Development & Aid, Economy & Trade, Headlines, Latin America & the Caribbean

TRADE-LATAM: Growing Pains, But Solidarity Endures

Marcela Valente

BUENOS AIRES, Jul 17 2006 (IPS) - The recurring problems that flare up between the countries of the Mercosur have had little effect on a regional integration initiative which, despite its difficulties, remains solid, is attracting new members, and is moving forward slowly but steadily, according to Argentine officials and experts.

“We do not share the negative view which tends to magnify every crisis,” the coordinator of Mercosur (Common Market of the South) in Argentina, Alfredo Chiaradía, declared on the eve of a bloc summit bringing together Mercosur members Argentina, Brazil, Paraguay, Uruguay and Venezuela.

“The Mercosur is a fundamental instrument for projecting our countries beyond their borders, and the disagreements that arise do not cast doubt on the project,” said Chiaradía on Jul. 14, while briefing foreign journalists about the presidents’ meeting, to be held Jul. 20-21 in the province of Córdoba, in central Argentina.

The bloc “is very much alive and active, in spite of its difficulties,” he said.

According to the Argentine foreign ministry, this year the bloc will come close to surpassing its 1998 record trade figure of 40 billion dollars, and in aggregate, it has already doubled its 1998 trade with countries outside the region, which has risen from 133.5 million dollars that year to 227 million dollars this year.

His optimistic view of the bloc’s progress is shared by the former secretary for Trade and Industry, Dante Sica, who is now president of Abeceb.com, a private consultancy.

“Political speeches might give the impression that there is a heated atmosphere and continual crisis between some Mercosur partners, but there has been substantial progress at the technical level over the past year,” the analyst told a group of foreign media correspondents, including IPS.

In Sica’s opinion, trade conflicts over certain items between Argentina and Brazil have been neutralised by creating a monitoring commission. There has been marked progress in customs integration, advantages for the smaller countries, and a strong push forward for the project through the incorporation of Venezuela as a full member.

“Even allowing for all the distrust and improprieties surrounding its entry, Venezuela’s inclusion is highly significant,” Sico said, and pointed out that since it joined, the Mercosur now represents 75 percent of the South American gross domestic product.

In the last six months, while Argentina held the rotating presidency of the bloc, its conflict with Uruguay deepened over the environmental impact of two pulp mills on a river shared between them. The issue is now before the International Court of Justice in The Hague.

The bloc was also shaken on May 1 by president Evo Morales of Bolivia’s decision to nationalise hydrocarbon fuels. Bolivia is an associate member of the Mercosur.

Because of its regional implications, the announcement led to an extraordinary meeting of presidents Morales, Néstor Kirchner of Argentina, Luiz Inácio Lula da Silva of Brazil, and Hugo Chávez of Venezuela.

Bolivia’s decision obliged Argentina to negotiate a new price for the natural gas it purchases there, and stirred up debate in Brazil, Bolivia’s main oil investor.

The new prices of Bolivian gas were passed on to Chile, another associate member of the Mercosur, which buys the fuel from Argentina. This measure by Kirchner’s administration was not well received in Santiago, which accused Argentina of being two-faced about integration.

These bilateral conflicts will not be on the Córdoba summit agenda, although they could influence the political climate of the meeting. However, Argentine officials downplayed this possibility and maintained that the integration project is solid enought to cope with internal squabbles.

In Chiaradía’s view, the controversy between Buenos Aires and Montevideo is now “encapsulated” in the judicial sphere, and while he admitted that it “is rowdy,” it will not prevent the bloc from making progress on its agenda. Furthermore, he emphasised that the progress achieved towards the Mercosur is “useful to all its members and provid(es) balanced benefits.”

Recently, he said, “Argentina and Brazil have recognised” the need to “compensate” Uruguay and Paraguay, the two smallest economies. Venezuela’s entry would help towards this.

With regard to the dispute with Chile over the increased price of the fuel sold it by Argentina, Chiaradía considered that it is due to the fact that “there is excess demand and unmet need, that’s all.”

In contrast, he highlighted the “substantial progress” there had been in the integration process during the Argentine presidency. The most important of these were in the area of customs, the liberalisation of services by each country, and in government purchasing.

After deciding to eliminate dual tariff imposition within the bloc, the members agreed common guidelines for a Mercosur Customs Code which should enter into force in 2008. At the Córdoba meeting this consensus will be approved and a commission designated to draw up the new code.

Member countries have discussed mechanisms for the distribution of net customs income. “Now what has to be decided is what agency will be in charge of collecting and distributing” the customs profits, Chiaradía told IPS, saying that this step will be “fundamental for perfecting the bloc.”

The governments also agreed that by the end of 2007 there should be an operational interconnection system between customs houses, so that products entering at any of the entry ports can be monitored simultaneously throughout the bloc.

In the services area, Chiaradía noted that Brazil, Uruguay and Paraguay had “taken on new commitments” for liberalising regulations for several services categories, a step which will facilitate the operation of companies from one country within the territory of another member state. Argentina has already opened its services market.

With regard to government purchasing contracts, transparency procedures have been agreed so that Mercosur companies can participate in the various stages of bidding to supply goods and services to governments, at the federal level only.

In Córdoba, an economic complementarity agreement with Cuba will also be signed, as well as a framework trade agreement to lay the foundations for a preferential agreement with Pakistan. Negotiations for the entry of Mexico as a full member of the Mercosur are ongoing, and discussions will continue with Israel.

The presidents will also listen to proposals on employment by a qualified group of advisers, who will make recommendations for increasing employment in the bloc, and for the first time there will be a civil society forum convened by the governments, which will function alongside the summit.