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SOUTH AMERICA: Mercosur Shares Social Concerns, Diverges on Economy

Mario Osava

COSTA DO SAUIPE, Brazil, Dec 16 2008 (IPS) - Concern over the social impact of the global economic crisis dominated the discussions at the Mercosur Summit on Tuesday, but economic proposals by some presidents underscored their ideological differences.

Left-wing Ecuadorean President Rafael Correa was in the forefront as the unofficial economic spokesman for the Bolivarian Alternative for the Americas (ALBA), pointing out three initiatives that, in his view, would have created better conditions for Latin America to face the crisis, had they been adopted earlier.

The Bank of the South, which could "coordinate our savings," would have generated resources to compensate for the loss of foreign investments and to maintain employment levels, he said. At this time of crisis, "a fiscal policy that promotes job growth" is needed, with public investment that the bank could have financed, he added.

Another measure he advocated was the creation of a fund to unite the foreign currency reserves of member countries, to bolster the South American bloc's balance of payments against possible threats. Combining the reserves and facing the risks in cooperative fashion would be less costly than doing it as individual countries, said Correa, whose country is an associate member of the Mercosur (Southern Common Market) trade bloc.

He also called for "a new regional financial architecture" to implement compensation mechanisms in regional trade and finance, in order to use foreign currency only for settling balances, while he recommended making progress towards a regional currency.

ALBA, an alternative bloc proposed by Venezuelan President Hugo Chávez, which has been joined by Bolivia, Cuba, Dominica, Honduras and Nicaragua, "has already decided to move forward" with the construction of "these three pillars," said Correa.

However, Ecuador has not yet joined ALBA, as it is waiting for the bloc to consolidate further.

Integration requires "concrete actions" such as these measures, to make the economies less vulnerable to external turmoil, Correa concluded.

A different economic vision of how to deal with the global crisis was expounded by Mexican President Felipe Calderón, of the conservative National Action Party (PAN), who said attracting foreign investment was "the only way" to achieve growth.

Latin America needs to recover the competitiveness it has lost and Asia has gained in the last three decades, and the lack of "legal guarantees" makes its situation worse, in a world in which "the low levels of investment funds available " cause investors to select economies that offer a more favourable environment, he said.

Calderón insisted that "opening up economies and trade" was needed in order to create jobs and wealth, and rejected protectionism. He also called for a "convergence of integration mechanisms," which could bring Latin America and Mexico closer together. At present Mexico has stronger ties to North America because of a free trade treaty.

Calderón took part in the Mercosur Summit as a guest, as did the presidents of Cuba and Panama. The three countries are members of the Latin American Integration Association (ALADI), Brazilian Foreign Minister Celso Amorim explained.

Argentina, Brazil, Paraguay and Uruguay are full members of Mercosur, and Venezuela is in the process of being admitted to full membership.

The presidents of Guyana and Suriname, the only South American countries that are neither full nor associate members of Mercosur, participated as observers, "as they have always done at Mercosur meetings in Brazil," Amorim said.

The summit meeting went smoothly, and all the resolutions agreed Monday at the Common Market Council, made up of the ministers of foreign affairs and the economy, were approved, Amorim said.

Brazilian President Luiz Inácio Lula da Silva highlighted the formalisation of preferential tariff agreements between Mercosur and India, and Mercosur and the Southern Africa Customs Union (comprising Botswana, Lesotho, Namibia, South Africa and Swaziland), as well as the expansion of the trade agreement with Chile to include services, as is also being pursued with Colombia.

The creation of a fund to guarantee loans taken out by small and medium companies, set up to stimulate this sector especially in Paraguay and Uruguay, is part of Brazil's commitment to "strengthening the smaller economies," said Lula, who announced that in 2009 "Brazil will double its contribution to FOCEM" (the Mercosur Structural Convergence Fund), created in 2005 to mitigate the asymmetries within the bloc.

"Protecting jobs and social inclusion" was a concern expressed by several of the presidents, in the context of a crisis which, in Lula's view, reflects the "perversions of the dominant economic system."

A declaration on "measures of social promotion and protection in response to the global financial crisis" was drawn up by social development ministers and authorities of the Mercosur member and associate states, reaffirming that the "ultimate goal of integration is improving the living conditions of the population."

Chilean President Michelle Bachelet backed that statement, and highlighted the fight against poverty and inequality. And as a paediatrician, she called for the reduction of maternal and infant mortality rates, in fulfilment of one of the Millennium Development Goals.

Meanwhile, the parallel Summit of the Peoples of Mercosur, held Dec. 12-15 in Salvador, the capital of the northeastern Brazilian state of Bahia, insisted that the cost of the crisis should not be paid by workers.

Social policies should be maintained, and Mercosur should institutionalise mechanisms to ensure permanent participation of social movements and civil society organisations in decision-making, they said.

Paraguayan President Fernando Lugo assumed the temporary presidency of Mercosur for the next six months, taking over from Lula.

Lugo promised to work for a "citizens' integration, not only of government officials, but of the people," with a "human face" and putting a priority on equality.

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