Mercosur Trade Bloc Focuses on Poverty

from Forbes

By MICHAEL ASTOR

South American leaders sought to refocus their fractured trade bloc on the needs of the region's poor masses at a summit Thursday, while Venezuelan President Hugo Chavez called for remaking Mercosur to fit his vision of "21st century socialism."

Brazilian President Luiz Inacio Lula da Silva, hosting the two-day summit attended by all of the continent's leaders except Peru's Alan Garcia, said it is time for the region to map its own economic future to benefit South Americans who live with little hope for what's ahead.

"Integration depends only on us. It doesn't depend on the United States, Europe, Japan and China. It depends on our courage and political competence," Silva said.

Chavez, an avowed socialist, went farther - saying he wants to "decontaminate" South America's main trade bloc of U.S.-supported free market policies and privatization of state industries that swept throughout the region over the last decade.

Chavez himself is exerting greater state control over key sectors of Venezuela's economy but insisted he was not trying antagonize other South American leaders who don't share his contempt of America, U.S. President George W. Bush, and its economic model.

Brazilian Foreign Minister Celso Amorim acknowledged Chavez's concerns about Mercosur, saying it needs to be changed to get "closer to the people. ... It's not just for businessmen."

With some 600 federal troops deployed around the city and warships patrolling the waters in front of Rio's famed Copacabana Palace Hotel, the presidents discussed Bolivia's request for full member status in the trade bloc and changes in customs rules to help Paraguay and Uruguay, who have the bloc's two smallest economies.

Silva and Chavez signed a memo of intent for the state-run oil companies of Brazil and Venezuela to launch a major technical study on a proposed natural gas pipeline stretching 3,110 miles from Venezuela to the northeastern Brazilian city of Recife.

A decision on whether to build the pipeline will only occur after the study is completed in 2007. It would be part of a much larger pipeline system Chavez is promoting that could eventually link Venezuela's vast natural gas fields to Argentina, Paraguay and Uruguay.

Earlier, Mercosur ministers signed an agreement to pursue a trade accord with the Gulf Cooperation Council, which includes Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman. No deal is expected for at least six months.

But the biggest issue facing Mercosur is how it can meet the needs of the tens of millions of disenfranchised people in this continent with a yawning gap between rich and poor.

"We came to approve accords, create space (for the disenfranchised), projects to strengthen the real integration of South America and contribute with something we consider absolutely necessary: the reformulation of Mercosur," Chavez said.

He added that Mercosur needed to "change in its structure, in its objectives, the social emphasis of Mercosur and the fair treatment of inequalities between countries."

The Southern Cone Common Market, or Mercosur, was born 16 years ago when Brazil, Argentina, Uruguay and Paraguay pledged to seek economic integration and free trade - goals that have been largely frustrated by bickering between member nations and a failure to synchronize policies.

Analysts said the addition of Bolivia, with a leftist leader in President Evo Morales, could deepen divisions in a bloc with a long-standing history of disputes.

"What sort of message will be sent by adding Bolivia, which just announced its intent to nationalize the mining sector and has of deep internal conflicts?" said Agustin Cornejo, a researcher at the Washington-based Institute for International Economics. "The point is that, as Mercosur expands, Latin America's problems increasingly become Mercosur's problems."

The possible future entry of Ecuador into the bloc also could add to divisions. Newly elected President Rafael Correa has also been critical of privatization and other free-market reforms and may also ask to join Mercosur.

But Amorim defended the future inclusion of Bolivia for "geopolitical" reasons.

"Mercosur is not just an economic project. We have a geopolitical interest in the stability of South America," Amorim said.

Silva, who was elected as a leftist but governs from the center, has stepped up social programs. But unlike Morales and Chavez, Silva's government has done so while embracing free-market economic policies. The Bolivian and Venezuelan leaders are reasserting state control of national assets like energy and trying to redistribute the profits to the poor.

Amorim rejected fears Venezuela's presence could further upset already uneasy relations within Mercosur.

"You don't make politics with fear," Amorim said. "I think it's easier for Brazil to influence Venezuela than vice versa."

Mercosur unites some 250 million people with a gross domestic product of $1 trillion, or about 76 percent of the total for South America.