South America: Integration at the crossroads

Hugo Chávez came close to wrecking the summit in Brasilia held on September 30 to set the CSN on its feet, by refusing to sign the formal Declaration. Chávez criticised the institutional structure for repeating the failed formulas of MERCOSUR and the Andean Community of Nations and, in the frank and direct style for which he is known, held that, along that road, regional integration will only just have become reality “in the year 2200”.

No one contradicted the Venezuelan President, perhaps because at bottom all accept that he is right. The Brazilian Minister of External Relations, Celso Amorim, admitted that the documents which Chávez was refusing to sign - the Brasilia Declaration – were just “political declarations” and that the 12 countries of the CSN should negotiate a treaty that would give form to the community. “In a reaction approaching panic, and flushed red, Lula declared that if Chávez did not change his mind the heads of state would leave Brasilia “as paralyzed as when we arrived”, according to press reports. [1]

Amorim proposed that, within 90 days, the debate on five of the 20 proposals be finalized on the format of the community that still had not been approved, and that they respond to the suggestions presented by Presidents Chávez and Tabaré Vásquez (absent from the meeting like the Presidents of Colombia, Guyana, Surinam). Before accepting, Chávez assured that he would not discuss those issues with Ministers but only with Presidents. Luiz Inacio Lula da Silva, pressured by the circumstances, came around to proposing that, in order to speed up the debates, discussions between the Presidents take place via fax, telephone and e-mail. Chávez accepted and everyone headed to Itamaraty for a private lunch, knowing that in reality everything remained up in the air.

Kirchner dodges the CSN

The conflict between Lula and Chávez was certainly not the only difficulty that presented itself during the summit of Presidents. The premature withdrawal of Néstor Kirchner - whose attendance the Brasilian foreign ministry had been demanding, given that he had not honoured his commitment to attend the first meeting of the Community, in December in Cuzco - irritated the Lula government. Citing commitments related to the electoral campaign in his country, Kirchner left the meetings just one half hour before the creation of the regional block was formalized, probably to avoid crossing paths with his political adversary, Eduardo Duhalde, in the midst of the electoral campaign. Lula could not contain himself: “I know that we have problems and responsibilities that demand our presence in our countries, which limits attendance to international commitments. But in an interdependent world we cannot stay confined within our borders”. According to Brazilian diplomats, the early departure of Kirchner was an insult. The Argentine government resists the creation of the regional block with the argument that it is an attempt by Lula to lead the region, which in practical terms weakens MERCOSUR.

Throughout this year new tendencies with respect to regional integration have been consolidating. On the one hand, it is evident that MERCOSUR has not managed to get out of its paralysis, but now it is not just driven by the commercial disputes between the two largest countries of the region (Brazil and Argentina), but also the so-called “junior partners” (Paraguay and Uruguay) are starting to play with assertions that they continue being the “Cinderellas” of the regional alliance. While Paraguay strengthens ties with the United States, opening its doors to its troops and studying the possibility of signing a Free Trade Agreement, the Uruguayan President, Tabaré Vásquez, is showing signs of moving closer to Washington. Vázquez said that “the United States buys more from us at better prices”, and that with that country “we are going to try to have more and better commercial relations”, and he did not rule out the possibility of signing an FTA [2]
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In this repositioning of Uruguay, the same concern appears to have been at play, that is leading more than one government in the region to wrap up secure agreements with Washington, in face of the uncertainty generated by alliances such as those existing up until now. In the sphere around Vázquez, apparently there is a dominant "perception that expectations for MERCOSUR have not been fulfilled and that the country runs the risk of seeing itself trapped in a club which barely exceeds the internal market”. [3]

What is clear is that Brazil – the only country with the capacity to lead integration – is opting for a double track: looking to strengthen commercial agreements with countries in the South while, in the continent, betting on the CSN as a way of freeing-up the log-jam in MERCOSUR. Argentina, which still has not overcome the debacle of the Menem decade, struggles with internal problems which are reflected at the regional level – the CSN was, in fact, an initiative of Duhalde – and with international challenges such as that presented by Brazil, to which it is not able to respond. In the face of its doubts, Argentina seeks refuge in renewed protectionism while not forgetting to build bridges to the George W. Bush administration, with which it maintains excellent relations.

Chávez plays rough

In the midst of this panorama, the “oil diplomacy” of Chávez enjoys good health and represents the most persistent and viable project, given that it is weaving beneficial, bilateral relations for the participants. Without renouncing his own integration project, ALBA (ALternativa BolivarianA), Chávez is taking concrete steps on such a strategic issue as energy. And in that regard, he was able to show his claws in Brasilia when he pointed out that the regional community project was no more than a repetition of failed experiences.

”The whole world smells of oil”, Chávez told the Argentine daily, Clarín. “In Venezuela we have a strong oil card to play at the geo-political table and we are going to play it with clarity in the process of regional integration”. And he added that he will use that card to “play rough against the world’s roughest: the United States” [4]. The strategy of energy integration, which turns on Petroamérica, has three legs: Petrocaribe, which is already in operation, Petroandina, which is just making its first steps, and Petrosur (with MERCOSUR and Chile), which for now consists of bilateral agreements.

In Brasilia, Chávez and Lula signed very important agreements between the oil companies of the two countries, PDVSA and Petrobras. Between them, they will invest 4,700 million US dollars, of which $2,500 million is destined for a refinery which will be built in the Brazilian state of Pernambuco, which will produce 200 thousand barrels of heavy oil, and give autonomy in energy to the entire North-eastern region. They also signed a preliminary agreement to develop oil fields in Venezuela, with reserves estimated at 11 billion cubic feet and whose exploitation requires an investment of 2,200 million dollars.

With Argentina, the Venezuelan President also signed agreements. PDVSA will invest 92 million dollars to buy 148 service stations of the Argentine company RHASA and the Uruguayan Sol, as well as a refinery in Campana to be exploited jointly with the Argentine state-owned company ENARSA. The Spanish company Repsol (which controls half of the market for fuel in Argentina) committed itself to provide the crude needed by the PDVSA-ENARSA company, and in exchange will cede the rich basin of hydrocarbons at Orinoco, one of the most important reserves on the planet [5]. For the Argentineans, the agreement allows them to breathe more easily by increasing the country’s diminished energy reserves. For the Venezuelans it implies a first step into Argentina, with which they are adding more links to the ring of alliances which they are weaving across the continent. “This is like OPEC, an example of integration to strengthen our processes of development”, said Chávez.

With concrete agreements, Chávez is demonstrating that integration does not happen as the result of diplomatic declarations and he is betting on generating a deep political debate between the governments of the region. His gesture of refusing to sign the declaration of Brasilia is something more than symbolic. It signals that he is ready to go as far as possible toward regional integration, that integration cannot be reduced to commercial agreements and, as demonstrated by the withdrawal of 20 billion dollars from the United States at the beginning of October, that it is necessary to start cutting ties to the North in order to build continental unity.

Translation: Donald Lee