Brazil and Argentina Protectionism to Jump with Venezuela in Mercosur

Venezuela has become the fifth member of Mercosur, an addition that could accelerate the South American trade bloc’s steady drift away from free trade principles.

The presidents of the current members of Mercosur – Argentina, Brazil, Paraguay and Uruguay – signed last night, July 4, a treaty in Caracas with President Hugo Chavez.

The move combines South America’s largest oil exporter with two of the world’s largest grain and meat producers to create a grouping of some 250 million people.

Pavel Rondón, Venezuela’s deputy foreign minister for Latin America, said the move to become a full member the 15-year-old bloc would "open up a huge market…for the country’s businesses".

Mr Chavez said Venezuela’s entry into Mercosur marked "a new era in both Venezuelan and South American history", and added: "The union of South America is today more feasible than ever before."

But domestic critics – principally those same local businesses – claim they were never consulted over a decision they say is more motivated by Chavez’s political agenda than by economics.

Venezuela is only really competitive in the area of oil, an export commodity that does not require trade agreements. "The government has taken this decision guided by geopolitical criteria rather than by economic motives," said José Luis Betancourt, head of Fedecamaras, the national business federation.

While Argentina and Brazil have officially embraced Venezuela’s entry, business groups in those countries have warned that Chavez will use the trade bloc not only to propagate policies opposed to free trade but also as a platform to rail against the US.

That, they say, could undermine already weak cohesion within Mercosur. Paraguay and Uruguay are becoming averse to maintaining a pact distorted by their two larger neighbors’ protectionism.

Mr Chavez signed a "strategic alliance" with Néstor Kirchner, Argentine president, earlier in the day and offered diplomatic support for Argentina’s bid to reopen talks over the sovereignty of the Falkland Islands.

Mercopress – www.mercopress.com

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