Venezuela’s Full Membership of Mercosur Converts the Bloc into “Fifth World Power”

Mérida, August 1^st 2012 (Venezuelanalysis.com) –  Venezuela’s formal entry into the Common Market of the South (Mercosur) yesterday will change the dynamics of the trade bloc, increase Venezuela’s economic possibilities, and is a step towards greater regional integration, the presidents of Brazil, Argentina, Venezuela, and Uruguay argued.

In an extraordinary summit held yesterday in Brasilia, Brazil, and attended by the four presidents of the full member countries of Mercosur, Venezuela’s entry into the bloc was formalised, giving it speaking and veto rights. Mercosur’s economic norms will also be applied to Venezuela gradually.

Mercosur is a free trade area with a common external tariff and a common external trade policy. It coordinates its position in other regional and international commercial and economic meetings, and coordinates policy on agriculture, monetary systems, communication, and transport. It is also committed to integration and creating closer political and cultural ties between member countries. As a bloc, and with Venezuela’s membership, it is the biggest world food producer and biodiversity reservoir.

President Chavez told press on Monday night that Venezuela’s membership of Mercosur means the bloc will become the “fifth world power, with a regional GDP of over US$3.3 billion” and that now Mercosur, which previously only included Argentina, Brazil, Uruguay, and Paraguay, will extend to the Caribbean Sea. Paraguay was suspended in June after a coup against its president.

Chavez said Venezuela’s membership of Mercosur will “give much more life to the South American project of independence and the integral development of the peoples of Latin America and the Caribbean”.

He also discussed “starting to design Petrosur, which will be the petroleum alliance of our region (Mercosur)”. Venezuela already has energy supplying agreements with the central American and Caribbean countries, called Petrocaribe, as well as with Ecuador and Bolivia (Petroandina).

During her address to the presidential summit of Mercosur yesterday, Argentine president Cristina Fernandez said that Venezuela, Uruguay, Brazil, and Argentina represent the “social and historical force of their peoples…showing, finally, that the loneliness is over, because we have found each other”.

Venezuela will have four years to fully adapt to Mercosur norms

At the summit yesterday the presidents decided that Venezuela will have four years to adapt to Mercosur’s trade norms.

To accelerate Venezuela’s adaptation, leaders created a working group comprised of technicians from the four countries that will meet on August 13 in Brasilia. The working group will work on the commercial aspects of Venezuela’s integration for 180 days, a period that can be extended if necessary.

Afterwards, Venezuela will adopt the Common External Tariff, which is currently around 10% on average, while Venezuela’s tariffs tend to be 12%. The third phase of adaptation involves Venezuela eliminating tariffs for Mercosur countries, a step that could take longer since the block is considering differentiations between member countries according to their level of development.

Other impacts for Venezuela and Latin America

In eight years, Venezuela’s industrial sector’s contribution to the GDP will increase from 14% to 20% as a direct consequence of its full membership of Mercosur, said economist and president of the Venezuelan section of the Latin American Parliament (Parlatino), Rodrigo Cabezas.

He said Mercosur would allow Venezuela to expand its national market, which will now not “consist of 29 million people, but rather around 300 million” (the respective populations of Venezuela and of Mercosur).

Responding to the media campaign by the opposition and by the Venezuelan chamber of commerce, Fedecameras, arguing that Venezuela’s membership of Mercosur would result in a “destruction of national production”, Cabezas said that their claims weren’t true and that Venezuela can’t “turn its back on Latin American integration because of the individual interests of the national bourgeoisie”. Further, Venezuela will have access to the goods and services that are produced in the Mercosur countries at lower prices.

Ricardo Sanguino, a Venezuelan legislator, said the “whole country will benefit with this membership, especially the petroleum, petro-chemical, mechanical, and tourist sectors, which will be boosted by agreements with the other member countries of Mercosur”. He also clarified that Venezuela’s fixed exchange rate “won’t be an obstacle to economic exchange…however, the policy will be evaluated”.

Cabezas also argued that such deepening of Latin American integration meant a “defeat of neoliberalism in Latin America”.

Agreements reached at yesterday’s summit

During yesterday’s summit the four presidents also approved the development of 40 projects, with an investment of US$1.1 billion. Brazilian president Dilma Rousseff announced that Mercosur will create a Structural Convergence Fund to reduce “asymmetries” between member nations and “promote equilibrated regional development”.

She also said that one of the main challenges of the bloc now will be to increase the competiveness of the productive sectors of the region, something which is “intimately linked” with technological innovation and human resource training. Based on that, she proposed the construction of a cooperation network made up of universities and research centres.

Regarding the temporary expulsion of Paraguay, she said that the four leaders’ perspective was that “Paraguay normalise its internal situation so that it can be worthy of its rights in Mercosur”.

Argentina and Venezuela signed energy agreements between Venezuela’s state oil company PDVSA and Argentina’s recently nationalised YPF, with the aim of strengthening their strategic alliance.

Venezuela also agreed to buy twenty planes from Brazil, for its state owned fleet, Conviasa. Six of the planes will be delivered at the end of this year, and the total value of the purchase is US$ 900 million.

Mercosur working groups for the various proposals and projects will begin meeting at the end of this month, and continue working together until the end of the year.

Changes to Mercosur

Uruguayan president Jose Mujica, in his contribution to the summit yesterday, highlighted the need to include the working class in Mercosur, to promote the “democratic character” of the bloc.

“Businessmen [sic] have to get involved, to create the system of multinational companies, but the workers also have to get involved, the ones who go about in t-shirts and sandals… we can’t forget [the debt to the people], because if we do we won’t be strong… the decisions Mercosur takes must be based on the working people’s opinion, otherwise it won’t be democratic enough, and that is part of our struggle,” said Mujica.

Six years since Venezuela petitioned for membership of Mercosur

Venezuela signed a membership agreement with Mercosur on 17 June 2006, however its membership had to be approved by the other member countries’ parliaments. Paraguay’s conservative dominated parliament refused to approve Venezuela’s entry, but Paraguay was temporarily suspended from the bloc in June for violating the Democratic Clause of the Ushuaia Protocol of 24 July 1998 when its parliament engineered a coup against its democratically elected president, Fernando Lugo.

On 29 June Mercosur then approved Venezuela’s entry, and decided to formalise it on 31 July.

This “is the biggest historical opportunity that, in 200 years, has been on our horizon. [Before], we were condemned to underdevelopment, colonisation, and misery,” Chavez said during his speech at the summit yesterday.