Last week-end, Colombian president Juan Manuel Santos was visiting Felipe Calderon, his Mexican counterpart. The meeting was explicitly linked by the leaders to the "Deep Integration Agreement" with Peru and Chile that was launched last April through the "Lima Declaration." Progress along those lines has to be worrying for Brazil, because if it gains any traction, the resulting bloc of fast growing and relatively large economies would represent a real alternative to Mercosur, with open economies and healthy relations with the United States, unlike poor, troubled and increasingly isolated Alba.
Checking a few numbers is a bit shocking in fact: both the total GDP of the Pacific bloc and its average GDP per capita (ppp) are slightly larger than Brazil's and so is the population of the bloc. Even its military budget is comparable, if slightly lower.
As I have noted earlier, Peru under Humala is a bit iffy and seems to be very keen on better relations with its big amazon neighbour. Moreover, Brazil "has" Mercosur, and once that bloc--essentially Argentina--is brought into the equation, things look much better.
Now, in 2011 Mercosur is "celebrating" 20 years of existence, but nobody seems to be particularly keen on celebrating. Those 20 years have seen trade grow, but since the mid-1990s, even trade within the bloc is down in relative terms. As to regional value chains, the real nuts and bolts of integration today, they are still a dream. Argentina and Uruguay are patching up their paper-mill war, and nobody seems to be particularly keen on deepening the relationship and moving towards coordinated policy. Many in Brazil, consider in fact that Mercosur is an obstacle to an effective trade policy, and things will get worse once Venezuela is finally admitted--Paraguay's senate at some point will have to yield.
What is left is UNASUR which, very cleverly for Brazil--and Venezuela-- excludes Mexico and guarantees Brazil's prominence. But UNASUR is not Brazil's thing. In fact, the secretary-general of the Union, Colombia's María Emma Mejía, has declared, not a bit mischievously, that Brazil cannot become a power without support from the region.
Add to this the negative perception of Brazil among its neighbours, documented recently by the Fernando Henrique Cardoso Foundation, and you get a sense that Brazil's South America project, launched in 2000 by Cardoso, but aggressively pursued under Lula, could well be unraveling.
Photo Jonathan Blair
Showing posts with label Mercosur. Show all posts
Showing posts with label Mercosur. Show all posts
Tuesday, August 2, 2011
Tuesday, July 26, 2011
Brazil and the dis-integration of Latin America
A noisy regionalist rhetoric dominates Brazil's foreign policy discourse: Brazil is a regional leader, Brazil's foreign policy priority is Latin America, Mercosur remains a central tenet of its foreign policy, etc. etc.
The Mercosur part of this argument has been damaged in recent years by repeated and never-ending disputes, leading prominent commentators like Marcos Janks to call the customs union "a suitcase without a handle," and PSDB presidential candidate Jose Serra a "joke" and a "hurdle" for Brazil. The rest of the equation, however, is largely taken for granted in discussions of Brazilian foreign policy.
Rubens Barbosa, a very prominent retired diplomat and former Brazilian ambassador to London, basically sinks the rest of the argument by pointing out that Brazil's share of foreign investments in the region has fallen from 5.9% in 2006 to 1.7% in 2010. Now, reflect on those numbers: Brazil is currently the world's seventh largest economy, with about 6% of global GDP and Latin America is "its" region. Yet, it basically does not figure among investors into it, leaving the place to "foreigners" like the US, Canada, and EU--particularly Spain--and, increasingly, China. Trade numbers tell the same story: while "up" in absolute terms, the region's share of Brazil's total exports and imports has been declining in recent years.
People have been wondering for a while why Brazil's many regional endeavors had been so devoid of structure, why the Rio Group, UNASUR and especially Mercosur had never really evolved significant institutional capabilities. Obviously, Brazil was not alone in all those, and most Latin American countries are reluctant to tie themselves into a constraining framework with so big a partner as Brazil. But, as Germany and to a lesser extent France have shown with Europe, asymmetry can be compensated in many ways, through institutions that constrain the big fish or through compensation funds. Yet Brazil has never seriously tried those.
The reason looks straighforward: there is simply not enough at stake in the region for Brazil to invest significant amounts of political and economic capital in building serious regional institutions. With so few real ties to the region, political leaders are at a loss to sell serious engagement to the broader public or even the national Congress. Without surprise, they thus fall back to making the right noises in ever multiplying summits and meetings, none of which contributes much to the institutionalization of regional affairs. It is the new inflation: ever-growing mountains of paper on ever-shrinking substance.
The investment numbers reinforce the impression that Latin America is dis-integrating. In the global division of labour, most countries of the region are becoming--again--exporters of primary goods, either minerals, energy or agricultural products, and importers of industrialized ones. Asia, and China in particular, is already the main destination of primary goods and the main source of industrial ones, while Latin neighbours appear increasingly like competitors on global markets. The structural basis of integration is breaking down.
One can argue about how good or bad these developments are, but it is becoming harder to deny that such a breakdown is taking place, however frequent regional summits may be and however thick the Latin solidarity rhetoric that accompany them.
The Mercosur part of this argument has been damaged in recent years by repeated and never-ending disputes, leading prominent commentators like Marcos Janks to call the customs union "a suitcase without a handle," and PSDB presidential candidate Jose Serra a "joke" and a "hurdle" for Brazil. The rest of the equation, however, is largely taken for granted in discussions of Brazilian foreign policy.
Rubens Barbosa, a very prominent retired diplomat and former Brazilian ambassador to London, basically sinks the rest of the argument by pointing out that Brazil's share of foreign investments in the region has fallen from 5.9% in 2006 to 1.7% in 2010. Now, reflect on those numbers: Brazil is currently the world's seventh largest economy, with about 6% of global GDP and Latin America is "its" region. Yet, it basically does not figure among investors into it, leaving the place to "foreigners" like the US, Canada, and EU--particularly Spain--and, increasingly, China. Trade numbers tell the same story: while "up" in absolute terms, the region's share of Brazil's total exports and imports has been declining in recent years.
People have been wondering for a while why Brazil's many regional endeavors had been so devoid of structure, why the Rio Group, UNASUR and especially Mercosur had never really evolved significant institutional capabilities. Obviously, Brazil was not alone in all those, and most Latin American countries are reluctant to tie themselves into a constraining framework with so big a partner as Brazil. But, as Germany and to a lesser extent France have shown with Europe, asymmetry can be compensated in many ways, through institutions that constrain the big fish or through compensation funds. Yet Brazil has never seriously tried those.
The reason looks straighforward: there is simply not enough at stake in the region for Brazil to invest significant amounts of political and economic capital in building serious regional institutions. With so few real ties to the region, political leaders are at a loss to sell serious engagement to the broader public or even the national Congress. Without surprise, they thus fall back to making the right noises in ever multiplying summits and meetings, none of which contributes much to the institutionalization of regional affairs. It is the new inflation: ever-growing mountains of paper on ever-shrinking substance.
The investment numbers reinforce the impression that Latin America is dis-integrating. In the global division of labour, most countries of the region are becoming--again--exporters of primary goods, either minerals, energy or agricultural products, and importers of industrialized ones. Asia, and China in particular, is already the main destination of primary goods and the main source of industrial ones, while Latin neighbours appear increasingly like competitors on global markets. The structural basis of integration is breaking down.
One can argue about how good or bad these developments are, but it is becoming harder to deny that such a breakdown is taking place, however frequent regional summits may be and however thick the Latin solidarity rhetoric that accompany them.
Monday, December 21, 2009
Venezuela in Mercosur: Insights from Copenhagen (out of all place)
Brazil's Senate has finally approved the entry of Venezuela in the Mercosur bloc. The only hurdle remaining now is a vote from the Paraguayan Congress.
Brazilian advocates of the move, like Celso Amorim, the country's foreign minister, point out that this will make the bloc significantly larger and more powerful. For Brazil and Argentina, it could also pay handsomely if Venezuela complies with Mercosur rules and fully eliminates tariffs on imports from bloc countries: both already have huge trade surpluses with Venezuela and the latter exports basically nothing but oil.
There will be a price to pay, however. Mercosur acts as a bloc in trade negociation, i.e. no member country can sign an agreement with anybody without the other bloc members agreeing to it. For the foreseeable future, this will mean making deals that Hugo Chavez approves of. And the problem is, Venezuela has very little at stake in trade negotiations, because markets are fully open to the only thing it exports, namely its thick oil. In other words, it is free to be as rigid as it likes. Clearly, moreover, Venezuela under Chavez appears keen on doing just that.
For a recent example, take Copenhagen. Everybody agrees that the agreement is at best a rough starting point. At least, arguably, everybody appears willing to start something. But wait a bit: not everybody. Out of 193 countries, five refused to sign the agreement: Bolivia, Cuba, Nicaragua, Sudan and Venezuela. But for Sudan--which also enjoys a perverse kind of "freedom" thanks to its oil--, this little club is Chavez' club.
Dear Argentina, Brazil, Paraguay and Uruguay: unless the Paraguayan Congress holds out indefinitely, expect more of the same on everything that Mercosur gets involved with. One more nail on the bloc's coffin?
Brazilian advocates of the move, like Celso Amorim, the country's foreign minister, point out that this will make the bloc significantly larger and more powerful. For Brazil and Argentina, it could also pay handsomely if Venezuela complies with Mercosur rules and fully eliminates tariffs on imports from bloc countries: both already have huge trade surpluses with Venezuela and the latter exports basically nothing but oil.
There will be a price to pay, however. Mercosur acts as a bloc in trade negociation, i.e. no member country can sign an agreement with anybody without the other bloc members agreeing to it. For the foreseeable future, this will mean making deals that Hugo Chavez approves of. And the problem is, Venezuela has very little at stake in trade negotiations, because markets are fully open to the only thing it exports, namely its thick oil. In other words, it is free to be as rigid as it likes. Clearly, moreover, Venezuela under Chavez appears keen on doing just that.
For a recent example, take Copenhagen. Everybody agrees that the agreement is at best a rough starting point. At least, arguably, everybody appears willing to start something. But wait a bit: not everybody. Out of 193 countries, five refused to sign the agreement: Bolivia, Cuba, Nicaragua, Sudan and Venezuela. But for Sudan--which also enjoys a perverse kind of "freedom" thanks to its oil--, this little club is Chavez' club.
Dear Argentina, Brazil, Paraguay and Uruguay: unless the Paraguayan Congress holds out indefinitely, expect more of the same on everything that Mercosur gets involved with. One more nail on the bloc's coffin?
Wednesday, December 2, 2009
Let's be serious: Mercosur is over
Mercosur has become a bad joke. Continuous little crises belie the assurances of confidence and progress that are periodically uttered by the foreign ministries of Brazil, Argentina and their partners in grime. The latest source of tension, which has been termed "The Toy War," is one more example of the pathetic state of a process of regional economic integration in which much effort and resources has been invested, with little to show for it. So little in fact that closing the file would probably be of little real consequence for the countries involved: they would still have their little fights, their good days together, and regular meetings to discuss common problems. They would be freer to negotiate commercial agreements but, above all, they would stop having to patch up a cover for a process that, honestly, has never gone far institutionally, and that has made very little difference to dynamics of cooperation, integration and conflict that would have developed anyway.
Mercosur stands for Mercado Comun del Sur: the Common Market of the South. Made up of Argentina, Brazil, Paraguay and Uruguay, it is a common tariff zone, i.e. its member countries not only trade freely with one another, but also share external tariff barriers. As such it is more ambitious than a simple free trade zone like NAFTA, but less so than a full-fledged economic community, like the EU. It has been touted as the region's answer to ultra-liberal NAFTA, as a way for its members to build-up their export capacities behind some protection, and as a political springboard for its member countries, to gain influence in the world by acting collectively, particularly but not exclusively in trade negotiations, where the bloc stands as one.
Mercosur has a little secretariat, a Presidency that roves from one country to the next every six months, and even a Parliament, but every decision of import are taken by the Presidents of the countries. The president has no autonomy, the secretariat no capacity, and nobody cares about the Parliament or knows anything about who its members are or what they do. If you don't believe me, go check the website of any of the major journals of any of the four countries, seach for "Parlamento" and "Mercosur" --or "Mercosul" for Brazilian papers. If you find something, PLEASE do send it to me because my files are empty...
The history of commercial conflicts between Mercosur countries, particularly Argentina and Brazil, is long, lively, and pathetic. Fortunately for the student of trade issues in the region, the press in the region has long decided to treat those conflicts lightly. Among others, we have thus had the Cellulose War (between Argentina and Uruguay, still raging, by the way), the Chicken War, the Fridge War, the Shoe War, the Stove War and now, in step with the holiday season, the Toy War, all of them between Argentina and Brazil. The Toy War story is typical: the government of Argentina, to protect its toy industries, announced last week that it was imposing import license for Brazilian toys and would limit the quantities brought into the country. This week, Brazil announced that they would do the same to Argentinian toys. This is happening a few days after a meeting between President Lula and Argentina's President Cristina Kirchner, a meeting meant precisely to tackle the fast-growing list of little commercial skirmishes that is poisoning the relationship between the two countries.
The problem is much deeper than toys, or shoes, or fridges or even all this together. As The Economist was noting a few weeks back, Brazil is taking off, and Argentina remains stuck. The asymmetry between the two countries has been growing consistently since the mid-90s, with Brazil's relative weight in Mercosur, for trade, investment, GDP per capita, military power or almost any other metric, growing steadily. Argentina appears to be living on borrowed time, with a new economic crisis in the offing. Perhaps most damaging, Brazil's dependence on the bloc is also steadily diminishing. It is as if Germany were getting ever more powerful relative to all the other members of Europe, while becoming increasingly tied up politically, strategically and economically with China and the US. The exact opposite, by the way, is happening, with the European bonds getting stronger and the relative weight of its big players --Germany and France-- diminishing progressively, as new countries join in and as growth in smaller and more backward economies is typically stronger than in the larger ones.
To make things worse for Mercosur, a vote in the Brazilian senate is the last obstacle to Venezuela's joining the bloc as a full member. This would mean that the commercial policy of all of its members would suddenly become hostage to the whims of Hugo Chavez. A vote in time for Chrismas would make for great titles though: Santa Chavez gets involved in the Toy War.
No, really: Time to bury this one.
Mercosur stands for Mercado Comun del Sur: the Common Market of the South. Made up of Argentina, Brazil, Paraguay and Uruguay, it is a common tariff zone, i.e. its member countries not only trade freely with one another, but also share external tariff barriers. As such it is more ambitious than a simple free trade zone like NAFTA, but less so than a full-fledged economic community, like the EU. It has been touted as the region's answer to ultra-liberal NAFTA, as a way for its members to build-up their export capacities behind some protection, and as a political springboard for its member countries, to gain influence in the world by acting collectively, particularly but not exclusively in trade negotiations, where the bloc stands as one.
Mercosur has a little secretariat, a Presidency that roves from one country to the next every six months, and even a Parliament, but every decision of import are taken by the Presidents of the countries. The president has no autonomy, the secretariat no capacity, and nobody cares about the Parliament or knows anything about who its members are or what they do. If you don't believe me, go check the website of any of the major journals of any of the four countries, seach for "Parlamento" and "Mercosur" --or "Mercosul" for Brazilian papers. If you find something, PLEASE do send it to me because my files are empty...
The history of commercial conflicts between Mercosur countries, particularly Argentina and Brazil, is long, lively, and pathetic. Fortunately for the student of trade issues in the region, the press in the region has long decided to treat those conflicts lightly. Among others, we have thus had the Cellulose War (between Argentina and Uruguay, still raging, by the way), the Chicken War, the Fridge War, the Shoe War, the Stove War and now, in step with the holiday season, the Toy War, all of them between Argentina and Brazil. The Toy War story is typical: the government of Argentina, to protect its toy industries, announced last week that it was imposing import license for Brazilian toys and would limit the quantities brought into the country. This week, Brazil announced that they would do the same to Argentinian toys. This is happening a few days after a meeting between President Lula and Argentina's President Cristina Kirchner, a meeting meant precisely to tackle the fast-growing list of little commercial skirmishes that is poisoning the relationship between the two countries.
The problem is much deeper than toys, or shoes, or fridges or even all this together. As The Economist was noting a few weeks back, Brazil is taking off, and Argentina remains stuck. The asymmetry between the two countries has been growing consistently since the mid-90s, with Brazil's relative weight in Mercosur, for trade, investment, GDP per capita, military power or almost any other metric, growing steadily. Argentina appears to be living on borrowed time, with a new economic crisis in the offing. Perhaps most damaging, Brazil's dependence on the bloc is also steadily diminishing. It is as if Germany were getting ever more powerful relative to all the other members of Europe, while becoming increasingly tied up politically, strategically and economically with China and the US. The exact opposite, by the way, is happening, with the European bonds getting stronger and the relative weight of its big players --Germany and France-- diminishing progressively, as new countries join in and as growth in smaller and more backward economies is typically stronger than in the larger ones.
To make things worse for Mercosur, a vote in the Brazilian senate is the last obstacle to Venezuela's joining the bloc as a full member. This would mean that the commercial policy of all of its members would suddenly become hostage to the whims of Hugo Chavez. A vote in time for Chrismas would make for great titles though: Santa Chavez gets involved in the Toy War.
No, really: Time to bury this one.
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