São Paulo – Political views aside, the Venezuelan entrance into the Mercosur is, in theory, advantageous for Brazil and for the other members of the bloc, as the country’s economy is focussed on oil and it needs to import all kinds of products. Proof of this theory, however, depends on steps that the government of Venezuela will take from now on, according to foreign trade specialists approached by ANBA.
"Theoretically [the entrance of Venezuela] is advantageous. If the [foreign] purchase decision was in the hands of the private sector, it [the agreement] would stimulate exports [from Brazil]. However, the decision is currently not in the hands of companies, but in the government’s,” said the acting president of the Brazilian Foreign Trade Association (AEB), José Augusto de Castro. This is due to the fact that the government of Venezuela exerts great control over exchange and authorises the disbursements for payment of imports.
Another question is adaptation of the country to the rules of the Mercosur, with the adoption of a Common External Tariff (TEC), practiced by the remaining members of the group (Brazil, Uruguay, Paraguay and Argentina) and characteristic of the customs union, ratification of treaties signed by the bloc with other nations, adoption of a schedule for liberalisation of trade, as well as definition of deadlines for the process to be concluded.
"It will take a while for the benefits [of the agreement] to take place,” said the coordinator of the foreign trade course of the Continued Education Programme at Getulio Vargas Foundation (PEC-FGV), Evaldo Alves. According to him, negotiations for Venezuela to adapt should take from four to five years.
Entrance of the Venezuelans began in 2006 and was ratified by the parliaments of Brazil, Uruguay and Argentina, but not by the Legislative of Paraguay, placing the process at a standstill. With the lightning impeachment of former president Fernando Lugo, in June, by a senate dominated by opposition, Paraguay ended up suspended from the bloc, under suspicion of a coup, which made way for the entry of the Caribbean nation, confirmed last week.
Castro pointed out, however, that negotiations took place in 2006 and the unpredictability of the Hugo Chávez regime does not make it possible to know whether that will take place in a fluidly.
In the same line, the CEO at the Arab Brazilian Chamber of Commerce, Michel Alaby, who has been closely following the Mercosur since it was established, says that the entrance of the country is “undoubtedly advantageous” for trade and investment, but that the government of Venezuela must provide guarantees. “Venezuela must guarantee legal security to motivate investment,” he said.
It is unanimous among specialists that Brazilian companies are interested not just in exporting to Venezuela, but also in investing in the country, due to the size of the market and the lack of local production to supply it, but they are still treading on eggs. The greatest expectation regarding the new member is the opportunity to export industrialized items, which Brazil finds hard to sell in other markets.
The National Confederation of Industries (CNI) said in a press statement, last week, that the entrance "establishes positive perspectives for greater Brazilian investment and exchange of industrialized products and energy resources between Brazil and Venezuela,” but that the "new partner has obligations to comply with" and needs to do so to "gain the confidence of investors and guarantee the future of the bloc.”
In this area, Alaby pointed out that there has been a change in the strategic vision of the Mercosur. If the objective was initially to expand trade, the current geopolitical concept requires that it generate “effective, energetic integration, of telecommunications, and also physical and of circulation of people,” as was the case with Europe.
"The challenge is to effectively integrate South America and we have already failed twice,” said Alaby, referring to the Latin American Free Trade Association (Alalc), in the 1960s, and the Latin-American Integration Association (Aladi), established in the 1980s.
In this aspect it is also necessary to see how Paraguay will behave when it returns to the bloc, after the presidential elections, in 2013.
The fact is that, economically, Venezuela will give the bloc a boost. With the entrance of the country, the Mercosur now represents 80% of the Gross Domestic Product (GDP) of the subcontinent, as against 70% by the original members.
According to figures disclosed by the Ministry of Development, Industry and Foreign Trade, Brazilian sales to Venezuela totalled US$ 2.35 billion in the first half, growth of 32% over the same period last year, and resulted in a surplus of US$ 1.75 billion for Brazil. These exports represented 22% of the value of shipments from Brazil to the remaining members of the Mercosur in the first six months of 2012.
Alves says, however, that trade with Venezuela is still far from the “economic dimensions of the country”. “Venezuela suffers the ‘curse of oil’," he said. Due to revenues with the commodity, the nation has not developed other areas of its economy, like industry and agriculture.
*Translated by Mark Ament
