SOUTH AMERICA:
New Member Venezuela Politicises Mercosur
Humberto Márquez

CARACAS, (IPS) - The addition of Venezuela as a full member of Mercosur, an economic bloc created in 1991 by Argentina, Brazil, Paraguay and Uruguay, marks a new era -- more political and turning the five countries into the driving force behind regional integration.

Venezuela's membership "is a true turning point for consolidating our integration project: the great Latin American homeland is absolutely possible," proclaimed Argentina's President Néstor Kirchner as he addressed the Venezuelan parliament Wednesday as part of the anniversary celebrations of the nation's independence: Jul. 5, 1811.

"More than a trade agreement or an economic bloc, Mercosur is now a political and social instrument that has in democracy, peace and human rights its basic rules and principles for coexistence," Kirchner added.

As of Tuesday, July 4, Mercosur (Southern Common Market) has a combined population of more than 255 million and a territory of 12.8 million square kilometres, an annual gross domestic product of over one trillion dollars, and foreign trade worth approximately 300 billion dollars, said Alfredo Atanasof, the Argentine president of the bloc's joint parliamentary commission.

Presidents Kirchner of Argentina, Luiz Inácio Lula da Silva of Brazil, Nicanor Duarte of Paraguay, and Tabaré Vázquez of Uruguay, with invited guest Evo Morales of Bolivia, (an associate member of the bloc), met in Caracas with their host president, Hugo Chávez, for a formal ceremony to confirm Venezuela's entry into Mercosur.

At the reception the focus was not necessarily on the region's big projects, like the gas pipeline planned to extend from Venezuela's Caribbean coast to the River Plate between Uruguay and Argentina, but rather on Mercosur's politics.

Lula said he hopes the event can be repeated soon in La Paz, expanding the bloc to include Bolivia as a full member, and in what some might describe as a fatherly tone, he turned to the host: "My dear Chávez, economic diversity and political plurality should not affect the union of South America."

The addition of Venezuela to the bloc comes just a few weeks after Chávez decided to withdraw his country from the Andean Community of Nations, of which it was a member for three decades, alongside Bolivia, Colombia, Ecuador and Peru. The move came after Bogotá and Lima had both signed free trade agreements with the United States.

Kirchner, the first to arrive, met with Chávez on Tuesday and announced that Buenos Aires and Caracas would jointly issue a "Bond of the South", the amount of which he did not specify, "as a prestigious 60- to 90-day bond, to be a substantial source of income for strategic investment projects."

Kirchner said these bonds "could be the first step in the construction of a bank, a financial space in the south," an initiative backed for several years by Chávez, who said the Bond of the South was "a marvellous idea."

Venezuela has so far bought a total of 3.24 billion dollars of Argentine debt paper, of which 1.45 billion dollars has been purchased this year.

Opposition economists in Venezuela are critical of the purchase of Argentine paper, which they term "junk bonds", saying it is a waste of government money.

However, Daniel Márquez, an independent who is a professor at the Universidad de Nuevas Profesiones (University of New Professions), told IPS that the joint bond issue "is a useful initiative towards regional integration, and more so if, as announced, it is going to provide financial resources for investments in infrastructure, because this will strengthen Mercosur."

He added that critics of the purchase of Argentine debt "have chosen to ignore the fact that private banks in Venezuela have bought up the bonds, and they wouldn't have done so if they really were junk bonds."

Another grand project linked to Venezuelan entry to the Mercosur is the Gas Pipeline of the South. Venezuela has the largest natural gas reserves in the region, amounting to some 150 billion cubic feet, although most of it is found in conjunction with oil (which makes it more costly to exploit / extract), and the Mercosur's dream project is to include Bolivia, which has the second largest reserves of free gas, and even Peru in the future.

The gas pipeline will require an investment of over 20 billion dollars -- depending on the installations and the final route -- before the first flame fuelled by Venezuelan gas can be lit in its new partner countries in the Southern Cone.

More generally, Venezuela's entry into the Mercosur is perceived as strengthening the bloc at a time when cracks were beginning to appear, such as differences over trade conditions, and the conflict between Montevideo and Buenos Aires arising from Uruguay's decision to build two pulp mills on the river Uruguay, which is part of its border with Argentina.

Joining the Mercosur offers Venezuela "some very definite advantages, because it opens up a market with high demand and consumption capacity, not to mention the fact that it strengthens our links with people in these countries, and increases the potential for integration and a closer relationship," the Venezuelan deputy foreign minister for Latin America and the Caribbean, Pavel Rondón, told IPS.

He cited Argentina as an example of "the many benefits, because in two years our bilateral trade has grown from less than 500 million dollars to nearly 2.5 billion dollars. We contribute energy resources, in return for heifers adapted to our different climates," Rondón added.

But among the region's business communities, there is some apprehension regarding Venezuela's entry to the Mercosur. In Brazil, spokespersons for several sectors were concerned that a president like Chávez could bring a controversial political emphasis to the group, because of his hostility to the United States.

In Venezuela, José Luis Betancourt, the president of the country's main employers' association, Fedecámaras, maintained that the government had not consulted private enterprise about the decision to join the Mercosur, and said that some agricultural and manufacturing industries are afraid of competition from countries that are advanced in these fields, such as Argentina and Brazil.

Over the next six months, while parliaments in Argentina, Brazil, Paraguay and Uruguay debate the ratification of Venezuela's membership, technical commissions will be discussing detailed terms for the country's inclusion in the Mercosur's tariff schemes.