Venezuela joins Mercosur bloc marked by disputes http://today.reuters.com/news/newsArticle.aspx?type=winterOlympics&storyID=2006-07-04T190911Z_01_N04208496_RTRUKOC_0_US-TRADE-VENEZUELA-MERCOSUR.xml
Tue Jul 4, 2006
By Patrick Markey
CARACAS, Venezuela (Reuters) - Venezuela on Tuesday becomes the fifth member of the Mercosur trade block alongside Brazil, Argentina, Uruguay and Paraguay as the group struggles to overcome disputes in its drive for economic integration.
Venezuela's entry should open the world's No. 5 oil exporter to Brazilian and Argentine products, but analysts say it may worsen frictions as President Hugo Chavez clashes with Washington over his self-proclaimed socialist revolution.
Chavez has promoted the Mercosur union as one counterweight to U.S.-backed free trade deals, but his intense confrontation with the White House contrasts with the more pragmatic approach of other leftist members of the southern cone alliance.
"We are again laying down foundation stones for this great pan-national South American project. The union of South America is more possible today," Chavez said after signing bilateral accords with Argentina's President Nestor Kirchner.
Bolstered by high crude oil prices, Venezuela has reached out to its South American and Caribbean neighbors with scores of preferential energy deals in cooperation Chavez says counters failed U.S.-backed capitalist policies in the region.
Kirchner, who was in Caracas along with the presidents of Brazil, Paraguay, Uruguay and Bolivia, said Venezuela and Argentina had proposed a joint bond issue but gave no details about the debt deal.
Venezuela, South America's No. 3 economy, will become a fully fledged Mercosur member in four years and will eliminate tariffs on exports from Paraguay and Uruguay immediately. That benefit will extend to Brazil and Argentina in 2014.
Mercosur knocked down barriers for trade among member states and set a common external tariff. But the group has been plagued by spats over sensitive goods and chaffing by smaller economies seeking greater trade benefits.
Paraguay recently urged Argentina and Brazil to allow it and Uruguay to sign free trade agreements with other countries to balance out the dominance of the two economic giants.
"We must develop more open commerce and not just make statements about regional integration that don't always coincide with what is practiced," Paraguay's President Nicanor Duarte Frutos told reporters at the airport. "We still have lots of obstacles, especially less developed countries like Paraguay," he said.
LOCAL BUSINESS FRETS
Under the Mercosur trade bloc, Argentina and Brazil should have eliminated car trade tariffs, but Argentina moved to protect its automobile industry with restrictions while Brazil set limits on some Argentine goods.
"Venezuela is going to join an aspiring common market that is dead on arrival. Mercosur has struggled to lay the foundations for an effective trading bloc," said Patrick Esteruelas, an analyst at Eurasia Group consultancy.
Venezuelan industry leaders, many of whom oppose Chavez, say they were not consulted and fret cheap goods from Brazil and Argentina will flood the country's oil-dependent economy and damage farming, automobile and textile industries.
Critics say Venezuela's admission may also undermine Mercosur's efforts to pursue accords with other blocs such as the European Union and further exacerbate political splits.
Allied with Cuba, Chavez says he is fighting U.S. imperialism and withdrew in April from the Andean Community bloc to protest bilateral trade deals between members Peru and Colombia and the United States.
He also pulled out of a trade group including Colombia and Mexico after criticizing its "neoliberal" roots. The 25-nation EU and Mercosur have been working to reach an accord to bolster trade and investment since 1999, but negotiations are stalled.
(Additional reporting by Guido Nejamkis in Caracas)
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