CARACAS, Jul 31 2012 (IPS) – After a six-year delay, Venezuela finally became the fifth full member of South America’s main trade bloc, Mercosur, on Tuesday, bringing with it huge oil and natural gas reserves and a market hungry for the abundant agricultural production of its new partners to the south. Humberto Márquez, from IPS, looks at prospects.
Ever since he first became president in 1999, Hugo Chávez had his sights set on membership of Mercosur, while he began to criticise the Andean Community of Nations, the region’s second-largest bloc, where Venezuela was partner with Bolivia, Colombia, Ecuador and Peru.
He finally announced in 2006 that his country was pulling out of the Andean Community, a process that was completed in 2011.
Mercosur (Southern Common Market) now extends from Tierra del Fuego in the extreme south all the way to the Caribbean Sea, and represents 83 percent of South America’s GDP and a market of 270 million people.
The presidents of Mercosur, founded in 1991 by Argentina, Brazil, Paraguay and Uruguay, accepted Venezuela’s bid for full membership in 2006. But approval of its admission was blocked by conservative lawmakers in the Paraguayan Congress.
The opportunity to overcome that barrier emerged at a Mercosur summit in Mendoza, Argentina on Jun. 29, when Paraguay was suspended from the bloc in response to the lightning-quick impeachment of President Fernando Lugo, a centre-left former Catholic bishop, a week earlier.
The new government of Paraguay, led by Lugo’s former vice president, Federico Franco, has only been officially recognised by Taiwan and the Vatican.
At the late June summit, presidents Cristina Fernández of Argentina, Dilma Rousseff of Brazil, and José Mujica of Uruguay invoked the bloc’s democracy clause, in which members committed to applying joint sanctions in the case of any disruption of the constitutional order.
With the suspension of Paraguay, which was not accompanied by economic sanctions, even though these are authorised by the democratic clause, the presidents at the summit considered that the path was clear for Venezuela to join the bloc. It officially did so on Tuesday Jul. 31 in Brasilia.
Venezuela “is where it should have been,” said Chávez, on the way to the Brazilian capital to sign the agreement.
“South America is the biggest food-producing region, and has the world’s largest freshwater reserves and greatest biodiversity,” the president said. “It is a perfect equation, and Venezuela was the missing cog to perfect it.”
Divided opinions in Venezuela
Cartoonists in opposition-aligned newspapers in Caracas depicted Venezuela entering Mercosur by the back door
It joined “in a not so elegant way,” Elsa Cardoso, a professor of international studies, told IPS.
“The explanation for the Venezuelan government’s determined efforts to join Mercosur lies in its geopolitical obsession with forging ties to countries that it considers strategic, like Brazil and Argentina, and it has done so in a hasty, bumbling manner, without preparing local industries for the move, which puts us in a vulnerable position,” Cardoso said.
Another professor of international studies, Carlos Romero, told IPS that “Mercosur is an agreement basically focused on free trade and free enterprise, while the Venezuelan economy is based on controls.”
His colleague Félix Arellano said that with Venezuela as a member, “the stability and consolidation of Mercosur will be affected, because this government does not believe in the free market. The Andean Community had safeguard measures, a dispute settlement process and other mechanisms of protection, but Mercosur does not,” he told IPS.
The president of the private Council of Industrialists, Carlos Larrazábal, lamented that the government did not discuss the withdrawal from the Andean Community and entry to Mercosur with the productive sectors, “which are in a precarious situation.”
“How will we be able to compete with giants like Brazil and Argentina?” asked Larrazábal.
He added that “96 percent of Venezuela’s exports are oil and its by-products, while the traditional industries continue to slump.”
Chávez’s rival in the October presidential elections, Henrique Capriles, criticised how Venezuela’s entry into the bloc came about.
“Venezuela’s incorporation in Mercosur will be a very good thing the day we are a country that produces and exports,” he said. “We don’t export today, we only import, even to produce gasoline.”
“In Brasilia, the other candidate gave a description of a country that does not exist,” he said, referring to Chávez.
“We import everything, even the rice, meat and black beans” in Venezuela’s typical dish, he said.
From 1999 to 2010, Venezuela’s imports from Mercosur totalled 34.3 billion dollars, compared to exports of just a little over two million dollars, if oil products – which form the bulk of the exports – are not counted, according to the National Institute of Statistics.
Trade between Venezuela and Argentina climbed from 100 million dollars in 2004 to 1.8 billion dollars in 2011, according to Argentine Ambassador to Venezuela Carlos Cheppi, while trade with Brazil stood at 5.8 billion dollars that year, 4.6 billion of which were Brazilian exports, according to the Venezuela-Brazil chamber of commerce.
Venezuela imports vehicles and meat, beverages, sugar and other food products from Brazil, and sells that country mainly gasoline and other petroleum by-products, and aluminium.
In Brasilia on Tuesday, Chávez agreed the purchase of Brazilian-made Embraer E-190 commercial airplanes for 270 million dollars, ordered oil tankers from Argentina, and agreed to create a new shipping line with Uruguay.
José Guerra, a former director of the School of Economics at the Central University of Venezuela, told IPS that “you don’t have to be an expert to see that, with 25 percent inflation, we will not be able to compete, for example, with Brazil, which has inflation of six percent on average.
“So we won’t be able to be exporters, but will instead be huge importers,” he complained.
On the other hand, the minister of science and technology, Ricardo Menéndez, said his country “will save some 2.5 billion dollars due to the reduction of tariffs in Mercosur.”
Mercosur is the source of “52 percent of the food that Venezuela buys,” said Menéndez, “and our entry will mean lower prices, which will benefit the population.”
More than 60 percent of the food consumed in Venezuela is imported.
Farmers in this country are worried about cheaper imports of food from the other Mercosur partners.