Economy & Trade, Headlines, Latin America & the Caribbean

SOUTH AMERICA: Mercosur Summit Brings Expansion as Well as Delays

Mario Osava

OURO PRETO, Brazil, Dec 17 2004 (IPS) - The Mercosur trade bloc expanded at this week’s summit to the point where it now encompasses nearly all of South America, in a show of vigour that stands in sharp contrast to the complaints of "assymetries" between its members and the difficulties in reaching agreement on the prompt implementation of certain key decisions.

Colombia, Ecuador and Venezuela joined Bolivia, Chile and Peru as associate members of Mercosur in the three-day meeting that ended with Friday’s summit in the southern Brazilian city of Ouro Preto.

The four full members of Mercosur (the Southern Common Market), which was created in 1991, are Argentina, Brazil, Paraguay and Uruguay.

Now Guyana and Suriname are the only South American countries remaining outside of some form of membership in the bloc. (French Guiana is an overseas department of France).

The associate members now outnumber the full members, underlined Chilean President Ricardo Lagos, who proposed doing away with the distinction between the two, arguing that it does not contribute to the aim of more profound, and not merely trade-oriented, integration in the region.

Panamanian President Martin Torrijos and Mexican Foreign Minister Luís Ernesto Derbez also expressed their countries’ desire to become associates of Mercosur, with Panama proposing to act as a kind of "bridge" to the other six countries of Central America.

But at this week’s summit, trade accords were also reached with more distant nations. Preferential trade agreements were signed with India and with the Southern African Customs Union (SACU), which consists of Botswana, Lesotho, Namibia, South Africa and Swaziland.

Although these agreements are limited, covering only 450 and 950 products on each side, respectively, they represent Mercosur’s first trade pacts with countries on other continents.

Negotiations with Morocco and Egypt will also begin next year, and preliminary talks are underway with China and South Korea, Brazilian President Luiz Inácio Lula da Silva reported.

However, the important agreements and decisions that emerged from the summit and pre-summit meetings of ministers did not conceal the bickering between members and complaints about shortcomings of the regional integration process.

These tarnished the symbolic significance of meeting in this colonial Brazilian city to commemorate the 10th anniversary of a historic summit.

Ten years ago, the presidents of the four full members signed the Ouro Preto Protocol, formalising the decision to convert their free trade accord into a customs union, thus eliminating tariffs and some other barriers that impeded trade with each other, while adopting common external tariffs on goods imported from outside the union.

But a decade later, the customs union is not yet complete, with thousands of exceptions to the common foreign tariff.

One measure that would help "perfect" the customs union, eliminating the double-charging of external tariffs – by which exporters often pay twice, once when the product enters Mercosur, and again when crossing the border of the final destination country – was one of the main issues discussed this week.

But that step will only begin to be taken in 2008, and gradually, in response to demands from Paraguay.

And while agreement was reached on another major decision, to create a Mercosur parliament, that will not happen until December 2006, after studies have been carried out to determine what specific shape it should take.

Nor did the approval of a structural convergence fund, aimed at reducing inequalities and assymetries between the countries, answer key questions, such as amounts and origin of the funds.

A May deadline was set for designing the new fund, with the aim of including the contributions from each member in the 2006 budget.

With the approval of this fund and a high-level group to draft a strategy to boost employment, Mercosur "has once again become an instrument of economic and social development," said President Lula.

In all, the presidents and ministers adopted over two dozen decisions and agreements, although most were of minor impact.

Among other initiatives, they approved the creation of a consultative forum of municipalities, provinces and departments (states), an education fund, and a Mercosur passport, and have agreed to organise a meeting of human rights authorities.

They also reached the decision to enter negotiations on the liberalisation of trade in services, preferential treatment for bloc member countries in government procurement contracts, and the creation of facilities and incentives for business activities.

A lengthy 51-point joint statement expressed the "satisfaction" of the four full member country presidents with the numerous resolutions and commitments adopted in the pursuit of fuller integration.

Their individual comments, however, reflected the frictions that persist within the bloc, despite their declarations of support for and confidence in Mercosur.

Argentine President Néstor Kirchner diplomatically spoke of the need to work towards common productive policies, balanced mechanisms for attracting investments and the industrial development of all of the bloc’s members.

"The benefits cannot all run in only one direction," Kirchner said, adding that the current asymmetries cannot be ignored, given the threat they pose to integration.

He did not, however, refer explicitly to the conflict that has emerged between Argentina and Brazil over the bilateral trade imbalance and relocation of companies, both aspects in which Brazil holds the advantage.

Uruguay’s Jorge Batlle, who will be handing over the presidency to leftist Tabaré Vázquez on Mar. 1, spoke out in defence of "integration from Alaska to Ushuaia" (the southernmost tip of South America, in Argentina), and maintained that foreign trade is the means to "promote the growth of the internal market, and not vice versa."

His comments were clearly intended as criticism of the resistance shown by the other Mercosur members to free trade agreements with the United States and the European Union.

Uruguay, a country without oil or natural gas, was hit hard by the recent crises in Argentina and Brazil. The country’s sales to the rest of Mercosur, which formerly represented 55 percent of all of its exports, fell to 25 percent, Batlle complained. He also called for greater integration in the science and technology sectors.

For his part, Lagos aimed his criticisms at the "institutional asymmetries" in Mercosur. Given the "discrimination" against associate members, a status now held by all of the Andean countries, including Chile, there are certain Mercosur institutions and mechanisms that exclusively apply to full members, limiting the integration of the others.

To illustrate, Lagos cited the example of Chile’s exclusion from the Mercosur dispute resolution system and the future Mercosur parliament.

Bolivian President Carlos Mesa also complained that the structural convergence fund will be limited to full members.