Venezuela’s entry to Mercosur not a done deal

Both the script and the mise-en-scène are ready — next Tuesday (July 31) in the Planalto presidential palace in Brasilia, a euphoric and bombastic Hugo Chávez will be signing and celebrating the incorporation of Venezuela in Mercosur, brought forward last month in Mendoza by a swap deal defenestrating Paraguay temporarily from the bloc.

Strangely enough, the Asunción Congress was the only obstacle delaying Venezuela’s acceptance as Mercosur’s fifth column — the selfsame Congress which ousted Fernando Lugo from the presidency and anointed Federico Franco in his stead with lightning speed last month. That is why that Congress and its country were duly “punished” by the Unasur/Mercosur presidential summit in Mendoza.

With the exception of Argentina, where a comatose opposition can barely arouse itself from its vegetative torpor to talk about the weather, the procedural legitimacy of Venezuela’s incorporation has been questioned by Mercosur oppositions — by the political adversaries of the José Mujica and Dilma Rousseff administrations in Uruguay and Brazil respectively (Paraguay’s Congress is barred, of course). They have advanced almost identical arguments to those produced by the now ex-president Fernando Lugo in Montevideo last December when Venezuela’s entry was debated (yet again) at the Mercosur meeting.

“My government is respectful of institutions”, said Lugo adding that “we know that there are unequal processes of resistance to change” (in reference to the delays in the Paraguayan legislative branch).

The same doubts about the way Venezuela has been sneaked into the trade bloc are now shared by the Brazilian business class, the main driving-force behind the Bolivarian country’s membership, as the Dilma government has always been at pains to stress.

“Venezuela in Mercosur means a very important market — the third-biggest in Latin America,” said Alessandro Teixeira, the Brazilian Development and Foreign Trade Minister, adding that the Caribbean state “has plenty of oil money and heavy demand structurally because it has scant industry, thus permitting us to grow there.”

In the view of economist Dante Sica (who heads up Abeceb business consultants), the issue of Venezuela in Mercosur is on the current agenda of the business chambers and the industrial lobbies of Sao Paulo. “The debate and the doubts are political,” Sica tells the Herald, “above all because everybody knows that it was President Rousseff herself who hastened Venezuela’s entry.”

Nevertheless, neither Brasilia nor Sao Paulo are wavering over the main political and economic premises underlying the syllogism Mercosur with Venezuela: 1) It would permit the containment of the now Bolivarian country within a “club” oriented to free trade; 2) it would complete the matrix of an energy security grid uniting the heavy oil of the Orinoco Basin with Brazil’s off-shore’s pre-sal and Argentine shale; 3) it would treble trade with Caracas (of the 35 billion dollars worth imported annually, only five billion come from Mercosur); 4) it would incorporate an economy with a trade surplus of 58 billion dollars (2011), the highest in the bloc owing to the fact that 96.5 percent of its sales abroad come from oil; and 5) it would constitute a bloc of 270 million inhabitants, with 77 percent of the South American gross product, thus countering the powerful commercial bloc of the Pacific Alliance (Chile, Peru, Colombia and Mexico).

“These are the advantages which will only emerge in the medium term,” says Sica, briefing this newspaper on the obstacle race which Venezuela must run if it really wants to join any trade bloc. Before joining, it must comply with the Common External Tariff, norms on incentives, environmental protection and the defence of competition, apart from the programme of meeting international standards to which Caracas has been pledged (although still a long way from compliance) since 2006, when the executive branches of the four member-countries approved Venezuela’s entry into the bloc.

Although the prestigious magazine The Economist has made it very clear: “Mercosur is moving towards a socio-political union” which would abandon the original commercial scaffolding, there are various (trade) agreements already signed by the bloc requiring immediate adhesion (along with a political pronouncement) on the part of Caracas. These are the commercial treaty between Mercosur and Israel (with which the Chávez government has broken off relations, preferring to align itself with Iran and Syria, among others) and the free trade agreement signed in 2004 with the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela until it left in 2011). The same would be needed were a deal to be struck with the European Union, an accident-prone process underway since 1999 (although there would be no problem, given the current international sympathies of Chávez, with last year’s treaty between Mercosur and the Palestinian Authority nor the one about to be signed with Egypt).

As for the velocity imposed on Venezuela’s incorporation at the late June summit in Mendoza at the foot of the Andes, some witnesses of the frantic discussions (not much negotiating going on there) let slip onto the table some of the motives, all Brazilian, strangely enough. Because it was Brazil, more than anybody, who sounded the alarm over the danger of the “two Chs.” The first of them, the health of Chávez, of uncertain diagnosis. The second “Ch” highlighted by Brasilia is the steady advance of China on Venezuela — the Chinese have already promised to invest 32 billion dollars only in infrastructure.

That raises the hackles of Odebrecht, Camargo Correa, Andrade Gutierrez and Queiroz Galvao, Brazil’s construction giants. And also causing BNDES (the investment and development state-owned Brazilian bank funding many of those companies’ ventures abroad) to whip out its calculators. “All part of the policy of regional integration”, a Brazilian government source took it upon himself to comment with a veiled smile. Integration, of course, with Brasilia in the driving-seat of the locomotive and the rest of Mercosur ... in the wagons.