ECONOMY-VENEZUELA: MERCOSUR Offers the Lure of Brazil

By Estrella Gutiérrez Reprint | | Print |

Estrella Gutierrez

CARACAS, Feb 21 1995 (IPS) - The creation of a South American Free Trade Area (SAFTA) between the Southern Cone Common Market (MERCOSUR) and the Andean Group holds a special lure for Venezuela: its giant southern neighbour, Brazil.

On Feb. 22-23 in Montevideo, Uruguay, vice-ministers from the members of the two sub-regional blocs which began to function this year as unified customs systems will begin to formally negotiate the creation of SAFTA, a free trade area that would have a potential market of 300 million people.

The government of Rafael Caldera has made relations with Brazil its new top foreign policy priority, and during the first year of the administration the only official visit made by the president was to the Brazilian capital, Brasilia, in September.

Brazilian President Fernando Henrique Cardoso plans to visit Caracas in May, and has also accorded Venezuela high priority, following relations with the MERCOSUR – Argentina, Brazil, Paraguay and Uruguay – and with Chile.

Government officials and members of the Venezuelan business community see negotiations between the four MERCOSUR nations and the five Andean Group countries – Bolivia, Colombia, Ecuador, Peru and Venezuela – as a multilateral “bridge” with Brazil.

“The accord could help Venezuela strengthen ties with Brazil, a strategic objective,” Pedro Carmona, president of the chemical industry association – the country’s most dynamic private sector in terms of exports – told IPS.

“Our big MERCOSUR market is Brazil and that is the country with which we have made the most progress…in the bloc,” foreign trade minister Alberto Poletto has said.

In late January Poletto became the first Venezuelan minister to carry out a working visit to Brasilia since Cardoso entered office, while in 1994 bilateral meetings abounded, and trade and border agreements were signed.

Rafael Alfonzo, president of the Venezuelan-Brazilian Chamber of Commerce and Industry, told IPS that placing products from Venezuela in Boa Vista, a city in Brazil’s extreme northeast, is half as expensive as bringing goods from Brazilian industrial centres such as Sao Paulo, 5,000 kilometres away.

In July, the two governments signed an accord in Caracas that expanded the list of goods receiving mutual commercial preference to 1,400 products and established norms for trade between the two countries.

Poletto said the potential for trade between the two neighbours is much higher than the 1994 turnover of only 135 million dollars, 47 million of which represented Venezuelan exports, above all if “regional integration” is achieved and progress is made in negotiations in strategic areas such as oil, gas and electricity.

The state-run Venezuelan Petroleum company and Petrobras of Brazil have begun to discuss future accords while the state-run firm that runs the Guri hydro-electric dam in the Venezuelan state of Bolivar is negotiating the exportation of electricity to the bordering Brazilian states of Amazonas and Roraima.

Meanwhile, the presidents of the MERCOSUR and Andean Group member countries have agreed, in separate summits, to push for SAFTA to be fully in effect by 2005.

The countries also hope for the participation of Chile, which is negotiating a free trade relationship and investments with the Southern Cone, and has reached or is in the process of negotiating bilateral free trade accords with the Andean countries.

Venezuelan trade with the MERCOSUR up to now has been relatively insignificant. In 1994 only two percent of the country’s non-oil exports went to the bloc, while only six percent of its imports came from the area.

But Poletto stated that despite the differences in the economies of the two countries, Brazil could become Venezuela’s “Colombia of the MERCOSUR”, referring to the dynamic trade between the two Andean neighbours which share 2,210 kilometres of border.

In 1994, the Andean Group did a total shared trade of some 3.4 billion dollars, of which 1.6 billion were represented by trade between Colombia and Venezuela, despite the recession and Venezuela’s exchange rate controls.

“After strengthening the relationship with Colombia in the Andean Group, and with the creation of the Group of Three free trade area, which the two countries share with Mexico, the time has come to concentrate on the south, and the south is Brazil,” Poletto has said.