Mercosur Is Not Viable as Economic Bloc, Says Brazil’s Former Minister

Brazilian ex-Finance Minister Mailson Nóbrega "Mercosur has become irrelevant and too complicated, and even more when Venezuela is finally incorporated to the block," said former Brazilian Finance minister Mailson da Nóbrega during a bankers and businessmen conference in Geneva to promote investments in Brazil.

Nóbrega who was Finance minister between 1987 and 1990 when Brazil suffered an outburst of inflation (almost 2.700%) forecasted that the Brazilian currency will continue to appreciate given the constant influx of foreign investments and pointed out that "whenever inflation emerges, the backing of any president begins to erode."

He currently heads one of the most respected finance consulting agencies in Brazil, Tendências and in the analysis of the region he split Latinamerica in two sides: those countries that base their development on the institutional framework, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Mexico, Peru and Uruguay, and those that reproduce "the old state dominated models of the caudillos" such as Venezuela, Bolivia, Ecuador and Nicaragua.

"Argentina is in an exclusive category which can be defined as "in between," but to be more specific Argentina is far closer to the old model than to the new one," said Nóbrega.

Further on the former Brazilian minister said that Mercosur has become irrelevant although it must be acknowledged that "it helped boost bilateral trade between Argentina and Brazil. But when Argentina began manipulating internal tariffs it became ever more complicated. I think that Mercosur is no longer viable as an economic block."

However "in political terms Mercosur is very important for Brazil. It's become irrelevant for Brazil's foreign trade."

Furthermore in the hypothetical case that Venezuela becomes a full member and chairs Mercosur, and for example an agreement is to be signed with Israel, "what will Venezuela's reaction be, and since in Mercosur all decisions must be unanimous, President Chavez could very well block the agreement and also become an obstacle for other bilateral agreements such as with United States."

More specifically about Argentina, Nóbrega said that the country has great potential but unfortunately "the Kirchner administration has tended to promote populist policies and has been manipulating the prices indexes. Everybody in Argentina tells you that inflation is far higher than the official percentages."

However Nóbrega believes that the incoming elected president Cristina Kirchner will move closer to Lula, Chile and Uruguay, in spite of the fact that "her administration is a continuation of her husband's and she has to act drastically to combat inflation; otherwise Argentina has a great future."

Finally Nóbrega discarded the idea of the Bank of the South promoted by President Chavez arguing that the region already has a development bank the Inter American Development Bank with its three main clients Brazil, Mexico and Argentina, and "has done its job."

"Brazil and Mexico don't need the IDB any more, maybe Argentina, but they have managed to convince Chavez to buy their sovereign bonds. Brazil has become a major player in global financial markets so it's hard to see how the initiative will effectively take off.," concluded the former Brazilian minister.



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