Venezuela was formally incorporated into the Mercosur trade group in Brasilia on July 31. But only three members of the group –Brazil, Uruguay, and Argentina– were in Brasilia for the celebration. The fourth, Paraguay, which had long blocked Venezuela’s admission, had been suspended a month earlier for its hurried impeachment and ouster of then President Lugo. This was judged to be a violation of Mercosur’s democratic clause.
What made the Brazil government so eager to bring Venezuela into Mercosur remains a puzzle. Argentina’s enthusiasm is easy to understand. Venezuela is one of the very few sources of foreign investment the country has left. No one could have expected Uruguay to withstand the pressure from its two big neighbors, Argentina and Brazil. And Paraguay, under suspension, had no say at all.
But what motivated Brazil? It is certainly powerful enough to resist whatever pressure Venezuela and Argentina could bring to bear. And it had ample justification for deferring a decision. There are still unanswered questions about the legal basis for Paraguay’s quick suspension and for Venezuela’s rapid incorporation into the trade group. Whether a Chavez-ruled Venezuela meets Mercosur’s democratic conditions was not even considered.
Brazilian officials have made their case mostly on economic grounds—arguing that oil-rich Venezuela adds a great deal of heft and future potential to the Mercosur economies. Brazil has seen its exports to Venezuela rise sharply in the past decade. Today, it runs a huge trade surplus with a country that imports almost everything but oil. Brazilian investments in Venezuela have made handsome profits as well. Venezuela’s vast petroleum reserves, under any government, should be an enormous asset well into future.
But Brazil’s economic arguments may be faulty. The costs of bringing Venezuela into Mercosur could well turn out to be higher than the benefits. Mercosur has been a troubled institution for many years. Its members regularly violate the group’s rules. Protectionism among the partners has long been a source of friction, and it has gotten much worse in recent years. Disputes among the countries have multiplied and deepened. Venezuela is likely to aggravate all these problems.
Mercosur will now be home to both Venezuela and Argentina, widely considered two of Latin America’s most bizarrely managed and highest risk economies. What remains of the trade group’s international stature has been further damaged. A trade arrangement with the European Union, which Mercosur has been negotiating off and on for ten years, is now further away than ever.
Brazil may just have recognize the deteriorated state of Mercosur and given up trying to make it a serious foundation for economic cooperation or integration. The Brazilian government may just see Mercosur as a useful mechanism for keeping its most disruptive neighbors pacified.
