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Grim present, dim future for Andean integration

Inter Press Service | 26 December 2007

CHALLENGES 2007-2008: Grim Present, Dim Future for Andean Integration

By Humberto Márquez *

CARACAS, Dec 26 (IPS) — The Andean countries are passing through the gates of the new year with their trade bloc, the Andean Community of Nations (CAN) — the oldest and most structured regional integration agreement in the Americas — fraying at the edges.

Currently made up of Bolivia, Colombia, Ecuador and Peru, CAN has had to absorb the blow of Venezuela’s outright refusal to return to the bloc which it left in 2006. And although Chile has rejoined, it has only done so as an associate member.

Venezuela’s rejection of re-entry was a consequence of the diplomatic row between Bogotá and Caracas, which erupted when Colombian President Álvaro Uribe abruptly put an end to Venezuelan President Hugo Chávez’s role as a mediator between the FARC guerrillas and the Colombian government, in search of a humanitarian exchange of hostages held by the insurgents for imprisoned rebels.

A breach has thus opened up between the South American government closest to Washington (Colombia) and the one most critical of it (Venezuela).

Of the four current CAN partners, two (Bolivia and Ecuador) have left-leaning governments, two are in favour of a free market economy (Colombia and Peru), and all of them pay scant attention to the bloc as a whole when it comes to foreign policy and international relations.

Venezuela’s departure has left CAN bereft of the chief engine which drove trade and energy relations in the group. Trade between Colombia and Venezuela, which is expected to total six billion dollars in 2007, is equivalent to the sum of all other intra-bloc exports.

The flow of trade between Colombia and Venezuela generates one million jobs, Fernando Gerbasi, a former Venezuelan ambassador to Colombia, told IPS. Colombian companies that export products to Venezuela employ about 700,000 workers, and another 300,000 people work for Venezuelan firms that export to Colombia.

The bloc was also establishing cooperation in energy. On Oct. 12 a gas pipeline connecting northern Colombia and Venezuela was inaugurated. On that occasion, Presidents Uribe and Chávez and Ecuadorean President Rafael Correa, attending as a guest, were to discuss possible terms for Caracas to rejoin the bloc.

Those plans, and others for a trade and cooperation agreement with the European Union (EU), must now take a back seat, while the Bogotá-Caracas conflict burns on, Bolivia is in upheaval over its new constitution, and Ecuador embarks on rewriting its own.

Peruvian Foreign Minister José Antonio García Belaúnde told IPS that the bloc is facing two major challenges: negotiating a free trade agreement with the EU and defining the areas in which the partners can move forward in terms of integration.

CAN secretary-general Freddy Ehlers is working on those two fronts, after underlining this month that the Andean nations "have participated with a single voice" in the talks towards an agreement with the European bloc.

The member countries also presented a unified stance at this month’s global climate change conference in Bali, Indonesia.

But analysts point to the underlying weaknesses. "The Andean Community is reeling. On top of its economic, political and organisational problems, this distancing between Venezuela and Colombia has caused a deep division," Elsa Cardoso, a professor of International Studies at the Central and Metropolitan Universities in Caracas, told IPS.

Unlike Venezuela, the other Andean countries are not attractive markets for Colombia, said Cardoso. Peru is focusing its efforts on negotiating a Free Trade Agreement (FTA) with the United States, and in the long term looks to the Pacific rim region. Ecuador’s main markets are far away, in North America and Europe.

Bolivia, meanwhile, has strong links with the Brazilian economy, and supplies natural gas to that country’s industrial southeast.

However, Gary Rodríguez, of the Bolivian Institute for Foreign Trade (IBCE), told IPS that the Andean Community buys 10 percent of Bolivia’s exports — 400 million dollars in agricultural products — while an additional 200 million dollars worth of goods are sold to Venezuela.

Félix Arellano, a university professor who formerly represented Venezuela at the CAN, said the community is experiencing "a process of disintegration; it presents itself as a free trade zone, but the dream of a common market is a far-off one, since it isn’t even a customs union yet, and has no common external tariff."

"The CAN could be a political or social bloc if its actions were consistent with its words, but social agreements are being reached only very slowly, and in the political terrain, explosive and confrontational reactions like that of the Venezuelan government have obviously done a great deal of damage," Arellano said.

The expert said that while Venezuela’s withdrawal was irrational, it was not the only development that affected the community. Colombia and Peru, by unilaterally negotiating separate FTAs with the United States, have also harmed the unity of the bloc, he added.

But García Belaúnde maintained that an FTA between Peru and the United States would not affect CAN. "Besides, in the past we had the cases of Colombia and Venezuela, which reached agreements with Mexico (the Group of Three, which emerged in 1994), that did not affect the bloc’s integration process," he argued.

For her part, Peruvian legislator Lourdes Alcorta remarked to IPS that "we will feel Venezuela’s absence, but we can’t force it to rejoin." At any rate, in her view, CAN "is working well, has resources and plays a key role, especially in today’s convulsed region."

The Andean Community "has been affected by political fragmentation throughout the subregion, and there is no sign of this easing. On the contrary, tension is increasing, as shown by the present situation between Bogotá and Caracas," said Venezuelan university professor Héctor Maldonado.

Although Venezuela pulled out of the community, "it should abide by the bloc’s free trade and reciprocity rules for a five-year period. But the partners never signed concrete agreements to that effect, which shows just how fragile the bloc’s institutions are," Maldonado told IPS.

Ernesto Velit, a Peruvian expert on international affairs, agreed that "CAN is facing one of its most difficult moments, especially because of the political problems shaking several of its members," particularly Bolivia.

Velit said CAN should be unified enough to be able to call together its member governments "to deal with the internal crises of its partners and come up with solutions. Without that, it will continue to steadily weaken."

CAN, created in 1969 and known until 1996 as the Andean Pact, has several institutions, including a parliament, a dispute settlement mechanism, an employers’ and employees’ council, and a general secretariat.

Over decades, its council of permanent representatives has approved a great number of resolutions which have the status of supranational legislation.

Its most successful initiative is the Andean Development Corporation (CAF), a multilateral financial institution which lends more than four billion dollars a year within the subregion, mainly for infrastructure projects.

The bloc has also signed cooperation agreements for healthcare, education and food security. Maldonado said the bloc’s Hipólito Unanúe Health Agency "has quietly developed programmes to combat malaria, and has energetically acquired anti-retroviral medicines" for HIV/AIDS patients.

On the positive side, whereas years ago the Andean Community only permitted free passage of goods within the subregion, now people can also travel freely with just their national identity document, and regulations and social security issues for Andean workers are now agreed by the whole community, Maldonado said.

But experts agree that few efforts have been made to make the bloc’s agreements relevant to ordinary people.

They also say that the current crisis in the Andean region comes at a time when, in spite of the original pact’s intentions to improve social conditions, there has been hardly any progress in dealing with longstanding challenges like poor governance, the breakdown of political parties, violence and drug trafficking.

* With additional reporting by Franz Chávez (Bolivia), Ángel Páez (Peru), Constanza Vieira (Colombia), and Kintto Lucas (Ecuador). (END/2007)

 source: IPS