By Marcela Valente
BUENOS AIRES, Apr 25 2006 (IPS)

Coming from presidents, statements like “Mercosur is not useful” or “the Andean Community is dead” sound like death sentences. But some observers believe that the crises facing South America’s trade blocs, which were rising stars in the 1990s, could lead to a South American integration process based on new foundations.

“The only alternative” for the members of Mercosur (Southern Common Market) and the Andean Community is the integration of South America, where Argentina and Brazil are the main motors of growth, expert in international relations Marcelo Gullo told IPS.

“That would allow the nations to move together towards an industrialisation process, which is the only route to modernisation,” added the political scientist, the author of the book “Argentina-Brazil: The Big Opportunity”.

If that does not occur, countries that sign free trade agreements with the United States, as Colombia and Peru have done and Ecuador is planning on doing, can only aspire to remaining suppliers of raw materials, he said.

Gullo said the South American integration process, anchored in the region’s two biggest economies, should find strength in adversity as a result of the crises faced by Mercosur – created in 1991 by Argentina, Brazil, Paraguay and Uruguay – and the Andean Community – made up of Bolivia, Colombia, Ecuador, Peru and Venezuela.

A late 2004 summit in Peru gave birth to the South American Community of Nations, made up of the members of the two blocs, plus Chile, Guyana and Suriname. But so far, the process remains only on paper.

Although Vázquez was specifically referring to the conflict between his country and Argentina over the construction of two paper pulp plants on the Uruguayan side of a border river, his criticism went beyond the dispute.

“We need a better Mercosur, where, for example, the big members do not resolve their own energy problems and later inform the rest of the partners,” he said, alluding to Uruguay and Paraguay, the members of the bloc that have been sidelined by the arrangements between Argentina, Brazil and Venezuela to build a gas pipeline running across South America from north to south.

President Duarte joined the criticism, lamenting the hurdles to trade that have been put in place by the governments of Argentina and Brazil. “Mercosur must become a platform for development, integration and solutions, and must be based on equality between its partners,” said the Paraguayan leader.

The Andean Community was also shaken last week, by remarks by Chávez, who now holds the rotating presidency of the bloc that emerged in 1969 as the Andean Pact.

The Venezuelan leader – whose country is in the process of becoming the fifth full member of Mercosur – stated during the presidents’ meeting in Asunción last week that the Andean Community “is dead” and announced that Venezuela would withdraw from the bloc.

“The Andean Community is finished, it is dead, it has been trampled by neoliberalism,” said the Venezuelan president.

For Chávez, the proof of the bloc’s demise lies in the bilateral free trade agreements that Colombia and Peru have signed with the United States. These trade pacts will grant import quotas to the U.S. market to the detriment of their regional trade partners.

Morales also criticised the free trade deals with the United States. But he was more prudent than Chávez, and stressed that the South American integration process remains in force.

Gullo maintained that Vázquez’s comments on the usefulness of Mercosur held a significant amount of truth.

It is true that “the way it is now, it isn’t useful, because in order to be useful for everyone, the integration process needs macroeconomic coordination that has still not been established, and that is what is provoking considerable frustration among its members,” he stated.

The analyst believes that Mercosur needs to “jointly plan the industrial development of its members,” and pointed to the formation of the European Coal and Steel Community that laid the foundation for the European Economic Commission and subsequently the European Union.

“Mercosur is seriously wounded, because in the 1990s it was infected by the neoliberal virus,” he remarked. “In those years, when the so-called Washington Consensus ruled supreme and the region’s economies swung towards neoliberalism, the original idea of cooperation and gradual coordination was abandoned, and everything was left to be determined by the market,” he said.

For Gullo, this shift in orientation, which bore fruit in the trade generated in the earliest years of the bloc, was ultimately the major error that has led to the recurrent crises seen today.

“The market doesn’t understand why Argentina needs industrial development to generate employment, or why the differences between the large and small members need to be taken into account,” he commented to IPS.

When viewed from this perspective, Gullo believes that the current Argentine-Uruguayan conflict over the pulp mills “is merely a consequence of the lack of macroeconomic coordination and joint planning.”

If this coordination existed, then the entire production process, from the forestry operations to the manufacturing of paper – which will be done in Europe under the current plans û could have been carried out within Mercosur, under sustainable conditions agreed upon and then supervised by the region itself.

Instead, Argentina is now threatening to take Uruguay before the International Court of Justice in The Hague, on the grounds that this is a bilateral affair, while Uruguay is calling for intervention by Mercosur through either the Common Market Council or a dispute settlement panel established by the Common Market Group.

In the meantime, the other two members of the bloc are left to watch with concern and relative powerlessness as the escalating confrontation between Argentina and Uruguay poses a growing threat to the bloc’s survival.

With regard to the future of the Andean Community, Gullo said there is a fundamental difference, because unlike Mercosur, this particular bloc “has no economic future.”

“Integration needs to be based on a dynamic core, and in this region there is no economy strong enough to drive a development process of this kind,” he said.

That is why “we have to aim towards a South American community, work in a coordinated fashion, and promote the adoption of ‘neo-protectionism’, by leaving neoliberalism behind and replacing it with short-term, selective protectionism that will allow all of the partners to develop jointly and equally,” he concluded.

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