Chavez Rewards Brazil with a US$ 1 Billion Deal for Venezuela’s Mercosur Entry

Hugo Chavez The president of Brazil Dilma Rousseff and her colleague Hugo Chavez of Venezuela signed a contract for the sale of Brazilian Embraer airplanes. Venezuela will buy six aircraft at a cost of around US$ 270 million, with an option for an additional fourteen. The whole deal could be worth as much as US$ 900 million.

Under the terms of the contracts, Venezuela’s state-owned airline company, Conviasa, will get its first Embraer 190AR in September and another two by December. These are passenger planes with a capacity that varies from 98 to 114 seats.

After the aircraft deal was closed, a formal ceremony took place to mark the admittance of Venezuela into the Southern Common Market (Mercosur), where it joined Argentina, Brazil, Paraguay and Uruguay.

Paraguay, where the president was impeached in June, has been suspended until April 2013, when new elections are scheduled to take place.

The presidents of Argentina, Cristina Kirchner, and José Pepe Mujica of Uruguay, along with Dilma Rousseff and Hugo Chavez, participated in the ceremony.

Dilma Rousseff then hosted a lunch at the Foreign Ministry (Itamaraty) for the Mercosur presidents who were present.

With Venezuela, Mercosur will now have a population of 270 million (70% of the population of South America), a GDP of $3.3 trillion (83% of the GDP of South America) and cover an area of 12.7 million square kilometers (72% of the area of South America).

Mercosur

Mercosur is the Southern Common Market (Mercosul in Portuguese), an economic block of South American nations seeking to strengthen regional integration and create partnerships.

The full members of Mercosur are Argentina, Brazil, Paraguay and Uruguay. Chile, Ecuador, Columbia, Peru and Bolivia are associate members of Mercosur, while Mexico and New Zealand are observer states.

The objectives of Mercosur are: free circulation of goods and production between member states through the elimination of custom restrictions; setting up a common external tariff and a common commercial policy to be used in regional negotiations; coordination of sector and macroeconomic policies among members in the areas of foreign trade, currency/monetary, exchange rates, agriculture and industry, including the areas of fiscal and capital markets. Member states must be committed to implementing legislation that strengthens the regional integration process.

The idea of an integrated South America dates from before the continent’s wars of independence at the beginning of the 19th century. Spanish colonies had to fight Spain for independence in the 1820s; Brazil (the only nation on the continent that speaks Portuguese) had imported a monarchy when the king of Portugal took refugee to escape from Napoleon in 1808.

The country declared independence from Portugal  in 1822 but remained an empire with an emperor. Brazil finally sent its emperor packing back to Europe permanently in 1889 when it became a republic.

It was only in the second half of the 20th century that the ideal of a South American union began to turn into reality. In the 1980s efforts began with timid agreements between presidents Sarney of Brazil and Alfonsin of Argentina, both new civilian presidents following long military dictatorships. Paraguay and Uruguay, located between the two larger countries were included in the talks.

Finally, in 1991, Mercosur was born when the Treaty of Asuncion was signed, to be modified by the 1994 Treaty of Ouro Preto. Since then, other changes in the block’s charter have been made.

Controversy

An integral part of the Mercosur charter is the Democratic Clause of the Ushuaia Protocol of 1998, which, as its name implies, requires Mercosur member leaders to be democratically elected. What happened was that on June 22, 2012, the president of Paraguay, Fernando Lugo, was impeached by an overwhelming majority in both houses of Congress (in a process that lasted a little over 30 hours).

Although Lugo had obviously lost support in the Congress, the quickie impeachment ruffled feathers in the rest of Mercosur, countries that have had their own historical problems with coups and dictatorships.

On June 29, presidents Dilma Rousseff of Brazil, Cristina Kirchner of Argentina and José Pepe Mujica of Uruguay decided to suspend Paraguay until April 2013, when new election are scheduled in that country. The reason for the suspension being that the removal of Lugo “disrespected the democratic order.” Paraguay denies that there was a coup.

Also on June 29, the presidents of Brazil, Argentina and Uruguay decided to admit Venezuela into Mercosur as a full member (during a six-year long process, Paraguay was the only Mercosur country that had not approved membership for Venezuela). The official entrance of Venezuela as a full member of Mercosur was July 31.

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