How Brazil’s Currency Devaluation Harmed Mercosur’s Members

Spanish wise man Felipe Gonzalez An idea which "involved a fantastic but frustrated will power." That's the way former Spanish Socialist president Felipe Gonzalez describes Mercosur, the South American common market. A previous common infrastructure commitment is more important for integration than having "political groupings such as Mercosur."

Gonzalez who ruled Spain from 1982 to 1996 and was invited to participate during the discussions for the creation of the Mercosur Treaty of Asunción in 1991, said that the great starting error of the four countries, Argentina, Brazil, Paraguay and Uruguay, was not having included a clause indicating that whenever one of the members was forced to modify its exchange rate, the others automatically could increase import duties in the same percentage as the modification of that currency's value.

He pointed out to the January 1999 experience when Brazil abruptly decided to devalue its currency, leaving the other three members economies under great strain since it was not contemplated they could increase their import duties.

"This was Mercosur's first major mistake," underlined Gonzalez during a forum to young Spanish and Latinamerican leaders held in Madrid. Felipe Gonzalez was recently named president of the EU Council of Wise Men

He went on to argue that Latin America's solution was not the integration into political groups, "such as Mercosur," but rather creating a net of infrastructure in energy, education and highways in all the region's countries. "It is essential to promote physical capital," he said.

"Lack of infrastructure in highways, links between countries is one of the main problems which impede Latinamerican integration," said Gonzalez who added that the region has an absence of a network of communications, water distribution, "but even more important energy."

"What are missing are projects, not funds," underlined Gonzalez who insisted that integration processes must be "practical" and "not only political or ideological."

Another area to be addressed according to Gonzalez is bringing down inflation to enable Latin American countries to combat poverty, which is one of the main points why "there's no sustained development in the area, and therefore no Latin American integration."

Gonzalez also identified as one of the basic needs in Latin America the redistribution of wealth, both directly and indirectly. This means promoting education, public health for the poorest sectors, particularly children so they can access to information and in the future it won't make a difference where they are born. Similarly with job opportunities, so wealth distribution really becomes fair for all.

"Creating and training human capital is vital," but not only learning, "you must teach people so they know what they can do with the knowledge they receive."

Finally and talking more directly about politics, the EU wise man said that one of the big problems in Latin America is that incoming governments present themselves as "saviors of motherland" and pretend to ignore the teachings of history and experiences in other countries of the continent.

Gonzalez won four Spanish elections running to complete thirteen and a half years in office; he convinced his countrymen to join NATO, the European Economic Community and helped transform Spain from one of the most backward to one of the leading countries in Europe. He also revamped the Socialist party from a Marxist orientation to main stream European social democracy.




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