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The Battle for Mercosur

What does it mean to lead Mercosur, a valuable customs union that includes Argentina, Brazil, Paraguay, Uruguay and Venezuela? Judging by the organization’s recent crisis, a lot.

Mercosur, translated as the Southern Common Market, was established in 1991 after an agreement between Argentina, Brazil, Paraguay and Uruguay. The environment, at the time, saw governments embrace neoliberalism after years of polarization and military governments. Conservative-led governments saw deregulation and free markets as paths to prosperity and a welcomed relief to decades of debt mismanagement.

The bloc’s creation upheld the commitment to free trade and open markets, a new chapter in Latin America’s economy. The New York Times, in 1994, noted how markets under the “old, Balkanized South America” suffered from problems such as tariffs, poor transportation routes and nationalism.

In addition, the bloc was originally set up to counter the North American Free Trade Agreement. Yet these plans were scraped after Mercosur became more profitable and attractive to foreign investors. There was even talk of creating a common currency, similar to the euro, as well as admitting members such as Chile and Venezuela.

However, these plans did not happen after the economic crises in the 1990s with Mexico’s peso crisis as one example. Furthermore, members could not work together and lead in unison, with countries like Brazil and Argentina acting on their own.

Incidentally, it was these crises that led members in the 2000s, as the “pink tide” began, to look toward Mercosur as a solution to their woes. Leftist leaders, such as Hugo Chávez and Néstor Kirchner, sought a closer relationship with each other and redefine the group. With full support of all members, Venezuela was admitted as a full member in 2012. Bolivia was admitted in 2015, although not as a full member.

 

New agreements with South American countries were signed, ties grew stronger and regional growth soared. Despite not accomplishing some of their plans, such as a long-overdue agreement with the European Union, the bloc became a valuable source of profit for members.

The bloc is still useful for members even after a shift toward the right among members. In March, Uruguayan Foreign Minister Rodolfo Nin Novoa, while reflecting on Mercosur’s 25th anniversary, said the group’s goal is still economic development for all members. Yet, he also warned about challenges that could threaten it. In just three months, it faced one of these challenges.

The Blame Game

It first began in May, as Uruguay prepared to pass the president-pro-tempore seat to Venezuela by the end of June. Every six months, each nation becomes the head of Mercosur, based on alphabetical order. This position allows a nation to act as leader when dealing with free trade negotiations. Uruguay, which held the position in January, needed to relinquish its title for Venezuela.

But Argentina, Paraguay, and Brazil fiercely opposed this. Their arguments against Venezuela’s new role cited the country’s failure to follow the union’s rules as well as concerns about the government’s stance against its opposition.

Uruguay dismissed any talk of a schism developing in the union. Its president, Tabaré Vázquez, from the left-wing Frente Amplio (Broad Front) coalition, vowed to transfer the presidential seat to Venezuela by the end of June without controversy.

But this never happened. Uruguay met multiple times with representatives from other countries. Paraguay, Argentina, and Brazil, notably a country that ensured Venezuela’s membership to Mercosur, fought against the leader of the Latin American pink tide.

As weeks passed without resolution, members became frustrated. Eladio Loizaga, Paraguay’s Foreign Minister, blamed Uruguay for the crisis by siding with Venezuela. Venezuelan Foreign Minister Delcy Rodriguez chided Paraguay and Brazil for “bad manners” in opposing the change.

Uruguay kept its composure amid conflicts among members. Nin Novoa pledged to, once again, transfer the president-pro-tempore seat, this time on August 1. Of course, the country recognized not all the members would be on the same page. After all, conservative-led nations outnumbered the leftist ones. But it could not risk further heightening tensions as most of the region sought a return to strong economic growth experienced a decade ago.

Negotiations still continued among members who publically and privately argued against the transfer. On August 1, it was only Uruguay that officially recognized Venezuela as the official leader of Mercosur. The other members objected to the new president pro tempore.

Paraguay, on July 30, publically said it would not accept Venezuela’s presidency and preferred Argentina instead. Brazilian Foreign Minister José Serra, a close adviser to President Michel Temer, believed Uruguay abandoned Mercosur by giving away the presidency. Argentinian Foreign Minister Susana Malcorra blamed Uruguay for putting Mercosur “in limbo.”

Nicolas Maduro, a few days after receiving the presidency, sharply criticized his opponents by calling Argentina, Paraguay and Brazil the “triple alliance of tortures.”

Such rhetoric was seen as revoking the days of the barbaric military governments, which would only deepen the schism in Mercosur. Paraguay, in response to Maduro’s triple alliance comment, said relations with Venezuela are “frozen.” In response, Venezuela accused Loizago of participating in Operation Condor, a bloody and repressive history in Latin America that led to hundreds of thousands killed.

In response to Maduro’s comments, Nin Novoa felt disappointed and said it wouldn’t alleviate the situation. Moreover, he defended Uruguay by saying it did what it needed to do and wanted to move on.

In August, a potentially damaging diplomatic incident occurred. In the summer, Serra visited Uruguay to persuade the country to not give the president to Venezuela. This, Nin Novoa explained, was an attempt to “buy” Uruguay’s vote, an accusation at a conservative government struggling to establish legitimacy after former President Dilma Rousseff’s questionable ouster.

Brazil became furious and summoned Uruguay’s ambassador over the comments. Strangely, this ended without a significant break in relations between the two countries. In fact, both said a misunderstanding took place and sought to move forward.

Meanwhile, Paraguay, which withdrew its ambassador to Caracas, suggested a Mercosur not only without Venezuela, but also Uruguay after the debacle.

Argentina suggested a collegiate presidency, which would centralize power among all members, until December. Then, in January, Argentina would govern Mercosur. Initially, Uruguay favored this if Venezuela accepted. But Nin Novoa quickly rejected it as he recognized Venezuela would never favor such a change.

Nin Novoa, while reflecting on the crisis in an August 1 interview with the Uruguayan outlet El Pais, acknowledged the situation as “grave.”

Blocking the Leader

Weeks passed without any resolution. Serra charged Uruguayan officials for creating doubt about Mercosur’s effectiveness. Nin Novoa reiterated it was not Uruguay’s responsibility to deal with the mess. He also criticized Venezuela for failure to collaborate more in the organization, which kept the country as a neutral in the dispute.

Then, on September 13, the four original members announced Venezuela would not lead Mercosur until it followed the union’s treaties and regulations. Uruguay said there was “consensus support” for the decision. The members set a deadline of December 1 for Venezuela to follow the bloc’s rules or else it would be suspended and, possibly, kicked out.

In the meantime, a committee with a representative from each nation, sans Venezuela, would lead Mercosur.

Expectedly, Venezuela sharply denounced the ultimatum with Rodriguez rejecting the claims of the “Triple Alliance” and upholding its status as president-pro-tempore.

Beyond this, Venezuela cannot do anything. Most likely, judging by Venezuela’s woes this past year as well as this crisis, it would end up suspended. It is required to “approve an estimated 300 rules and regulations from the block, and must still incorporate some thirty international treaties which Mercosur has adhered.” Doing this in three months is not easy.

Can its allies do anything? Not really. Bolivia is still not a full member until Brazil approves it, its power is useless. Uruguay is focusing on attracting foreign investment and recently received support from Brazil’s Michel Temer for leading negotiations with the European Union. Frankly, for a center-left country, it is not politically viable to stand with Venezuela.

A New Phase

In June, Serra spoke about the direction of Mercosur and acknowledged the power it holds. His goal was not to eliminate the bloc, but demand “deeper investment policies and physical integration.” He sharply criticized the populist wave of the 2000s and blamed PT-led governments for acting as the “vanguard of backwardness.”

It does seem likely other conservative-led governments share this goal of reversing “de-industralization” from the populist era. Yet, it is difficult to see whether that’ll come true. After all, Temer’s government is unpopular and ruling after a coup against Dilma Rousseff.

There are positives that may signal change. China, a major consumer of Latin American products, signaled its support of Temer at the G-20 summit earlier this month. Furthermore, leftist parties are weak in waging a counter-offensive after being voted out.

Still, Mercosur faces a tough road ahead. The world economy is barely recovering with countries such as China worried about growth rates. Global trade is decreasing with World Trade Organization Director-General Roberto Azevêdo projecting it will continue to fall this year and even next year if nothing changes.

As the Organization for Economic Cooperation and Development reported last year, “robust trade and global growth go hand in hand together.” It’s one way of ensuring growth, and Mercosur members know that.

Brazil and Argentina are recovering from their economic woes, and seek to become rising stars once again. Paraguay, years after capturing the presidency years ago in a coup, does not want to relinquish its power to the left. Uruguay is doing well so far, but the ruling coalition is concerned with keeping power.

Mercosur may have faced its gravest crisis yet, but the story is not over.

More articles by:

Brandon Jordan is a freelance journalist. He can be reached at bjordan7474[at]gmail.com.

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