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Venezuela joins Mercosur: A new strategic alliance

CIP Americas 26/10/2012

Venezuela joins Mercosur: A new strategic alliance

by Raúl Zibechi

Venezuela’s entry into Mercosur has had interpretations centered on the economic and commercial aspects, but the most important it is a geopolitical and geoenergy matter. The region becomes a food and hydrocarbon power pointing to the Caribbean.

On July 31 when the entry of Venezuela into Mercosur was decided in Brasilia, presidents Dilma Rousseff and Cristina Fernández emphasized the importance of the new Mercosur in the framework of the world crisis that is summed up in the birth of a “new pole of power.”

During the meeting in Brasilia, Chávez and Fernández signed a joint agreement that is aimed at incorporating the nationalized YPF to the Orinoco Oil Belt and the incorporation of PDSVA to the oil and shale gas exploitation projects in southern Argentina. The accord anticipates the elaboration of a joint portfolio of projects in the area of petrochemical that includes a transfer of technology.

But the significance of the first expansion of the bloc goes far beyond, especially for Brazil who was its true promoter. In the ambassador Antonio Jose Ferreira Simões’ opinion, the entry of Venezuela “significantly alters the international weight of Mercosur” [1].

On the one hand, this is because an enormous energy power summed up by the fact that Venezuela possesses the largest proven petroleum reserves in the world now joins one of the principal producers of food in the world, that Brazil relies on the greatest discoveries in its offshore platform and Argentina counts on recently confirmed important resource deposits. To all of this should be added the immense water power of the Amazon and the Guaraní Aquifer.

“Mercosur is no longer a project centered in the Southern Cone and widens its capacity toward the Caribbean and Central America,” emphasized Ferreira Simões. But it also reinforces its Amazonian dimension and opens a “development perspective on the northern region of Brazil” [2].

All of the aforementioned implies a geopolitical turn of enormous dimensions. A bloc that not only looks toward the South Atlantic but that focuses on the Caribbean and Central America is sticking its nose into the oldest, most exclusive and most important zone of influence for the United States, one that was the trampoline for its global hegemony.

It is not just any step nor is it an improvised decision. Most importantly, it is a geostrategic response to the repositioning of Washington in the region.

Responding to the empire

A long article entitled “The United States, Venezuela and Paraguay” [3] by Samuel Pinheiro Guimarães, the most influential ambassador from Itamaraty, puts forward the nucleus of the Brazilian vision of the current world. He indicates that the central strategic objective of the United States entails “incorporating all of the countries in the region into its economy,” which means “a political alignment of the weakest countries with the United States in negotiations and in international crisis.”

At this time it would be looking to incorporate Brazil and Argentina into its zone of influence, considering that it deals with “the two principal industrial economies of South America.” In relation to Venezuela, Pinheiro Guimarães maintains that the election of Chávez in 1998 assumed to redirect the country toward South America, diversify its economy and exports, including to China, and the construction of infrastructure, carried out to break its traditional dependence on Washington.

This decision by Venezuela “affected head-on the strategic objective of the North American foreign policy of guaranteeing access to future and secure sources of energy.” For that reason Chávez began to be demonized by the White House and related media.

Most interesting, however, are the four consequences that Pinheiro Guimarães attributes to Venezuela’s entry into Mercosur:

“To hinder the removal of President Chávez through a coup d’état; to impede the eventual reincorporation of Venezuela and of its economic and energetic potential into the North American economy; to strengthen Mercosur and to make it even more attractive for the adhesion of the rest of the South American countries; to hinder the United States’ permanent project of creating an area of free trade in Latin America, now by the eventual “fusion” of the bilateral free trade agreements, of which the Pacific Alliance agreement is an example.”

Only to add that the previous paragraph was written by one of the most influential dignitaries in Brazil, a career official of the Foreign Ministry, ex-minister of Strategic Affairs during the Lula government, member of the Center of Strategic Studies of the Advanced School of War, editor of the project Brasil 2022, and an inspiration, among others, for the National Defense Strategy.

Unknowns to clear

This turn should not be interpreted as something definitive, but rather as just one more move on the regional chessboard. The conservative media emphatically questions Venezuela’s entry with political as well as economic arguments.

“The growing protectionism of the economic leaders of the bloc and their political position has reduced it to a shadow of itself,” argued a report from the agency Reuters, which upholds that Mercosur “has become a political club of leftist leaders that pursue the unity of Latin America” [4].

Each part is playing its cards. Five members of congress from the United States arrived in Asunción on Monday, August 6 to make their way to Ciudad del Este, on the Triple Frontier, with the objective of “better understanding the challenges of transnational crime that the Western hemisphere faces,” according to a press release from the United States embassy [5].

Brazilian diplomacy counterattacks putting forward the advantages that Paraguay will obtain with Venezuela’s entry into Mercosur, to whom it can sell food and grains, since Chávez’s country imports 70 percent of the food it consumes.

Ambassador Ferreira Simões’ analysis of the free trade agreements deserves separate mention, since it is speculated that Paraguay could go as far as signing a free trade agreement with the United States. “Studies from the IDB and ECLAC show that these agreements have null effect on the GDP and on income distribution” [6]. Since signing the free trade agreement, Chile’s exports grew 15 percent but its imports from the United States increased 200 percent.

Furthermore, he adds, the export pattern was concentrated: “Copper went from 56 percent of all exports in 2006 to 74 percent in 2009. That data shows that free trade agreements can be not as beneficial as they say.”

The former Minister of Foreign Relations and current Minister of Defense, Celso Amorim, referred to the other taboo that seems to hover over the region, the installation of a Pentagon military base in Paraguay: “It would be something so unreal that it would result in the long term isolation of Paraguay, and I don’t believe it’s worth it. I don’t think that will happen” [7].

The strategic Brazil-Venezuela alliance

The coup against the president of Paraguay Fernando Lugo on June 22 demonstrated that relations between Brazil and Venezuela acquired a degree of strength unforeseen years ago. And which covers all levels: from energetic to productive integration with special emphasis on subsoil resources. For Brazilian strategists it deals with the entrance of an emerging Caribbean power.

When Lula arrived to the government in 2003 a qualitative jump occurred in bilateral relations. In 2005 the Strategic Alliance Brazil-Venezuela was defined and in 2007 the quarterly presidential meetings began –something unprecedented that shows the depth of the alliance—that went on until 2010 to deepen an alliance that includes the integration of infrastructure and productive complementarity.

One of the principal results is a strong increase in trade. Of the 800 millions of dollars that were exchanged in 2003 it went to 5 billion in 2011. What’s new is that both countries strengthened institutional ties with consultancies in public policies, training courses that included the installation of the prestigious center of thought and investigation IPEA (Institute of Applied Economic Research) and Embrapa (state agricultural research company) in Caracas.

Perhaps one of the decisions of greatest magnitude was the decision to substitute one of the axes of integration of the Initiative for the Integration of Infrastructure in the South American Region (IIRSA), the Escudo Guyanés axis for the Amazon-Orinoco axis, where “comprehensive development” projects that are “the Brazilian paradigm of South-South cooperation” are implemented,” as the IPEA indicates [8].

Among the defined actions appear the integration of land, water and air transport systems, electrical energy integration and the possible construction of the postponed Southern Pipeline to interconnect Venezuela, Brazil and Argentina.

In the medium term the objective consists of establishing the interconnection of the Amazon and Orinoco Basins and the formation of a “common economic space” in northern Brazil and southern Venezuela, a space of “geostrategic importance” [9].

The analysis stresses “the quantity and quality” of the resources that the region possesses, which include biodiversity, watersheds, energy and iron ore, “among others,” that “awaken diverse interests and face a growing complexity of actors.”

The analysis from the center of Brazil’s thought and planning points out that the Amazon-Orinoco axis “creates a new frontier of Brazil’s rapprochement to the countries of the Caribbean basin in a context in which the foreign policy for regional integration widens South America’s area of action toward other regions of Latin America and the Caribbean” [10].

The “new frontier” appears linked to the creation of the Community of Latin American and Caribbean States, driven by Brazil in the same period.

The role of natural resources

In indirect language the Brazilian strategists insinuate the underlying reasons for this alliance. Venezuela is first in petroleum reserves in the world, third in bauxite, fourth in gold, sixth in natural gas and tenth in iron reserves. In the Brazilian state of Roraima, bordering Venezuela, lie the largest gold, niobium and tin reserves in the world, along with important deposits of thorium, cobalt, molybdenum, diamonds and titanium [11].

The most important and unsaid is that the region harbors the largest deposits of uranium in the world, shared by Brazil, Venezuela and Guayana Esequiba, a zone in dispute since 1966 between Venezuela and the Cooperative Republic of Guyana, formerly British Guiana. Since 2009 Canadian companies exploit uranium deposits in this region, something that is looked unfavorably upon by both Caracas and Brasilia.

The strategic alliance woven under the Lula government seeks to give greater economic, demographic and political density to one of the most important geostrategic zones on the continent. It deals with a comprehensive alliance that addresses issues from productive integration in agribusiness, civil construction, minerals and metallurgy, which function by cooperation between the free zones of Manaus and Puerto Ordaz, to infrastructure and staff training.

For both countries “occupying” the border zone is a response to Plan Colombia (that is, the Southern Command) whose zone of “natural” expansion is precisely the Amazon and particularly the Amazon and Orinoco river basins as well as the Andean region.

A large part of the economic relations with Venezuela rests in Brazilian construction multinationals, like Odebrecht, which carry out important work in the Bolivarian country. This is one of the Achilles heels of the “strategic alliance” which vividly contrasts with the type of cooperation that China conducts that encourages the creation of Sino-Venezuelan state businesses with the transfer of technology and the creation of management teams and techniques that benefit the country.

Relations between Brazil and Venezuela deepened in 2011. On June 6 Dilma Rousseff received a visit from Hugo Chávez and reaffirmed the strategic alliance between Brazil and Venezuela. In addition to signing agreements to deepen cooperation in areas such as petroleum, science and technology, Rousseff said that the alliance between Petrobras and PDVSA (the two state oil companies) would continue.

After oil, the priority is fixed on the border zone, which in the opinion of the Brazilian president “deserves policy and initiatives of interconnection of our systems, whether they are electric, television, highways and the integration of the productive chains” [12].

Brazil is contributing to promote the industrial development of Venezuela to reduce its dependence on oil exports, on the import of 70 percent of the food it consumes and of a large part of industrialized products through the coordination of the productive chains in both countries [13].

The IPEA indicates the interest in which Venezuela would be the provider of industrial supplies for northern Brazil so that complementary industrial chains are created in the border region in sectors like metallurgy, agribusiness and glass. The expansion of coke production in the Orinoco Oil Belt is being attempted, a product which Brazil imports in large quantities, in addition to the export of fertilizers that Brazil’s agribusiness needs.

Imperial Bad Mood

The alliance with Brazil, axis of integration into Mercosur, will play a decisive role in the consolidation of the Bolivarian process, beyond what happens with the government of Hugo Chávez, as Pinheiro Guimarães notes. A reality that forms part of the changes that are being produced in South America. For now Washington’s bad mood seems to focus on the important role of China in Venezuela.

An article in the Miami Herald this past July 9 assures that Hugo Chávez is sacrificing the sovereignty of the country for its economic alliance with China. Evan Ellis, professor at the Center for Hemispheric Defense Studies associated with the Pentagon, assures that the true owners of PDVSA are the Chinese banks, whose presence in the country is challenged as if a strong dependence on the United States never existed before.

Apparently, what is bothersome is that some of the areas granted to China belong to foreign businesses pressured by the government to leave the country. A large portion of the loans are described as future sales of oil under very favorable conditions for the Asian country. Resources begin to be assigned to specific projects, some of which are being performed by Chinese corporations, which would constitute a double benefit for China.

But the most shocking in Evans’ view is how he observes the presence of China in the region, although for now he focuses on Venezuela: “In the era of globalization having Chinese bankers as advisers is the equivalent of having military advisers from the Soviet Union in Cuba and Nicaragua during the Cold War” [14].

Raúl Zibechi is an international analyst for the weekly Brecha of Montevideo, professor and researcher on social movements in the Multiversidad Franciscana of Latin America, and advisor to several grassroots organizations. He writes the monthly “Zibechi Report” for the CIP Americas Program:

Translated by Libby Quintana

 source: CIP Americas Program