Joining the Club: Mercosur Weighs Venezuelan Membership

At this week’s Mercosur Summit in Montevideo, member countries Argentina, Brazil, and Uruguay unsuccessfully pushed for a fast-track solution to ratify Venezuela as a full member. Mercosur—or the Southern Common Market—encompasses a combined GDP of $2.9 trillion, and Venezuela would add another $387.85 billion. Though Venezuela requested full membership in 2006, the ratification has been stalled in the Paraguayan Congress for years. Full membership requires ratification from member executives and parliaments; legislatures in Argentina and Uruguay quickly ratified the agreement, while former President Luiz Inácio Lula da Silva convinced Brazil’s Congress to approve Venezuela’s entry in December 2009. Paraguay’s legislature—dominated by the opposition—is against Venezuela’s entry, contending that President Hugo Chávez’s limits on political freedoms violate Mercosur’s “democratic clause.” Senator Oviedo Matto, president of the Paraguayan Congress, threatened to withdraw Paraguay from Mercosur if President Fernando Lugo approved Venezuela’s entry, saying: “We won’t be losing much. What have the advantages been so far?” Some parliamentarians even threatened to impeach Lugo if he ratified Venezuela’s entry without congressional approval.

Uruguayan President José Mujica proposed an amendment to the Mercosur rules that would allow Venezuela’s entry based on the approval of Paraguay’s president rather than the full legislature. While Mercosur members are interested in market access to the Venezuelan economy and the Bolivarian Alliance of the Peoples of Our Americas (ALBA) trade bloc, there are political motivations as well. Some observers say Brazil, often willing to extend diplomatic relations to political pariahs, believe it’s better to have Chávez in the fold to prevent him from making other outside alliances. Chávez’s interest in Mercosur is also geopolitical: he views the move as “strategic” in order to “deepen Latin American integration,” and for the bloc to serve as a counterweight to U.S. influence.

But some opposed the fast-track approach. Former Uruguayan President Luis Alberto Lacalle told the press that bypassing regulations to let Venezuela into Mercosur would mean “the beginning of the end” of the organization. Venezuela’s membership could prevent Mercosur from achieving trade goals by derailing ongoing negotiations for a free trade agreement with the European Union. It could also complicate a potential agreement with the United States; U.S. Trade Representative Ron Kirk told O Estado de São Paulo this week that the U.S. wants a free trade agreement with South America, and is particularly keen to expand trade with Brazil. The United States would be less likely to engage Mercosur with Venezuela as a member. U.S.-Venezuelan relations took a hit this week after U.S. President Barack Obama criticized Chávez’s administration in Venezuelan newspaper El Universal, causing Chávez to call Obama “a clown” and tell him to “mind his own business.” In the end, no conclusion was reached on the Venezuela question, and Mujica established a commission to decide next steps. Also, the shocking suicide of a senior Argentine official at his Montevideo hotel interrupted negotiations.

International politics also came into play. On Monday, foreign ministers from the Mercosur countries agreed to blockade all boats with Falklands flags at their respective ports, and reiterated support for Argentina’s claim to the islands. On Tuesday, leaders formalized a free trade agreement with Palestine, which some say is more symbolic than economic in nature, since bilateral trade is relatively limited. The bloc also signed a free trade agreement with Israel in 2007, which went into effect in September 2011.

Yet regional politics will likely determine the group’s future. Brazil plans to protect local markets from a flood of cheap imports by increasing tariffs, a measure supported by Argentina. In the end, the bloc approved tariff increases for 200 products at a maximum tax increase of 35 percent. But Uruguay and Paraguay are pushing for more market access, as they feel Mercosur’s two biggest partners are restricting trade from their smaller partners. Also, at this week’s summit, Ecuador requested full membership to Mercosur. If it is eventually accepted, it will leave the Andean Community of Nations trade bloc.

Learn More:

• See a list of Mercosur treaties and agreements.
• Watch a video of Chávez discussing Venezuela and Ecuador’s Mercosur ambitions.
• Read O Estado de São Paulo’s interview with the U.S. Trade Representative.