Chávez, Morales Seek Transformation of MERCOSUR Trade Bloc

After Mercosur the LatAm presidents were invited to a practice at the Portela Samba School (photos).

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As South American presidents gathered in Rio de Janeiro this week to negotiate regional trade and integration strategies, including the possible ascension of Bolivia as a full member of the Southern Cone trade bloc MERCOSUR, Presidents Hugo Chávez and Evo Morales challenged the bloc to abandon its free market neoliberal roots. Bolivia’s Morales called for ‘profound reforms’ in the MERCOSUR structure, while Chávez of Venezuela declared his intent to ‘decontaminate it of neoliberalism.’ The direction taken by the trade bloc, which encapsulates 250 million people and a gross domestic product of about $1 trillion, will shape how effectively it will be able to reduce poverty, spur regional integration, and establish a hemispheric counterweight to United States.

In its present form, MERCOSUR has more in common with the U.S.-initiated North America Free Trade Agreement (NAFTA) and the European Union than the alternative framework for trade and integration that has been articulated by Chávez and Morales. The two leaders have joined with Cuba to launch a socialist-oriented accord called the Bolivarian Alternative for the Americas (the ALBA in Spanish, or alternately the ‘People’s Trade Agreement’) based upon cooperation, solidarity and complementarity. The ALBA includes provisions in which member nations collaborate in industrial and infrastructure development projects, and provided the greatest benefits to the smallest economy (Bolivia). This past week, newly elected Presidents Daniel Ortega of Nicaragua and Rafael Correa of Ecuador both expressed an interest in joining the ALBA.

The expansion of MERCOSUR, however, without significant reforms would frustrate the implementation of the ALBA. Although an expanded but essentially unchanged MERCOSUR would probably increase trade and GDP for its member countries, it can also be expected to contribute to Latin America’s extremely inequitable distribution of wealth and maintain the region’s dependent economic role as an exporter of primary products. A MERCOSUR status quo would essentially subjugate the ALBA within a framework of market liberalization, despite Latin Americans’ deep and widespread discontent with neoliberalism.

MERCOSUR and neoliberalism

The Common Market of the Southern Cone, MERCOSUR, was created as a ‘customs union’ in 1991 with the Treaty of Asunción. It initially comprised Argentina, Brazil, Paraguay and Uruguay and sought to achieve several objectives: to integrate its member nations through the free movement of goods, services and capital; ensure protection of investments by foreign firms from member nations; establish ‘rules of origin’ standards for traded goods; devise a common external tariff (CET); and harmonize trade and economic policies within member nations. The union also established ‘safeguard’ mechanisms by which countries can establish limited trade barriers if there is a threat of significant economic harm from a rapid influx of imported goods. MERCOSUR includes a dispute resolution process which favors negotiations, although countries may resort to tribunals to adjudicate their differences.

http://www.venezuelanalysis.com/articles.php?artno=1939