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Sabino: Mercosur’s Uncertain Fate

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Mercosur is shaping up to be an overall small economy, and — worse — one that is riddled by significant internal conflicts, argues Carlos Sabino.

BY CARLOS SABINO

Several days ago, Córdoba, Argentina, was the stage for a meeting of presidents of Mercosur countries, a gathering that stood out for its markedly leftist tinge. This was mostly because several other regional leaders were invited, but only two attended: Evo Morales, who was recently elected president in Bolivia, and veteran dictator Fidel Castro, who has governed Cuba since January 1, 1959.

Neither Fidel Castro nor his Venezuelan counterpart, Hugo Chávez, missed the opportunity to attack President Bush and United States “imperialism” at demonstrations attended by the radical left of the host country. There was also open talk about the political character that Mercosur ought to assume.

Worst of all was the incredible passivity of presidents who call themselves Democrats but who welcomed the only functioning dictator in the region and tolerated his virulent statements, no doubt somewhat nostalgically, as well as the bluster of the would-be dictator who has emerged in Venezuela.

Mercosur is an accord that was drawn up by four Latin American countries in the 1980s, when most of the region’s nations returned to democracy after a period of dictatorships. The group was initially formed by Argentina, Uruguay, Brazil and Paraguay, and—for a while—produced interesting, practical results.

There was a first phase, during which many of the tariff barriers imposed by the group’s members—some of the very protectionist for the period—were lowered. At the same time, trade increased and the economies that at the time carried out reforms favorable to a free market experienced a healthy expansion.

Later, however, and particularly after the mid-1990s, Mercosur stagnated. Its common tariffs, raised high to keep the rest of the world out, kept the member nations’ economies from diversifying and halted the rise in domestic productivity. Meanwhile, disputes arose among the group’s members that were never fully resolved.

Now, since June, Mercosur has a new member, Venezuela, whose leader, Hugo Chávez, has promised a plethora of projects and accords in the energy field. Venezuela, under Chávez, has also begun to develop its signature foreign policy, which in practice consists of handing out donations or buying the national debt of countries with whom it wishes to ally, while encouraging the presence of extremist groups in the rest of the region.

Despite the economic benefits he can contribute, Chávez remains an uncomfortable and unmanageable ally. The first thing he proposed in June was that all the armies in the region unite in a joint armed force. That idea is a bit absurd—it hasn’t yet been put into practice even in the European Union—and it alarmed and annoyed the other governments of Mercosur, who perceive in Chávez’s proposal an inappropriate and unrealistic attempt at politicization.

Now, in Córdoba, in the presence of Fidel Castro and Evo Morales, Mercosur again displayed the growing incoherence that seems to have resulted from its recent expansion. On one hand, its traditional trade agenda, always a bit protectionist, has been threatened by the new initiatives that are leading to a broadening of trade in the region. For example, the accords signed by the United States with Central America, Peru, and Colombia have cornered Mercosur by forcing the group into an increasingly secondary role in the region.

On the other hand, Chávez’s obvious intention to impose his projects of world expansion onto the southern accord has unnecessarily politicized Mercosur. A somewhat symbolic step in that direction, although no less important, is his bid for a permanent seat in the United Nations Security Council. The southern countries have promised to support Venezuela in the upcoming election; the United States, Mexico, Central America, Colombia, and Peru strongly oppose the idea of Venezuela holding a permanent seat.

While Uruguay and Paraguay, and to a lesser degree Brazil, appear reluctant to follow the controversial path set by the Venezuelan leader, they feel compromised by his initiatives and provocative statements. Those three countries, as well as Argentina, find themselves at a crossroads: They must either support Venezuela and receive its economic favors, or remain isolated in a trade bloc that appears to have no chance of certain growth.

Today, in the face of the agreements being consolidated everywhere else in the world, Mercosur is shaping up to be an overall small economy, and—worse—one that is riddled by significant internal conflicts. For that reason, its actors will have to define themselves, decide between their immediate interests and a long-range policy, and finally assume a clear stance vis-à-vis a continental left that is still beguiled by the now ghostly figure of a senile Fidel Castro, the man who, in Cuba, has imposed the longest dictatorship in modern times.

Carlos Sabino is an adjunct fellow with The Independent Institute, a fellow of the Francisco Marroquín Foundation in Guatemala, a director at CEDICE, a public policy institute in Venezuela, and the author of many books on development. This column was republished with permission from The Independent Institute.

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