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Venezuela Set to Join Mercosur Trading Bloc


Oil-rich Venezuela is due to become a full member of the Southern Common Market, Mercosur, currently made up of Argentina, Brazil, Paraguay and Uruguay. Finalization of Venezuela's entry into the trading bloc is expected to take place during a Mercosur summit that got under way Thursday in Uruguay. Venezuela's interest in joining appears to extend beyond economic and trade matters.

Venezuelan President Hugo Chavez' visit to Uruguay is his second to a Mercosur nation in as many months. Last month, at a rally outside the Summit of the Americas in Mar del Plata, Argentina, the socialist leader called for Latin American unity to defeat the Bush administration's primary initiative for the region: a proposed hemisphere-wide Free Trade Area of the Americas.

"We must bury the FTAA and the capitalist imperialist economic model," said Mr. Chavez. "We must also bring in a new era, a new integration for the people of the Americas, a truly liberating integration."

Venezuela's entry into Mercosur would mark the first time that the trading bloc has expanded its list of full members since its creation in the early 1990s. Venezuela has leapfrogged ahead of other South American nations currently listed as "associate" Mercosur members, notably Chile and Bolivia. This is no accident, according to Michael Shifter, vice president for policy at the Washington-based Inter-American Dialogue.

"What is driving it, on the part of Mercosur countries, is money," he said. "The Chavez government clearly has a lot of resources from oil. What it brings to Venezuela is power and political influence in Latin America, which is clearly something that he is pursuing very actively."

Buoyed by high oil prices, Venezuela, the world's fifth-largest producer of crude, has made a flurry of goodwill gestures to the region, selling oil at reduced prices, helping some nations to expand oil refining capacity, and even buying some of its cash-strapped neighbors' foreign debt. The director of Western Hemisphere studies at Johns Hopkins School of Advanced International Studies, Riordan Roett, says President Chavez' prestige and clout in the region are on the rise.

"I think that we have a very anomalous situation developing where the oil-state driver, Chavez' Venezuela, is now the tail that is beginning to wag the dog," he said.

Indeed, despite its massive oil revenues, Venezuela's gross domestic product is less than half that of Argentina and less than a fifth that of Brazil. Yet Venezuela has logged South America's highest economic growth rates since 2003, boosted by massive public expenditures financed by petroleum earnings.

President Chavez is South America's most out-spoken critic of the proposed Free Trade Area of the Americas (FTAA), which, if implemented, would supercede both Mercosur and the North American Free Trade Agreement (NAFTA). At the recent Summit of the Americas, 29 nations indicated their backing for the FTAA. But Mercosur nations and Venezuela steadfastly refused to endorse the measure, and a final document from the summit noted the lack of consensus.

"After Mar del Plata, it is very difficult to see the FTAA going anywhere," added Mr. Roett. "We also have to wait and see what happens in Hong Kong for the Doha round of the World Trade Organization. So there are a lot of balls in the air [possibilities to explore], and the Mercosur countries and Venezuela do not and will not sign on to the U.S. [backed] FTAA and are looking for a different trade deal, either among themselves or in the context of the WTO process."

President Bush has said that the FTAA would benefit the economies of all nations involved, boosting prosperity and combating poverty in the process. U.S. officials note that the vast majority of nations in the hemisphere still back a hemisphere-wide trade pact, and that, in the meantime, the United States has implemented several smaller trade accords, most recently with a group of Central American countries plus the Dominican Republic.

But the Inter-American Dialogue's Michael Shifter says U.S. agricultural subsidies along with negative public sentiment in Latin America toward President Bush are stumbling blocks for U.S. economic initiatives in the region.

"It does make it hard," he said. "The United States today is a very tempting target for a lot of these criticisms and attacks, and it makes it much more difficult. Even though the governments want to work with the United States, they have to be sensitive to pressures from their constituents. I think that to the extent that the United States can begin to demonstrate some concern and respond to the agenda in the region - the social problems, poverty, inequality - I think those would be steps forward that would be greeted with some enthusiasm by the governments."

Mr. Shifter says greater U.S. willingness to scale back large domestic agricultural subsidies would also be well-received by agriculture-rich nations like Argentina and Brazil that fear their products could not compete with their artificially inexpensive counterparts from the United States.

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