Category Archives: Venezuela

Venezuela into Mercosur: devil in the details and hints of a Paraguayan push-back

Although Venezuela appears to be quickly on its way into Mercosur thanks to the suspension of dissenting Paraguay’s political rights in the bloc, things may move more slowly than desired. A report from Brazilian business daily Valor Econômico points to the devil in the details. Political declarations need to be translated into bureaucrateeze, which in this case means that Venezuela has to sort out how to translate its trade coding terminology into the Common Mercosur Nomenclature. Brazil is apparently looking for five days of negotiations a month until the end of the year to ensure progress. Such an aggressive approach is perhaps necessary to keep focus if we look back to the problems of the Lula/Chavez-brokered PDVSA-Petrobras refinery and the collapse of the anel energetico South American gas pipeline ring.

Paraguay’s congress also appears to be pushing back on its Mercosur castigators, threatening to finally vote on Venezuela’s petition to join Mercosur. They reputed promise is to deny the petition. So far the vote has not taken place, which is perhaps a judicious decision given the increased presence of Brazilian anti-contrabanding and drug interdiction forces in the tri-border region as part of a likely strategy to pressure Paraguay’s illicit elites, which may well be leaning on the nation’s political representatives.

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Filed under Brazil, Foreign Policy / Diplomacy, MERCOSUR, Paraguay, Venezuela

News Brief: Venezuela on for Mercosur; Air Dilma ready to launch in Brazil?

Brazil appears set to hold course and bring Venezuela into Mercosur at a special meeting of the bloc at the end of July. Venezuelan president Hugo Chávez has reportedly tweeted that Dilma has invited him to the Merocsur meeting.

 

Meanwhile, Dilma’s recent lengthy voyages appear to have caused her to loose patience with the ‘Air Lula’ Airbus A319 that bought shortly before Lula started his globe-trotting presidential foreign policy ways. Apparently four different sources have told Reuters that Dilma is talking to Boeing about buying the same sort of 747 as used for Air Force One. Dilma’s gripe is that she will be undertaking at least one trip a year to India and China and that Air Lula lacks the legs to do the trip with anything less that two refueling stops. This wastes time and, worse for the nervous flyer Dilma, requires more take offs and landings.

The wider story flagged by Reuters is that Dilma’s talks with Boeing might be a sign that the US aircraft maker is going to crack the Brazilian market and might also show that it has a leg up on the competition for the Brazil’s long-delayed FX-2 fighter contract. Of course, it could also become a consolation prize if the lucrative air force renovation project goes to the French or Swedish bidders. This particular soap opera has being going on since the dying days of the Cardoso administration.

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Filed under Brazil, Foreign Policy / Diplomacy, MERCOSUR, News brief, Venezuela

Paraguay’s suspension from Mercosur: Implications for Australian trade policy

ANCLAS Senior Associate Sean Burges has just had a short analytical article published by the site The Conversation looking at what impact Paraguay’s presidential disruptions might have on Australian trade policy in the region. His conclusions are that there could be problems:

“Brazil’s enormous internal market and large economy is the real prize for Australian trade policy, with Uruguay being a pleasant addition. The catch is that any trade agreement with Brazil or Uruguay would have to come through a deal with the entirety of Mercosur. Venezuela’s full membership in Mercosur makes a deal with Australia as likely as a 2014 repeat of Uruguay’s 1950 World Cup defeat of Brazil in Rio de Janeiro’s Maracanã stadium.”

The full article, entitled “Paraguay’s ‘coup’ puts a dent in Australian-South American trade dreams” can be seen here.

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Filed under Brazil, Democracy, MERCOSUR, Trade, Uruguay, Venezuela

Brazil being a forward thinker by pulling Venezuela into Mercosur?

Dilma Rousseff’s government in Brazil has been heavily criticized by a large number of internal and external critics for cynically branding Lugo’s ouster in Paraguay a coup. This was promptly followed by the decision, along with Argentina and a reluctant Uruguay, to suspend Paraguay’s political rights in Mercosur, thereby negating the Paraguayan Congress’s veto over Venezuela’s  accession to the South American trade bloc. Uruguay’s justified complaints of marginalization aside, Venezuela’s entry into the bloc raises serious questions about the economic rationality of the grouping. Hugo Chávez is likely to be a huge barrier to a further widening of the bloc and a successful tackling of the myriad internal economic contradictions plaguing the trade arrangement. The chief complaint is that the Dilma/Cristina decision has effectively killed the economic logic of Mercosur and turned it into little more than a political plaything.

A quiet riposte to this critique is being whispered into the ether by Mercosur country officials (posted outside Australia). Their argument is that Brazil took a long view on Venezuela’s membership in Mercosur. Venezuela has become a good export market for Brazil, and officials not only hope it will continue to grow, but also will grow faster in the post-Chávez era, whenever that is.

Does this make sense?

The quick answer is perhaps, but you need to be a little bit optimistic. While Venezuela is not an insignificant market for Brazil, it is a bit of a volatile one thanks to the vagaries in oil prices.

Drawing on trade data from the Inter-American Development Bank Trade and Integration unit we get a picture of Venezuela as generally being under 2% of Brazil’s exports over the last decade. More to the point, we don’t really see any sustained growth past the 2007-2008 spikes in oil prices which predated the most aggressive period of the Brazilian real’s appreciation against global currencies.

Perhaps of more interest to Brazilian policy makers is  Venezuela’s share of exports from Brazil’s value-added industries. These are the economic sectors that create wider spread employment.

First, the total value-added export picture.

Over the last ten years Venezuela’s share of Brazilian value added exports has oscillated between 1.3% and 5.4% of the total, but in general has been fairly flat and in decline since 2007.

The picture is pretty much the same if we look at Brazil’s market share in Venezuela.

Brazil’s share of Venezuelan imports is relatively stable, experiencing a rise in share from when Lula was elected to the presidency in Brazil, but then entering into a period of sustained, if mild decline.

The significant point is that in the Chávez era the spikes in value-added exports from Brazil closely follow oil prices.

Again, the picture is rather mixed. Exports to Brazil as a percentage of total Brazilian exports vary with shifts in oil prices. But, what matters for Brazilian exporters struggling with competition from China is the rising importance in sectors such as textiles and ceramics.

There are two problems with this rosy spin. First, Venezuelan imports appear to be tightly tied to oil prices and are in decline.

The second is that Brazil appears to be losing value-added market share in Venezuela.

The overall message from the IADB/Intal trade data is that while the Venezuelan market matters for Brazil, it is not nearly as important as Argentina, Europe or the US. Clearly the hope behind the whispers is that this will change with Venezuela’s full accession to Mercosur. Of course, this leaves the question of how the bloc’s internal trade spats are going to become easier to manage with the entrance of another member, and a decidedly vocal and anti-capitalist member at that.

The spoiler in the negative analysis presented here is an account of business that Brazilian construction companies are doing in Venezuela and FDI flows, both of which are extremely difficult to track with any accuracy. Although exports in services (i.e., engineering services) do not show through the IADB trade stats, the transport equipment line in the last chart gives a sense of the importance of service exports — Brazilian firms have played a major role in projects such as expansion of the Caracas subway system.

Still, trade flows are not overwhelming and do raise questions about why there was suddenly a need to rush Venezuela into the bloc over the objections of Paraguay’s congress. Asunción’s beef was with Chávez (partly as a proxy for Lugo), not Venezuela, presumably making it likely that the Paraguayan Congress would have removed its veto fairly quickly once Chávez is out of office. Maybe Brazilian policy makers feel they can capture markets and contacts before the post-Chávez era begins. Of course, links to Chávez of any kind could be a major handicap should there be a major political change in Venezuela.

At the moment the whisper’s slipping into the ether are a tempting, but not quite a convincing explanation.

–Sean Burges

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Filed under Analysis, Brazil, Foreign Policy / Diplomacy, MERCOSUR, Trade, Uncategorized, Venezuela

Lugo’s ouster in Paraguay — the Mercosul implications viewed from Uruguay and Brazil

More details are starting to come out with respect to last week’s Mercosur summit meeting and the decision to suspend Paraguay’s political rights. The online newspaper Mercopress has a series of fascinating reports on Uruguay’s reaction to the whole process, which can be summarized as follows:

Story #1 — Uruguay agreed to Venezuela’s July 31 entry into Mercosur as part of a negotiation to prevent Argentina and Brazil from imposing economic sanctions on Paraguay. Why? The political class staged the disruption so why punish the people, mused Uruguay.

Story #2 — There was not a unanimous agreement between the three remaining Mercosur presidents (Dilma, Kirchner, Mujica) that Venezuela should join the bloc, although Argentina and Brazil contest this.

Story #3 — Brazil and Argentina will benefit most from Venezuela’s accession to Mercosur. Brazil has a large trade surplus with Venezuela (and its firms get paid with regularity).

Story #4 — Uruguay vice president Astori is calling the outcome of the last Mercosur meeting a major blow against the already fragile institutional framework of the bloc.

Story #5 — Uruguay is claiming that it was Brazil that pushed so hard to bring Venezuela into the bloc. (This fits with much of the sustained pressure from various presidential advisors in Brasília.)

Story #6 — Former Mercosur cheerleaders and ex-Brazilian diplomat, Rubens Barbosa is now publicly worrying that Argentina is going to kill the trade bloc. Barbosa is currently head of the foreign trade council of the São Paulo Federation of Industrial Entreprises (FIESP), one of Brazil’s most important business groups.

Story #7 — The opposition in Brazil’s congress is complaining that the Dilma government is reducing Mercosur to little more than a political plaything. The bloc was once a critical part of Brazil’s foreign economic engagement strategy.

 

Rapid Analysis: Mercosur is not really in any more trouble than it has been for the last several years. The difference with this latest instance is that the internal discord and contradictions are now becoming very public. Ultimately, it will take a political decision from Brazil that trade deals with other countries are critical for things to move in Mercosur. Argentina matters and Paraguay and Uruguay have demonstrated they can exercise a veto, but none of these countries, or Venezuela for that matter, will be willing to block a major shift in Mercosur policy direction if it is something that Brazil really wants.

–Sean Burges

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Filed under Analysis, Argentina, Brazil, Foreign Policy / Diplomacy, MERCOSUR, News brief, Paraguay, Trade, Uruguay, Venezuela

International Crisis Group on Venezuela’s Election

The International Crisis Group has released a short briefing and appraisal of the situation in Venezuela as the country approaches a presidential ballot between cancer-striken incumbent Hugo Chávez and the opposition candidate Henrique Capriles. The whole report can be seen here, including a long set of policy recommendations, but two penetration paragraphs are as follows:

Many in Venezuela, including in the Capriles camp, stress a major breakdown of order is unlikely. Chávez has always rooted his legitimacy in the ballot box and promises to accept the result in October. The electoral authorities are, perhaps, more resistant to his meddling than other institutions. The opposition swears there will be no witch hunts if it wins; if it loses, it appears to have little stomach for a fight, particularly if the vote is clean. Many citizens are tired of confrontation. While senior generals are loyal to the president, with the defence minister suspected of ties to drug-trafficking, the armed forces’ middle and lower ranks would not necessarily follow them into blatant violations of the constitution. Nor would regional powers condone a power grab or welcome Venezuela’s slide from flawed democracy into turmoil or dictatorship.

But Chávez’s illness takes Venezuela onto unknown – and unpredictable – terrain. At stake is not only his rule but also a model of governance that many Venezuelans perceive to serve their interests. One scenario, were the president or a late stand-in defeated, would see the ruling party seek to force the electoral authorities to suppress results or itself stir up violence as a pretext to retain power by extraordinary means. A second, especially if the president’s health should decline rapidly, would have it delay the vote – perhaps through a decision by the partisan judiciary – in order to buy time to select and drum up support for a replacement. Either scenario could stimulate opposi-tion protests and escalating confrontation with government loyalists.

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Filed under Democracy, News brief, Uncategorized, Venezuela

Chávez, Venezuela’s election and regional reactions

Despite a reportedly still-advancing cancer in his pelvic region, Venezuelan President Hugo Chávez continues to vigorously campaign for reelection later this year. The Spanish newspaper ABC is reported to have seen an intelligence dossier claiming that Chávez has been put on the powerful painkiller Fentanyl to help him continue campaigning through his cancer-caused pain. Reports from Venezuela are that things are going well for the incumbent, which is helping to draw in further support, including the unconditional support of Brazilian President Dilma Rousseff’s Worker’s Party.

The results of Venezuela’s presidential election have become an issue of abnormally major concern for the country’s hemispheric neighbours. Former Colombian President Alvaro Uribe continues to maintain that Venezuela is a narcotrafficking haven, with a growing list of seizures in Latin America and Africa suggesting that there is some merit to this accusation. The suggestion is not necessarily that Chávez is directly responsible for the use of his country as a drug transhipment point (probably only his most virulent critics would maintain he is consciously supporting such activities), but that the centralization of power that he has encouraged has created a situation where effective control and oversight has been lost in many important areas of Venezuela.

Over at the blog Jacare Mirim Carleton University’s Prof. Jean Daudelin offers a penetrating analysis of the dangers this creates for the region — too many illicit interests are reliant upon maintenance of the existing state framework in Venezuela, which in turn is entirely predicated on Chávez’s own personal charisma. The worry for regional policy makers and security gurus is what will happen if Chávez either dies or loses the election. Will it push Venezuela towards being a narcostate, or will something more positive rise from the uncertainty. The problem right now is that nobody can tell, with seasoned Venezuelan analysts speaking off-the-record of a willingness only to discuss potential scenarios, not certain outcomes.

–Sean Burges

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Filed under Analysis, News brief, Uncategorized, Venezuela