The decision between deepening integration and incorporating new member countries, even from beyond the regional limits, is unbalanced in favor of the second option as a result of pressures by the US to impose the Free Trade Area of the Americas (FTAA), that should take effect as of early 2005.

But the FTAA is dead in its original version as well as in its “light” version designed to keep this proposal alive. The refusal by Mercosur -led by Brazil- to accept the FTAA, strengthened by the posture assumed by Venezuela and by the reluctance of several countries in the region, made of Chile and Mexico the only nations that, as US allies, agreed to this proposal. Meanwhile, Washington has rapidly been signing bilateral free trade agreements with Central America and several Andean countries (Colombia, Ecuador, and Peru), in order to isolate and weaken Brazil, the only country that has opposed the FTAA with an alternative strategy that consists in tightening the bonds with big countries in the Southern hemisphere (China, South Africa, India) and establishing punctual alliances on agricultural issues like the G-20(a group of 20 third world countries within the World Trade Organization that have certain power)

Alliances and new partners

In the recent Mercosur summit, held last July in Puerto Iguazú (Argentina), the whole picture of different alliances and expectations of extra-regional agreements was defined. The founding members (Argentina, Brazil, Paraguay, and Uruguay), were joined by several members with a status of “Associated States”(Chile, Bolivia, Peru, and now Venezuela), while Mexico was accepted as an observer until a free trade agreement is signed that enables it to attain the same status as the other associates.

Shortly, Mercosur should make a free trade agreement with the Andean Community of Nations (CAN), integrated by Bolivia, Colombia, Ecuador, Peru, and Venezuela. The agreement is already concluded and should have taken effect last July, but it was delayed because of difficulties with the duty reductions lists. Mercosur has two objectives: to counteract the free trade agreements yet to be subscribed between the US and Colombia, Peru, and Ecuador; and to tighten the bonds in order to forward the formation of a Community of South American Nations, an endeavor undertaken by Brazil, which has been followed, with different degrees of enthusiasm, by several of its Mercosur partners.. All in all, it is a race against the clock to win those that are still hesitant, in which George W. Bush has solid allies like Álvaro Uribe’s Colombia, while Mercosur counts on Latin-Americanist Hugo Chávez.

Venezuela’s incorporation to Mercosur, has several aspects to consider. One of the most important is related to domestic politics, since Chávez found support amid a strong revocatory referendum campaign against his presidency. In this context, he was also able to subscribe an agreement with president Néstor Kirchner to have ships from the Venezuelan state oil company Pdvsa, built and repaired in Argentinean shipyards. The first step will be the construction of eight oil tankers; Chávez explained that his country imports 5 billion dollars a years in goods and services from he US, such as valves and pipes, and that he intends to “have 25% of all this made in Argentina and Brazil”. The agreements went even further: Announcement of the creation of an Argentinean-Venezuelan interstate oil company, although some Argentinean officials somewhat lessened the Chávez euphoria by assuring that his announcement was only an “expression of desire”.

Economics and politics, heading different ways

The Mexican case is different. Uruguay has already subscribed commercial agreements over industrialized products with Mexico, while Argentina is also heading in that direction. Meanwhile, Brazil is somewhat reluctant to Mexico’s incorporation as a full member, since it would diminish its role as a regional leader. Other sources estimate that Vicente Fox’ initiative “is more rhetorical than practical and effective”. So were the words of Mario Marconini, director of the Brazilian Center of International Relations, to whom the agreement seems difficult to subscribe, since Mercosur should adapt to a more open economy, like that of Mexico.

In Brazil, the political reasons for the “Foxist” attempt are not underestimated, and interpretations range from foretelling Mexico’s “shying away” from its NAFTA (North American Free Trade Agreement)partners, to defending the hypothesis of a “conspiracy” to “weaken” Mercosur. Meanwhile, Kirchner said that “it is more a matter of political unity than of an economic union”, to strengthen Mercosur before the countries in the North.

Also, before year end, Mercosur should conclude an ambitious agreement with the European Union (EU). The difficulties are the same that hindered the FTAA; “Northern” subsidies to agriculture, and the EU’s expectation that the countries of the South, open their services, governmental purchases and investments to European multinationals. Negotiations are making very slow progress, amid reservations to sign an agreement that harms the sovereignty of Latin-American countries. The EU seems willing to be more flexible in what concerns the entrance of agricultural products, but in compensation demands that the states open the “governmental purchases” item, a proposition that Brazil firmly rejects. Some observers estimate that by yearend both parties could come to a good political agreement, but nevertheless without commercial significance.

Geopolitical considerations have a considerable weight on the agreements with the EU and with the CAN. The Financial Times has indicated that the UE might be trying to attract Brazil and Argentina in order to divide the G-20. Meanwhile, Brazilian Foreign Minister Celso Amorim pointed out that the agreement with the EU has an important political profile because “we want to reinforce a multipolar world context”. Likewise, the Mercosur-CAN agreement is seen on the continental chessboard as a way to hinder Washington from moving ahead in the Andean area as it has done, first by way of its “carnal” relations with Colombia, and then spreading its influence dangerously through Ecuador and Peru. It’s the same type of logic that led Brazil, Argentina, Chile, and Uruguay to send troops over to Haiti to “preserve peace”.

Imbalance and integration

However, US pressure is not the most difficult factor to face in the pursuit of Latin-American integration, which is moving ahead at the pace of a turtle, if moving at all. In some cases, the obstacles are old disputes (like Bolivia’s claims before Chile over an outlet to the sea), in other cases, they are problems concerning neo-liberal policies (like the conflict between Chile and Argentina over the latter’s lack of investment, that jeopardizes gas exportation). But above all, there are confrontations derived from the subordination of almost all of the governments to the great national and multinational corporations which intend to impose their petty selfish interests.

One of these conflicts marred the recent Mercosur summit. Days before the event, the Argentinean government decided to restrict import of Brazilian household appliances, that had invaded the Argentinean market and had pushed the local manufacturers aside. Technit, the Argentinean multinational, put some pressure, demanding that actions be taken, claiming that the Brazilian industry receives state subsidies: besides granting the exporters loans at privileged rates, the Brazilian state allows manufacturers to sell as “products of Mercosur origin” those that are assembled with pieces imported in the Manaos duty free area, a practice that gives Brazilian manufacturers great advantages. There are yet other inequalities: lack of investment by Argentinean industrials for more than a decade of economic crisis and stagnation, different sizes of the internal markets (180 million people in Brazil and 38 million in Argentina), Brazil’s more solid banking system and low ratio of deposits in foreign currency, compared to the massive “dollarization” suffered by Argentina in the 90’s.

In the face of all these inequalities, Technit was an enthusiast supporter of Carlos Menem’s government. By the end of last year, it proposed before the Argentinean Industrial Union the need to redefine the terms of Mercosur, transforming the joint customs system into a free market area, in order to recover the ground it had lost throughout a decade. The constant controversies between both countries, in which Uruguay sometimes mediates with similar arguments, are obstructing the road towards integration. In the case of the import of household appliances, Lula and Kirchner decided to ease up on the confrontation and open space for negotiations. But a price the Brazilian government had to pay for its conciliatory attitude was a hard editorial by the influential O Estado de Sao Paolo, that on July 9th accused it of “acquiescence to Argentinean aggressions against free trade” .

These are mere examples of how the interests of the big entrepreneurs take regional integration as their hostage. Much of Lula’s foreign policy goes along with the agriculture business, a sector that is supportive of the FTAA, of the agreements with the EU, and of the expansion of commerce with China, although they are all supposed to be different political options.

¿Free Commerce?

Finally, there is still serious resentment among different countries, but overall towards Brazil’s attitude of leadership, or of hegemonism. At the end of the summit, Lula left for Santa Cruz de la Sierra, Bolivia, where he demanded more loyalty and less intrigue among the countries of the South Cone, in order to guarantee parallel development of the region and a greater weight in the commercial negotiations with the US and the EU. He assured president Carlos Mesa, and the group of entrepreneurs that accompanied him, that Brazil “wants to be generous and loyal to poor countries” and that “there will not be a rich Brazil if Bolivia and other countries remain poor” .

The initially surprising nature of these statements subsided when Mesa’s government called a referendum last July 18th; a consultation that divided the country’s public opinion in two when the Bolivian social movement, following the path of the Bolivian worker’s union (Central Obrera Boliviana), called for a boycott as it questioned the convenience of such event. Bolivia’s social opposition considers that the referendum would legitimate control, by the multinationals, of the hydrocarbon deposits and reserves (54 quintillion cubic meters of gas and 480 million barrels of oil). The embassies of the US and Spain successfully put pressure so that “their” companies ( Repsol-YPF, Shell, Enron, and others ) would preserve their privileges beyond the results of the consultation until 2036, expiring date of the contracts.

Lula did exactly the same in favor of the Brazilian Petrobras , which controls one sixth of the total Bolivian reserves, and to which the neo-liberal governments granted enormous gas fields and a 32% tax reduction. Lula signed with Mesa -nine days before the referendum, amid threats by the government against those who wouldn’t vote , and reinforced militarization of the country- a declaration in which they hope that “the results of the referendum (...) allow the continuity of bilateral cooperation and the development of new projects of mutual interest, in an atmosphere of stability, confidence, and juridical security”. In summary, strong support in favor of Mesa and a shocking “bucket of cold water” on the social movement. The Bolivian “pearl” will now have to be added to the list. It’s beyond words.

Under these conditions, integration is either impossible or contrary to the interests of the peoples. No wonder Brazilian economist César Benjamin claims that “free trade strengthens and deepens international division of labor”, which confronts peoples with other peoples. His words over Lula are lapidary: “In presenting himself as the ‘champion for true free commerce’; partly because of bewilderment, partly because of ignorance, and partly because of irresponsibility, he adheres to the hegemonic discourse of the central countries”. Now we will have to add the Bolivian “pearl” to the list.