Brazil Expecting the World from Venezuela

Venezuela has joined Mercosur, a free trade zone commonly known as the Southern Common Market. The entry of the world’s fifth largest oil exporter to Mercosur will add South America’s sixth largest economy to the group originally comprised of Argentina, Brazil, Paraguay and Uruguay.

Venezuela will be an ordinary member, technically defined as "Estado Parte," meaning that, for now, it will have a voice but no vote.

Apparently, the Venezuelan president Hugo Chavez’s main objective is to politically and economically unite a significant part of South America.

However, many analysts expect that his plans will end up aggravating Mercosur’s internal divisions and will do little to help Mercosur become a more powerful force or increase trade among member nations.

Although Mercosur’s members have formed a common front on issues like opposition to the subsidies rich nations give their farmers, critics say the most flagrant failure of the trade pact has been its inability to fully integrate the economies of the participating nations. Instead, frequent trade battles have occurred between Mercosur’s members mostly between Brazil and Argentina.

Venezuela will increase the total population of Mercosur nations to 252 million, almost 70% of South America’s 362 million people. And after adding Venezuela’s US$ 78 billion in annual gross domestic product, Mercosur’s GDP of US$ 803 billion would be a whopping 89% of the continent’s US$ 906 billion in goods and services produced each year.

The new entrant arrives at a crucial time, as high oil prices make Venezuela’s promise of lower-cost energy all the more attractive. With the new member, South America’s biggest trade bloc will become the biggest source of energy in the American Continent.

Some experts say that Venezuela’s exports to Mercosur nations are not estimated to rise any faster than normal once it becomes a member. It is also not expected to gain more diversity in the trade within Mercosur. The country’s biggest exports by far are oil and petrochemical products, and Venezuela has little more to offer its new partners.

Mercosur’s members have set a one-year waiting period before Venezuela is fully integrated into Mercosur. This process could be accelerated, though. During this period, Venezuela will have voice but not vote, and it is supposed to meet certain prerequisites, such as signing the Treaty of Asuncion and other protocols.

Mercosur was founded by Argentina, Brazil, Uruguay and Paraguay in 1991. Since then, Venezuela – along with Peru, Bolivia and Chile – has held associate member status. This blocked it from participating in many important Mercosur tariff agreements. From now on, as a full member, Venezuela will have to adopt Mercosur’s common external tariff.

Brazil and Argentina

Venezuelan citizens, especially farmers, complain about Brazil, South America’s largest economy, and Argentina, South America’s second largest economy. These countries could steamroll the Venezuelan economy via cheap imports of everything from beef to beans.

Venezuela is a huge importer of food, cars, and industrialized products, which would theoretically help Brazil and Argentina’s economies. Both nations are heavily industrialized, and have already staked out international reputations as agricultural superpowers in products such as soybeans.

According to Forbes, Chavez is already using Venezuela’s entry into Mercosur to increase opposition to the Free Trade Zone of the Americas, saying that South America’s "destiny is Mercosur, and that’s anti-FTAA." Apart from that, it’s almost certain that Chavez, who led the anti-FTAA crusade in Mar del Plata (Argentina), has political interests to get through Mercosur.

Industrial Information Resources (IIR) – www.industrialinfo.com

Tags:

You May Also Like

1 Million Linux- and Crank-Powered US$ 100 Laptops Coming to Brazil

The US$ 100 laptop that is a brainchild of the Massachusetts Institute of Technology ...

US Keeps by Far Title of Brazil’s Number 1 Exporter and Importer of Capital Goods

Brazilian exports of capital goods yielded US$ 8.6 billion in 2005, performance 25% above ...

Brazil’s Small Businesses Grow Modest 1.9% in 2005

The year of 2005 was, on average, positive for micro and small companies in ...

Low-Income Brazilians Get Government Loan to Get Own Homes

Brazilian families that earn up to five minimum wages will be eligible to receive ...

Brazil’s Council Urges Corruption Crackdown and Asks Congress to Be Bigger Than the Crisis

Members of the Brazilian government’s Economic and Social Development Council (CDES, Conselho Nacional de ...

The Brazilian Six-Pack at Indy

There are six Brazilians in the spotlight this Sunday, May 25, competing in 87th ...

Brazil’s Lula and 400 Businessmen Off to Japan and South Korea

President Luiz Inácio Lula da Silva left Brazil, Sunday, on a trip to South ...

Hacker Is Beautiful and I Am One, Says Brazilian Minister

Brazil’s Culture Minister, Gilberto Gil, defended in the recently finished 5th World Social Forum, ...

Brazil: Starving at Home to Fatten Speculators

The Brazilian economy continues to be the cave of Ali Baba transformed into a ...

Brazil Ready to Receive 120,000 for World Social Forum

Porto Alegre, state capital of Rio Grande do Sul, in the south of Brazil, ...