Venezuela in Mercosur: A New Mercosur?

September 12, 2006 10:01 | by Raul Bassi

Regional trade blocs based on the EU model are increasingly seen by governments in different parts of the world as a means to compete on the global market, cooperate in defence of regional producers and pool resources to mutual advantage. Like the EU itself, however, they are also open to use as weapons in an intensified assault on workers' rights, social provision and environmental protection - and, as in the case of the EU and NAFTA, are specifically designed for this primary purpose. Raul Bassi looks at recent developments in Mercosur and concludes that Venezuela's admission to full membership of Mercosur - the "Common Market of the South" set up in 1991 between Argentina, Brazil, Paraguay and Uruguay - is a "blow" to Venezuelan's Bolivarian Alternative for the Americas (ALBA).

The presence of Cuban President Fidel Castro, Venezuelan President Hugo Chavez and Bolivian President Evo Morales at the July 20-21 Mercosur presidential summit has led many people in Latin America to ask whether Mercosur will make it possible for Latin America to be more independent from US imperialism, and to overcome the misery and poverty that millions throughout the region suffer.

The process of Latin American integration is changing traditional alignments in the region. On the one hand, despite failing in its attempts to reopen discussions on the Free Trade Area of the Americas (FTAA), the US rulers have continued to move forward in opening up Latin American markets for their corporations through the signing of bilateral free trade agreements, particularly with Central American countries, Peru and Colombia.

Meanwhile, Brazil and Argentina have been pushing for a relaunch of Mercosur as an alternative to the FTAA. The admission of Venezuela into Mercosur has enabled increased business within Mercosur, but could at the same time work against a third project which has emerged within this process of shifting alliances - ALBA.

Initiated by Venezuela and Cuba, and incorporating Bolivia since April, ALBA is based on the idea of a trade system resting on social solidarity instead of capitalist profit and has become a beacon of hope for the region's social movements.

Although Mercosur has begun to revive itself, many of the problems that have plagued it in the 1990s remain, particularly the competition between Brazil and Argentina as the two economically biggest partners in the bloc. The threat by Uruguay to sign a FTA with the US, due to the smaller partners not receiving any benefits from Mercosur, points to another weakness of the project.

In reality, Mercosur offers an integration model that magnifies rather than heals regional differences, and disadvantages the smaller countries. It is different to the FTAA, but it is not an alternative that can truly confront US domination. It cannot be compared to the European Union, because the dominant classes in Latin America don't play any role on the world stage.

The concept of ALBA has taken a blow as a result of the decision of Venezuela to enter Mercosur. This can be seen by who was most keen for Venezuela's entry and who benefits.

For example, trade between Argentina and Venezuela has increased threefold since 2002. All of Argentine's big corporations are projecting further increased exports to Venezuela and even more investments in the country. This increased business is presented as the complementary exchange of primary and industrial products for Venezuela's energy resources. But the big corporations are looking at increased market access, independent of the governments of each country.

The Bank of the South is another case in point. As a part of Mercosur, the role of this bank is mostly to help refinance the external debt of these countries. Last year, Argentina paid up its IMF debt, while at the same time Venezuela bought Argentine bonds, thus keeping the financial reserves of Argentina in place.

Putting aside the question of the legitimacy of paying this debt, what we have is a triangular scheme, where Venezuela lends, Argentina pays and the international bankers collect for a debt that has been paid several times over.

This is exactly what pits Mercosur in opposition to ALBA. The widening of the association was done on the basis of the rules of capitalist profitability, competition and guarantees for capital - the same rules that ALBA was intended to challenge.

Under the vision of ALBA, the common bank's mission would be very different. It would be aimed at helping small producers, supporting cooperatives and financing public projects relating to the primary needs of the peoples, like health care, education, housing and agrarian reform.

As many commentators have noted, there is an urgent need on the side of the capitalist ruling classes of Latin America to "moderate" Chavez and his influence in the region. This goes part of the way towards explaining why the process of incorporating Venezuela into Mercosur, rather than taking six or 12 months, was finished in three days.

The most probable intention of the capitalist governments of Brazil and Argentina is to put Chavez in a compromising position aimed at stopping, or at least reducing, his influence in the region.

Hopefully something can change in the future, but this Mercosur is not "new" nor more "social". As has been the case throughout the history of Mercosur, every national capitalist ruling class in it will be looking for its own gains, while the millions will continue to suffer in misery.

This article first appeared in Green Left Weekly, September 6, 2006.