to his Mexican equivalent Felipe Calderón, who in front of various businessmen condemned nationalisation policies in South America. “I still haven’t had any contact with the new Mexican President, even though his colleague (referring to Vicente Fox) last year tried to discriminate, marginalise and publicly humiliate me. My information is that the new President is of a similar vein, but we can put up with any humiliation,” stated Morales who said Bolivia would never break relations with Mexico.
Morales also had a verbal exchange in the session of Presidents, with Alvaro Uribe, one of the US’s principal allies. The Bolivian mandate said that “anti-imperialist countries”, in which he cited Cuba, Venezuela, Argentina, are the countries that grew the most economically in 2006, whilst Colombia had a big fiscal deficit despite the funds it receives from the US for Plan Colombia.
Uribe defended US aid and called for ideological diversity within Mercosur. “President Morales: I have the same position whether I am in Caracas, La Paz, Washington or Europe”, he fired back. Morales listened in silence, but Chávez went out in his defence. “Lula, I want to say that Evo had no bad intentions in his remarks, the reply by Uribe was over the top.“ The Colombian mandate retorted: “I replied with respect as I can’t allow Colombia to be doubted.” “We can speak about this together afterwards,” concluded Chavez.
Dispute over hegemony
Mercosur has become a battle field for South American leadership between Brazil and Venezuela. It is reported that President Kirchner pushed for the entry of Venezuela as a member with the aim of controlling the power and influence of Brazil.
Brazil, which handed over the rotating presidency of Mercosur to Paraguay this term, tried to defend its leadership in the region. "President Lula has a good balanced role in South America: everyone can see this. It was for good reason that Correa, who was, in inverted commas, supported by Chavez, like Alan Garcia, who by contrast suffered from Chavez’s opposition, chose Brazil as the first place to visit after his election,” summarised Brazil’s foreign minister Celso Amorim.
Bush visited Brazil, Uruguay, Colombia, Guatemala and México in March 2007. The US clearly would like the strongest voice on the continent to be that of Lula and not Chavez.
Signs of economic and political independence
1. During the summit, there were concrete announcements, such as the start of the first stage of the Southern Gasduct, a controversial project of energy integration between Venezuela and Southern America as well as clear support by Brazilian and Argentinean Presidents for Chavez’s proposal to create a regional financial institution known as the (Banco del Sur) Bank of the South.
2. With Correa’s support, there was also consideration of a proposal to repatriate a good part of the region’s financial reserves that are currently deposited in banks in Europe and the US.
3. The heads of State also committed themselves to deepen the search for a path that would lead to the creation of monetary currency for inter-regional trade transactions.
4. There was openness to supporting the regional communications project of Telesur.
5. The leaders recognised that Mercosur is a political space for discussing ideas, and for even confronting each other if there is not agreement, recognising that all the countries of the region are “condemned” to move towards integration. This acceptance of the fundamental importance of politics is a direct blow against neoliberalism in the area of integration: the more discussion revolves around ideas, the less space there will be for those who argue that Mercosur and other regional entities should be solely subjected to the market and should just be about dividing work which is in the hands of multinationals.
Or as Ecuatorian leader Correa put it, the more the debate centres on ideas, our region will be less about the market and more about the construction of a real citizenry based on political, social and economic democracy.
New times?
The President of the Commission of Permanent Representatives of Mercosur, the Argentinian ex-vice President Carlos Chacho Alvarez, defended the anti-neoliberal profile of many countries of the Southern hemisphere: “For the first time, the region has political leaders that are equal to the region’s history of conflicts. It is a favourable moment to convert South America into a political, economic and social actor on the international stage which is so limited democratically today. We have an unprecedented chance to work towards a cycle of trade integration.”
But not everyone is so optimistic. In the IX International Meeting on Globalisation and Development, held in Havana between the 4th and 9th February, the Mexican economist and researcher John Saxe Fernández called CAN, Mercosur and the Community of South American Nations projects of integration based on “bland neoliberalism.”
Mercosur looks for more justice in terms of trade, it rejects FTAA, it establishes independence from the IMF and World Bank, but it maintains privatisation and the States have little participation in the decisions of companies. Mercosur’s members continue to permit the free movement of capital and maintain high interest rates which principally benefit multinationals.
According to Saxe Fernández, while these policies continue it will be impossible to construct a real integration of the peoples of Latin America, especially those in countries that have signed a FTA with the US.
The integration process in Latin America is permeated with multiple contradictions and interests, particularly as a result of the weakened but continuing neoliberal model in the region. The Mexican researcher warned too of the dangers of the Bank of the South being accepted by all the leaders, in order to finance private businesses and not to address the social changes that are needed on the continent.
Fifteen years after creating Mercosur, it has failed to sufficiently advance economic and political integration, and has failed to change the conditions of life for the majority of its population. In the words of President Morales, “we have had almost 15 years of Mercosur and forty of CAN and we are still discussing how to resolve the social problems in our countries.” He said that the experience of Latin America showed the importance of uniting in order to defend regional interests.
According to Hugo Chavez, of the 300 largest companies working in Mercosur, 40% are multinationals and another 37% depend on them, which means that only 23% relate to national companies from the five country members. “A good part of our trade is decided not by ourselves, but by these companies.” “Every country should have a greater presence of the State in the economy,” he suggested.
“The important thing is that we sit down to speak about integration,” said Ecuadorian President Rafael Correa with the aim of minimising the differences. He proposed Quito as the capital of the South American Community of Nations.
Lula Da Silva, in his welcoming speech as the outgoing temporary President of Mercosur, said “If we don’t resolve the issue of integration, there is no way out for Latin America.... Our great grandchildren will enter the 22nd Century in the same conditions as the 21st.”
