South America – Leading integration

{{Good economic results are providing South American countries with the momentum for planning national and sub-regional political and economic strategies, but their different stages of development are creating difficulties only a strong leadership can overcome.}}

Strong economic growth based on exports and buoyant demand, particularly from China, are causing South America to grow 5.5 per cent in 2004, the best result since 1980. José Luis Machinea, the ECLAC’s secretary-general, has said to the Financial Times that there has been some structural change in the region, paving the way for an export-oriented growth and the second current account surplus in half a century. Nevertheless, the growth statistics should be seen in relative terms, as some of the major economies in the region are only recovering from their deepest financial crisis ever. This is the case particularly for Argentina (8,2% growth) and Venezuela (18% growth).

In the political arena, the scenery is mixed across the region. Instability and uncertainty characterises the political present and future of the countries in the Andean Community (Bolivia, Colombia, Ecuador, Peru and Venezuela). In the Mercosul, all four full-member countries elected leftist governments, which carry a strong and symbolic weight, reflecting the disenchantment and disillusion with the neo-liberal policies of the 1990s. The Argentinean Néstor Kirchner leads an internationally discredited country, with profound structural social and economic imbalances. The internal pressure from Argentine trade unions and companies to protect its industries is hampering the political momentum for the development of an Argentine-Brazilian axis, nevertheless both countries realise the importance of developing a regional dimension. This is important in the multilateral (WTO), inter-regional (negotiations with the European Union, the Southern African Customs Union, or for a Free Trade Area of the Americas) and bilateral playing fields (with strong emerging economies such as India and China). Moreover, competitive insertion in the global economy depends on the regions’ attractiveness to foreign investment, its capacity to export its products and internationalise its companies. This will be better achieved with better and deeper integration and through joint action in international markets.

In the last few weeks of 2004, the Mercosul has celebrated ten years since its founding treaty of Ouro Preto. Then, in Cuzco (Peru), the bloc of the Latin American southern cone signed a treaty with the countries of the Andean Community, plus Chile, Guiana and Suriname, officially establishing the South American Community of Nations. The numbers characterising this new initiative are impressive: 17 million square kms, 361 million habitants, GDP above 725 billion euros and exports above 134 billion euros. However, criticism and disbelief is strong.

The main criticism is aimed at the incapacity of both the Mercosul and the Andean Community to deepen and strengthen its integration, mainly the Andean Community, even though Mercosul is also seen by many in the region like a failed attempt. Nevertheless, the political, economic and cultural roots and basis that pushed integration forward in the first place are still very important. As Celso Amorim, the current brazilian minister of Foreign Affairs, has stated, Mercosulian integration is more than just economic, it is very political and very cultural. Furthermore, even though the internal image of Mercosul is very fragile and needs reconstruction, the external dimension of the bloc is still strong and important.

Rebuilding confidence in the bloc has to be done through pragmatic action in developing the region’s physical integration, contributing for socio-economic development, decreasing inequality and strengthening institutions. The South American Community of Nations is institutionalising this objective approach to development, and thus, is going in the right direction. The basis of its existence is success in its initiatives. The first and founding one is the Initiative for South-American Regional Infrastructure, announced in 2000 and now ready to be signed by the 12 member countries. This initiative identifies key structural work of bilateral and regional interest in the areas of transports, energy and telecommunications, being divided in eight geo-political axis and seven industry-specific projects aimed at harmonising norms and operation systems. Governments, multilateral financing agencies like the Andean Financing Corporation, Inter-American Development Bank, and private sector companies, will finance these projects.

In this way, South American integration is making progress, however, this progress depends on the strong and understanding leadership of Brazil. The biggest and economy in the region has put its credibility on the successful progression of regional integration. It is promoting a development model that is an attempt to provide answers to Brazilian and South American difficulties in an economy where competitiveness is measured at global scale, at the same time that tries to promote a more just social and economic order. Investment in infrastructure, education and institution strengthening is the way forward, but this development model also and essentially depends on the region’s attitude towards Brazilian leadership and Brazilian attitude towards the region. Countries like Argentina and Chile are and will be heavy weights in regional negotiations, but can also become strong voices in promoting its political and economic integration.