New context helps economic drivers face threats
Inter Press News Service
New Context Helps Economic Drivers Face Threats
Analysis by Gustavo González
6 September 2006
SANTIAGO, Sep 6 (IPS) - Shifting world dynamics mean that a proposed overhaul of the U.S. tariff preference system threatening to exclude Argentina, Brazil and Venezuela — the three main countries currently driving trade within Latin America — needs to be examined in a global context.
The Montevideo-based Latin American Integration Association (ALADI) reported in August a 110-percent increase in trade among its 12 member countries since 2003. The association gave credit to Brazil as the major force behind the expansion, followed by Venezuela and Argentina, along with Chile, Mexico and Colombia.
The excellent intraregional trade levels of recent years grew against a background of U.S. failure to push through the Free Trade Area of the Americas (FTAA) and obstacles to Washington’s efforts to nail down treaties with members of the Andean Community trade bloc.
In mid-August, Bush floated the proposal to limit, suspend or withdraw concessions that the Generalised System of Preferences (GSP) currently grants for Argentine, Brazilian and Venezuelan products entering the U.S. market, unless their governments sign on to White House trade-integration models.
However, the United States, despite its position as a hegemonic power in the unipolar, post-Cold War world, does not seem to have the economic clout to impose "sanctions reminiscent of the ancient Roman Empire on countries that do not toe its policy line," said Argentine President Néstor Kirchner.
ALADI, founded in 1990 to replace the defunct Latin American Free Trade Association, comprises 10 Spanish-speaking countries from South America, as well as Mexico and Cuba.
The association’s report on this year’s outlook described the region as gaining relative autonomy, and moving away from its traditional trade dependence on industrialised economies.
ALADI’s general secretariat predicted that internal trade this year would climb as high as 94 billion dollars — four billion more than preliminary forecasts, representing growth of 21.2 percent over 2005 intraregional trade levels.
The report, which draws on data from 11 countries (up-to-date statistics were not available for Cuba), shows that in 2003 just 43 billion dollars worth of goods were traded within the ALADI zone.
Brazil, under the Luiz Inácio Lula da Silva administration, is the number-one driver of regional trade. It is followed by Venezuela under Hugo Chávez, with that country’s increasing oil exports to other South American countries representing 14 percent of the region’s trade.
Chile, Mexico, Colombia and Argentina each will account for approximately 11 percent, while Peru and Uruguay will contribute eight and seven percent, respectively.
ALADI’s general forecasts for this year predict a favourable trade balance for the region, with overall exports totalling 620 billion dollars and imports reaching 520 billion, reflecting an 18.9 percent increase in sales and a 17.7 percent increase in purchasing, as compared to 2005 figures.
The regional organisation also cited International Monetary Fund (IMF) estimates that show Latin America’s percentage of world sales increasing to 5.5 percent in 2006, up from 5.1 percent in 2005.
This places Latin America’s major economies in line with world trends where trade is recognised as the major driving factor, but with different central protagonists.
While a 3.8 percent growth rate is predicted for the global gross domestic product (GDP) in 2006, GDP growth in Latin America and the Caribbean is forecast at five percent, according to a report released late July by the Santiago-based U.N. Economic Commission for Latin America and the Caribbean (ECLAC).
Developing countries as a whole will reflect growth rates of six percent, largely driven — as over the past five years — by China’s continued economic boom, which has had positive ripples throughout South America.
ECLAC found that, compared to the 1990s, South America’s economic terms of trade were up 31 percent in 2005; however, if Venezuela and Chile are taken out of the equation the increase is closer to 10.3 percent.
Both Venezuelan oil and Chilean copper continue to feed the seemingly endless demand of the Asian giant, one of the top consumers of both materials, which are fuelling its rapid industrialisation and urbanisation.
On Aug. 24, Chilean President Michelle Bachelet signed into law the free trade agreement with China reached in 2005 even as Chávez was visiting Beijing to ensure support for the election of Venezuela as a future rotating member of the U.N. Security Council and to increase sales of crude oil to the Asian country.
The "China Factor" throws another element into the mix, creating a scenario more complex than U.S. attempts to use tactics such as GSP exclusion to put pressure on countries reluctant to buy into its trade integration strategies.
Peruvian economist Ariela Ruiz suggests that if Chile joins the Andean Community as an associate member, this would boost the U.S. strategy of isolating Argentina, Brazil and Venezuela (members of the Mercosur trade bloc).
In the meantime, Washington has been seeking bilateral treaties with countries like Colombia and Peru, and smaller economies like Paraguay and Uruguay.
Peru’s new President, Alan García, has proposed an October visit to Washington to persuade the U.S. Congress to ratify the free trade treaty signed by his predecessor, Alejandro Toledo. Also pending is the ratification of the free trade agreement with Colombia, whose president, Álvaro Uribe, is Bush’s strongest ally in the Andean Community.
The two other members of that bloc, Bolivia and Ecuador, would like to see an extension of GSP trade concessions rather than negotiate bilateral free trade deals with the United States. However, the latter scenario would become more likely if the Andean Community were to admit Chile, the second Latin American country (after Mexico) to sign a free trade agreement with Washington.
In Ruiz’s analysis, the emergence of a "Pacific axis" encompassing Chile, Colombia and Peru would put pressure on Bolivia and Ecuador and, at the same time, support Bush’s intention to negotiate bilateral treaties with Paraguay and Uruguay, the smaller members of Mercosur.
The accuracy of this picture, painted in broad strokes with classic images of U.S. hegemony, comes into question because of changes in the global economy as a result of factors such as China — the strongest developing nation in the World Trade Organisation — and strong intraregional trade in the ALADI zone.
