Merco-sucks

The recent rapprochement between Mercosur (Southern Common Market) and suspended member state Paraguay appear to have hit a roadblock that will delay Paraguay’s reentry into the organization until next year at the earliest. Following the controversial impeachment of former president Fernando Lugo, Brazil, Argentina and Uruguay suspended Paraguay from the organization for violating its democratic charter. The move allowed Venezuela to finally become a full member as Paraguay’s senate could no longer block its admittance into the group. Now, Paraguay is refusing to rejoin the group so long as Venezuelan president Nicolás Maduro holds the rotating presidency, arguing that since Paraguay hasn’t yet approved Venezuela’s membership, it could not hold the presidency. This latest spat helps to highlight the unfortunate missed potential of Mercosur, an economic bloc with so much potential that often behaves in direct opposition to its founding, and very ambitious goals.

Mercosur was established in 1991 with the intention of eventually evolving into a common market akin to the European Common Market that eventually became the European Union. In the 1990s, trade within the group grew quickly and it looked like Mercosur could soon become an important economic block. However, since then, Mercosur is defined more by its failure to reach its potential than by its achievements. While the customs union was successfully established, little significant progress has been made toward a deeper economic integration, let alone a full-fledged common market. Trade between the member countries has grown dramatically among the four original members—averaging more than 4 percent annual growth since 1994 by UN COMTRADE statistics. However, that also took place during a period where Latin America’s trade in general was growing rapidly as a result of neoliberal reforms and was starting from an exceptionally low point after decades of Import Substitution Industrialization had closed off their economies.

Most damagingly, the member states have been all too willing to renege on their Mercosur commitments when it benefits when it will provide short-term economic or political boosts at home. For instance, the Kirchner governments in Argentina allowed environmentalist groups opposed to two pulp mills in Uruguay to blockade one of the crossings between the two countries off and on for years until Argentina finally lost its case in the International Court of Justice in 2010. In a similar vein, following Brazil’s devaluation in 1999, Argentina placed a tariff on Brazilian steel to forestall the deleterious effects of a suddenly more competitive Brazilian car industry on Argentine markets. More broadly, Paraguay and Uruguay have often complained of asymmetrical access to the larger Brazilian and Argentine markets, particularly as both have reverted to increasingly protectionist policies over the past few years and retreated into bilateral economic agreements that exclude their smaller neighbors.

Venezuela’s adhesion to the group was, in many ways, the culmination of Mercosur’s failure. Most conspicuously, Venezuela, first under Hugo Chávez, and now under Nicolás Maduro, has been Latin America’s leading voice in opposition to free trade. For an organization that purported to be working toward a common market (i.e. completely free trade within the member states), allowing the country that had spent a decade working to undermine free trade seemed incongruous at best. This played no small part in Paraguay’s resistance to ratifying Venezuela’s membership. How could a group attempting to increase free trade admit a member so diametrically opposed to the concept?

Moreover, that Fernando Lugo’s impeachment was sufficient to warrant a suspension from Mercosur for violating its democratic principles, but that Venezuela was allowed entrance in spite of its complete degradation of rule of law showed how hollow its commitment to democracy really is. The Ushuaia Protocol establishes Mercosur’s commitment to democracy and procedures for dealing with a “rupture in the democratic order.” As Javier El-Hage argued at the time, it is difficult to argue what happened to Lugo was a disruption in the democratic order considering the margins by which both houses voted to impeach him and the fact that it was conducted within the letter of Paraguayan law—if not its spirit. However, suspending Paraguay allowed Mercosur to backdoor Venezuela’s ascension into the organization; a cruel irony considering the Venezuelan government’s systematic disregard for its own constitution.

With Argentina continuing to close its economy in response to economic troubles, Venezuela still being run by chavistas and Brazil’s slowing growth and ambivalence toward the economic wellbeing of its co-members, it’s difficult to foresee a medium-term scenario where Mercosur returns to its roots and works to increase economic openness among its member states.

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