Bolivia’s entry adds to pressure on Mercosur
Inter Press Service | 18 Jan 2007
Bolivia’s Entry Adds to Pressure on Mercosur
Mario Osava
RIO DE JANEIRO, Jan 18 (IPS) — The economic inequalities undermining unity among the countries of Mercosur will become more urgent with the likely acceptance of Bolivia as a full member at the bloc’s summit being held Thursday and Friday in this Brazilian city.
Brazil’s foreign minister, Celso Amorim, has already declared in favour of upgrading Bolivia’s present associate status to full membership of Mercosur (the Southern Common Market), although it may need to be granted special terms, such as temporary exemption from the common external tariff, the bloc’s hallmark as a customs union.
This would allow Bolivia to import certain goods duty-free to overcome food shortages, for example, whereas other member countries levy import duties on such goods. But it would also provide Paraguay and Uruguay with fresh arguments in favour of their demands for more flexible conditions for their relatively small economies.
The entry of Bolivia, the poorest member of the group, accentuates the need for differential treatment to encourage development of the smaller economies of Mercosur, which was founded in 1991 by Argentina, Brazil, Paraguay and Uruguay, and was joined last year by Venezuela. Bolivia, Chile, Ecuador, Colombia and Peru are currently associate members.
Brazil, which has talked for a long time about its willingness to be "generous" to the smaller countries, is now proposing to lower the nationalisation index (percentage of components originating in Mercosur) for industrial products from Paraguay and Uruguay, so that they may export them tariff-free to other Mercosur members.
But Argentina also complains of asymmetries with Brazil, saying it is being swamped by industrial products from the largest country in the region and pointing to a large deficit in bilateral trade over the last several years.
As a result, last year a Competitive Adaptation Mechanism was adopted in order to reduce the imbalances, but little progress has been made.
The problem is reflected in Brazil’s relatively large trade surplus with its regional neighbours. In 2006, Brazil’s trade with its Mercosur partners — excluding Venezuela — produced a net surplus of 4.9 billion dollars on exports worth 13.9 billion dollars.
Uruguay’s exports to Brazil were only 61 percent of its imports from that country, and Paraguay’s were barely 24 percent. The situation is even worse for Venezuela, which has more than doubled its imports from Brazil in the last two years, and for Bolivia, which only achieved some sort of trade balance because of its sales of natural gas.
What is more serious is that Brazilian exports are for the most part industrial goods, while it imports virtually nothing but agricultural products from the rest of the region. It is unrealistic to expect major changes in this situation until well into the future.
Brazil’s express wish to employ resources from the Structural Convergence Fund immediately to promote development projects in underprivileged economic sectors and geographical areas will do little to alter the imbalances in trade and in the attraction of investment.
Mercosur has expanded in two ways since the first few years, when it was made up only of its four founding states. All the countries of South America except Guyana and Suriname joined as associate members between 1996 and 2004. And in August last year, Venezuela was accepted as a full member, as Bolivia is applying to do now.
The acceptance of Venezuela on benevolent membership terms, such as adaptation to the common external tariff over four years, and free trade with Mercosur by 2014, was a mistake, according to José Botafogo Gonçalves, president of the non-governmental Brazilian Centre for International Relations and former Brazilian ambassador to Argentina and to Mercosur.
As a potential Mercosur member, Bolivia would, like Venezuela, create a political risk of the kind that is inherent to nationalist governments that proclaim ill-defined socialism, say critics like Botafogo and other diplomats who steered the foreign policy of the previous Brazilian government under President Fernando Henrique Cardoso (1995-2003).
These are "ideological" criticisms by those opposed to Venezuelan President Hugo Chávez’s policies, but a far greater, "colossal", error would have been to refuse Caracas membership, historian Luiz Alberto Moniz Bandeira, who has written books on South America and its relations with the United States, told IPS.
The wave of nationalist and centre-left governments recently elected in Latin America favours, rather than hinders, South American integration and contributes to the expansion of Mercosur, because of the awareness that "it is necessary to join Brazil and Argentina" in order to withstand pressure from the United States, he added.
Disputes and conflicts are inherent to integration processes, and were frequent during the formation of the European Union, said the historian, who has been living in Germany for several years.
Paraguay and Uruguay "could not leave Mercosur" in spite of their dissatisfaction, because to do so would harm their interests and isolate them from the rest of South America, he said.
However, many people interpret the complaints by Paraguayan and Uruguayan government officials about the lack of benefits of integration for their countries as warnings that they might desert the bloc.
A trade and investment promotion agreement between Uruguay and the United States, to be signed at the end of January, may open the way to a free trade agreement in the future, according to some experts, but this would be unacceptable to Mercosur, as foreign minister Amorim has already warned.
The Mercosur summit in Rio de Janeiro, when Brazil’s six-year presidency of the bloc will be taken over by Paraguay, will not be able to settle all the uncertainties, but it will be an important indicator for the future of South American integration.
Eleven presidents from the region’s countries will be present at the meeting. The only one not attending is recently elected President Alan García of Peru.
