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Monday, June 11, 2007
Perspectives

Venezuela's Trade Limbo

The agreements promoted by ALBA are making a lot of political noise but have little commercial substance.
A cargo ship at the Orinoco river in Venezuela. (Photo: Wilhelm Heinz/Inter-American Development Bank)

CHRONICLE SPECIAL
VenEconomy

Now that some time has passed, the Venezuelan government’s decision to withdraw from the Andean Community (CAN), announced in April of last year, appears hasty. At the time, President Hugo Chavez justification for this decision was that Colombia and Peru had signed bilateral commercial agreements with the United States. In his opinion, these agreements went against the nature of the integration process and would put and end to CAN. It didn’t seem to matter that a decision to accept the negotiation of bilateral agreements with third parties had been approved by all five Andean countries – including Venezuela – through Decision 598 of the finance ministers of Andean Community member countries.

When Chávez announced Venezuela’s withdrawal, it looked like Ecuador would be the next Andean country to sign a bilateral agreement with the United States. Venezuela and Bolivia – whose current president Evo Morales had just been elected – seemed to have been relegated to the Bogota-Quito-Lima bloc. Little over a year later, however, things have changed.

The new government of Ecuador, at least for now, rules out the possibility of negotiating a bilateral commercial agreement with the U.S. The newly elected, mostly Democratic U.S. Congress, however, has objected to the approval of the treaties signed by Colombia and Peru. After Democrats and Republicans reached an agreement in May, the treaty signed with Peru may be approved. The one with Colombia, on the other hand, is doomed, and not even President Alvaro Uribe’s visit to Washington at the beginning of May seems to have changed its fate.

For a few months it looked like Venezuela could possibly reconsider its decision and rejoin the CAN. Venezuela’s name continued to appear in the documents of the institution. Hope of this happening, however, is fading. Even though Venezuela’s commercial politics are unpredictable, it doesn’t look like anyone in the administration is capable of getting Chávez to reconsider his decision. Venezuela has even refused to abide by the commitment included in the Cartagena Agreement, according to which it would continue to offer commercial advantages to other Andean countries for at least five years.

In the meantime, Venezuela’s admission to Mercosur has taken its time. Despite enthusiastic official announcements, Venezuela is still in the admission process. It will only become a full member once this process is completed, and once the five countries sign the documents to approve Venezuela’s entry. Meanwhile, Venezuela’s name isn’t even mentioned as a member in Mercosur’s web page. More importantly, when Mercosur’s regional parliament met in Montevideo during the first week of May, Venezuelan delegates were invited to participate, but couldn’t vote. In this, as with all other regional organizations of the bloc, decisions will continue to be made by the four countries with full membership.

Having withdrawn from the CAN but not yet being a member of Mercosur, the meager agreements reached by the Bolivarian Alternative for the Americas (ALBA) didn’t stop Venezuela’s descent into integration limbo. An analysis, even if superficial, of the agreements signed by ALBA, show they are full of good intentions but have little substance. And if the analysis focuses mainly on this lack of substance, things look even worse.

The treaty signed last year between Bolivia, Cuba and Venezuela is an example of dangerous carelessness. In one of the few clauses with some substance, Venezuela is obligated to drop all tariffs on products coming from Bolivia. At first sight, there is nothing wrong with that. The problem is that, under commercial rules, a product’s origin is not equivalent to its original source. In other words, under ALBA, Venezuela has agreed to drop tariffs on all products coming from Bolivia. These products could be Argentine or Brazilian, and just happened to have passed through Bolivia on their way to Venezuela, or they could have been slightly altered in Bolivia – a change of packaging, for example.In other words, Venezuela gained nothing by having managed to postpone opening markets to products coming from Argentina and Brazil until 2012. The Venezuelan market is already open to any product that passes through Bolivia.

Moreover, Venezuela made a commitment to Bolivia to buy any agricultural or industrial product that had no market as a result of the application of a bilateral treaty with Europe or the U.S. Since Bolivia hasn’t signed bilateral treaties with Europe or the U.S., Venezuela’s commitment actually applies to Bolivian exports to any market around the world. It’s impossible to quantify Venezuela’s commitment. It could mean that Venezuela is obligated to buy any Bolivian export that can’t find a market.

Venezuela’s withdrawal from the Andean Community seems to have plunged it into the limbo of Latin American integration. Limbo seems like an appropriate place for it to be since, according to Roman Catholic doctrine, it was some kind of ‘‘deposit’’ for innocent souls that couldn’t go to hell, but weren’t allowed in heaven either. The problem is that in April the Catholic Church officially announced it was closing down limbo. Apparently, the innocent souls of infants trapped there would be transferred to heaven. It’s not clear, however, if Venezuelan politics will be as lucky. Though the decisions made by the Venezuelan government regarding commerce are so careless they look almost innocent, they have affected Venezuelans so negatively that it seems more like they will lead the country straight to hell.

This column is based on an editorial in VenEconomy. Republished with permission.

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