Back in September, MERCOSUR member states voted to block Venezuela from assuming the presidency of MERCOSUR due to “its failure to comply with trade and human rights bylaws.” The other member-states gave Venezuela until December 1 to rectify their deficits.
On December 2, it was announced that Venezuela will be suspended from the regional economic bloc.
The Venezuelan government has called the action “[an] attack and legal manipulation on the part of the governments of Argentina, Brazil and Paraguay.”
Conspicuously absent from the Venezuelan government’s vitriol has been Uruguay. The president of Uruguay, Tabaré Vázquez, said recently that Venezuela’s suspension is not irreversible.
MERCOSUR is part of a quilt of economic agreements and organizations that blanket the continent and the Latin America-Caribbean region.
The 1990s saw a resurgence of integration agreements in South America that included MERCOSUR, the Andean Community, and various free and preferential trade agreements that built upon past the experience of the Latin America Free Trade Association (LAFTA), Latin American Integration Association (LAIA), and the Andean Pact.
MERCOSUR is the latest incarnation of Simon Bolivar’s dream of a United States of South America; a tentative step towards integration that can trace its lineage from LAFTA in the 1960s. South American integration is a phoenix which constantly dies and is reborn from the ashes of the old.
LAFTA was a regionalization of import substitution industrialization policies, which reduced trade barriers between member states. The perceived unfairness between the more advanced economies of Brazil, Argentina, and Chile and the poorer Andean countries led to the creation of the Andean Pact.
By the 1970s, the gains from LAFTA had plateaued. In 1980 LAFTA was terminated and LAIA was born. It is generally accepted that the LAIA was successful in integrating members within subregions, more than it was able to facilitate integration within the LAIA as a whole. While the LAIA sought to address the problems with the LAFTA, it too ended in failure.
MERCOSUR (Mercado Común del Sur) is a regional economic bloc founded in 1991 by Argentina, Brazil, Paraguay, and Uruguay. The results of MERCOSUR’s effects on trade between members seem to be mixed, but generally are positive and significant.
Venezuela joined the organization in 2012. Bolivia was accepted as a member in 2015, with the full-throated backing of its close ally Venezuela, and has until 2019 to gradually adjust its laws to meet MERCOSUR requirements.
Trade between MERCOSUR member states has fallen precipitously since its peak in 2011. This is a reflection of the significant economic downturn in these countries since the early 2010s but also suggests one source of the strains within the bloc.
Unfortunately, table shows, the data are incomplete for all years, as the table below shows.
While Venezuela’s suspension will not be the death knell for MERCOSUR, it may be indicative of its decline.
The next test for MERCOSUR will be the reactions from other South American countries which have sought to join the organization. Bolivia may be a bellwether for the future of MERCOSUR. Will Bolivia continue to adjust its regulation to fully join MERCOSUR or will it stand steadfast with its longtime ally, Venezuela?