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Venezuela formally exits Andean nations and waits for Mercosur incorporation

MercoPress, Uruguay

Venezuela formally exits Andean nations and waits for Mercosur incorporation

24 April 2011

Venezuela formally exited the Andean Community of Nations, CAN, Friday when it stopped belonging to the free trade zone which for 38 years eliminated a full range of tariffs among its members (Peru, Ecuador, Bolivia and Colombia), announced the Venezuelan Foreign Affairs ministry.

“This April 22 Venezuela formally ceases to belong to CAN, although trade operations with Bogotá, La Paz, Lima and Quito will continue under other rules and principles”, said the release. “Since 2006 the Bolivarian nation is working to establish new trade integration schemes with Colombia, Peru, Bolivia and Ecuador, following its withdrawal announcement from CAN”.

In effect in 2006, to protest trade negotiations of Colombia and Peru with the United States, President Hugo Chavez announced his decision to abandon CAN and join Mercosur, as aspiration that remains locked at the Paraguayan congress which so far has not taken a vote on the initiative even when Argentine, Uruguayan and Brazilian lawmakers have supported the measure.

At the time Venezuelan President Hugo Chavez called the free trade agreements with the US an ‘imperialist’ instrument that only benefits US corporations.

Nevertheless as of this week Venezuela which enjoyed the full CAN preferential tariffs agreement will see that benefit substituted with bilateral agreements.

In recent weeks the administration of President Hugo Chavez signed trade agreements with Bolivia and Ecuador to boost ‘joint investments’ and ‘fair trade’. In the case of Peru and Colombia it was decided to extend for a further 90 days CAN benefits until a new set of norms for bilateral trade has been reached and agreed.

“New opportunities have opened and the vision of a Great Latin American economic nation integration into a joint economic zone” has been born added the official release.

However the expected departure has generated uncertainty amongst trade specialists in the region regarding the future of international commerce among Andean nations, which totaled over 7 billion US dollars last year.

“We’re leaving a framework that has advanced, with rules … and we’re going to something that we don’t know what it’s going to be” said Luís Alberto Russián, president of the Venezuela-Colombia business chamber. “The situation affects confidence; we don’t know what customs regulations will be applied as of Monday”.

But CAN Secretary General Adalid Contreras said earlier this week that the flow of trade among the countries wasn’t threatened because of substituting agreements, “Venezuela’s move will not greatly impact regional trade”.

In recent years, Chávez has championed a “Bolivarian” alternative for regional trade known as the Bolivarian Alliance for the People of Our Americas, ALBA, which was created by the governments of Cuba and Venezuela in 2004. It now counts six more member states including Bolivia, Ecuador, Nicaragua, and several small island states in the Caribbean.

Meanwhile the Mercosur option hasn’t proved that successful either in spite of forecasts because Venezuelan imports since 2006 have only increased 8.5%, and have so far been unable to compensate the 23% imports from CAN (mostly Colombia), particularly during the 2009/2010 crisis with Bogotá, when Venezuela virtually closed its borders to her second trade partner Colombia.

According to Venezuelan sources the “Great Latinamerican Economic Community” will be born next 5 July in Caracas when the 200th anniversary celebrations of Venezuela’s independence, when Mercosur, “obviously including Venezuela” will consolidate with the Pacific Agreement (Chile, Colombia, Mexico and Peru).

“We’re optimistic. Sooner of later we will have a positive answer from the Paraguayan people and Congress”, said Marcos Cabezas, Venezuelan Member of Parliament and former Finance minister.

“The incorporation of Venezuela has already been approved by the Executives and Legislatives from Argentina, Brazil and Uruguay and at the end “the Paraguayan congress will understand that the strategic vision of integration has no political colour”, said Cabezas.

“Integration means full respect for the ideological visions in Latin America and it is therefore possible to conceive integration with the diversity that will always be present in the different governments of Latin America”, added the Venezuela lawmaker.