Venezuela gains Mercosur entry, deepening relations

Venezuela Gains Mercosur Entry, Deepening Relations (Update1)

Dec. 9, 2005 (Bloomberg) — Venezuela today gained entry into the South American trade group Mercosur, a move pursued by President Hugo Chavez to help strengthen regional agreements and thwart a U.S.-sponsored accord for the hemisphere.

Venezuela, the world’s fifth-largest oil exporter, obtained ``special member’’ status in the bloc, which includes Argentina, Brazil, Paraguay and Uruguay, Uruguay Foreign Minister Reinaldo Gargano said. That designation will bar Venezuela from participating in votes by the bloc until the country reaches specific accords on tariffs with the other four members, Gargano said speaking at a Mercosur meeting in Montevideo, Uruguay.

Chavez’s push to join Mercosur is part of an effort by the former paratrooper to spread his influence across the region through energy projects and purchases of government debt. At a meeting of Americas leaders last month in Argentina, Chavez took part in an anti-U.S. protest and vowed to bury U.S. plans to create a Free Trade Area of the Americas.

Joining Mercosur ``is part of Chavez’s strategy of building relations to strengthen Venezuela’s position in its confrontation with the U.S.,’’ said Boris Segura, who helps manage $800 million in emerging market debt at Standish Mellon Asset Management in Boston. ``And he’s been using his deep pockets from the oil revenue to buy his way into the region.’’

Venezuela already is a member of the Andean free trade association, which includes Colombia, Ecuador, Bolivia and Peru. Venezuela’s two largest trade partners are the U.S. and Colombia.

``Chavez is looking south,’’ said Vitali Meschoulam, an analyst with HSBC Securities USA in New York. ``This is part of his strategy of diversifying his customers and suppliers but this is also a political statement.’’

Two Visions

U.S. President George W. Bush, in a veiled reference to Chavez during a speech Nov. 10 in Brasilia, Brazil’s capital, said the region had two visions to choose from.

``One offers a vision of hope,’’ said Bush. ``The other seeks to roll back the democratic process of the past two decades by playing to fear, pitting neighbor against neighbor and blaming others for their own failure to provide for their people.``

Venezuela benefited this year from record-high oil prices. The country has the world’s eighth-largest natural gas reserves, totaling about 151 trillion cubic feet. Chavez has proposed building a $4 billion, 6,000-kilometer (3,730-mile) natural gas pipeline to Argentina from Venezuela.

Venezuelan Foreign Minister Ali Rodriguez on Nov. 21 said the South American country and its state-owned oil company anticipated no problems with financing.

Uruguay President Tabare Vazque said Venezuela’s entry into Mercosur ``shows that it is possible to expand Mercosur from the Rio Bravo to Tierra del Fuego.’’

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source: Bloomberg