Skip to Navigation

News: Economy | International

Venezuela and South American Allies Advance Integration

Mérida, October 1, 2008 (venezuelanalysis.com)-- The presidents of Venezuela, Ecuador, Bolivia, and Brazil met in Manaus, Brazil, on Tuesday to advance the economic and political integration of the South American continent. They discussed plans for expanded infrastructure, the formation of new banks among nations in the Global South, and the impact of the world financial crisis on their countries. Venezuela and Brazil signed accords to boost soy production and improve low-income housing in Venezuela.

"As neo-liberalism sinks, we should advance integration and unity," said Venezuelan President Hugo Chávez in a press conference in Manaus. "Our only option is to pick up the pace in the direction we have been going."

The four presidents elaborated plans for the integration of the gas industries across the continent and referred to the city of Manaus as the "epicenter" that will connect Caracas, Quito, and La Paz.

According to Chávez, the previous proposal to build the world's longest gas pipeline connecting Venezuela, Brazil, and Argentina has proven to be difficult, so the leaders are discussing alternatives, such as highways and shipping by sea.

The presidents also agreed upon what they called a "formula" for a Bank of the South to fund development across the continent and now plan to consult with the rest of the presidents on the continent to move forward on the project.

The president of Ecuador, Rafael Correa, said the Bank of the South is a "long-term structural solution, to learn to depend on our own strengths, to make our regional economy more and more independent [and] pool reserves to have a regional backup in the case of a crisis."

Chávez reiterated his proposal for an International Petroleum Bank, which would be a joint initiative of state-owned oil companies to help finance what Chávez has called a "energy alliances" among countries.

Chávez had proposed a broader version of the International Petroleum Bank previously at the second-ever summit of the Organization of Petroleum Exporting Countries (OPEC) that Venezuela hosted in the year 2000, but, according to Chávez, "there was no consensus."

Over the past four years, Venezuela has initiated energy integration accords such as PETROCARIBE and PETROSUR, which promote the building of new refineries, the expansion of storage facilities in oil-scarce countries, and the exchange of oil for goods and services.

"We must start creating a new international financial architecture, not wait for the North to create another Bretton Woods," said Chávez Tuesday. "We are going to create our own structure in the South."

When asked about the price of oil, Chávez said it is unpredictable, especially with the financial crisis in the U.S., but that it would be "sufficient" if the price were to stabilize between $80 and $90 per barrel.

Brazil-Venezuela Accords


During Tuesday's meeting, Chávez and Brazilian President Luiz Inacio "Lula" da Silva signed the constitutive documents of a mixed enterprise between the Venezuelan state oil company PDVSA and Brazil's PETROBRAS, and worked out the details for the joint construction of the Abreu de Lima oil refinery in northern Brazil, a project inaugurated officially last March.

The two leaders also launched the second stage of their industrial and agricultural cooperation accords, which were initiated last year. They signed technology transfer agreements to help Venezuela boost its soy production and promote family farms, established regulations for airline services and the airspace between their nations, and discussed the construction of a joint steel factory in southeastern Venezuela.

Brazil will also assist Venezuela in setting up a finance program low-income housing based on the model currently operated in Brazil by the Caixa Económica do Brasil, which is the largest state-owned bank in Latin America.

At the press conference Tuesday, Lula spoke of the "obligation to be more in solidarity with the most fragile economies on the continent" and said Brazil's "role is to contribute so that all Latin American countries grow together and we become a more just continent."

According to the Venezuelan Ambassador to Brazil, Julio García Montoya, commerce between Brazil and Venezuela is $5.5 billion so far this year.

Both Lula and Chávez expressed confidence that their countries' economies will not be harmed by the financial crisis sparked by the sub-prime mortgage collapse in the United States.

"We were prudent, our financial system is not wrapped up in this problem, we did our homework, they didn't," said Lula.

Chávez said Venezuela is ready to confront the financial crisis because of its sustained economic growth, the solidity of its banks, and its large international reserves, which he said have reached $40 billion.

The recent formation of a bi-national bank with Russia and the $12 billion joint development fund with China also help secure the Venezuelan economy, he said.

Bolivian President Evo Morales said the financial crisis indicates that it is necessary to create alternatives to capitalism. "Now the poor in the United States and in the world will have to pay the price of the financial crisis," said Morales. "This should bring us to a profound reflection about changing economic models."

Published on Oct 1st 2008 at 7.31pm