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SOUTH AMERICA: Andean Bloc – Venezuela Out; Chile In?

Analysis by Gustavo González

SANTIAGO, Jul 20 2006 (IPS) - Chilean President Michelle Bachelet is looking to this week’s Mercosur summit in Argentina to revive the integration agenda, currently overshadowed by the region’s increasing focus on domestic interests and the resulting bilateral economic disputes.

Chile has been an associate member of the Southern Common Market (Mercosur) -consisting of Argentina, Brazil, Paraguay and Uruguay – since 1996. The rightwing opposition to Chile’s centre-left Bachelet administration has called the country’s ties to the bloc worse than useless, charging that the affiliation has in fact kept Chile from responding quickly to the prolonged energy conflict with Buenos Aires.

On Jul. 10, the administration of Néstor Kirchner in Argentina announced an increase in gas prices at border service stations, but only for cars with foreign plates. The move further tarnished Chile’s view of Mercosur, which is also immersed in a dispute between Montevideo and Buenos Aires regarding the construction of two paper pulp mills on the Uruguay River, opposite the Argentine shore.

The pulp mill dispute, as well as the conflict triggered when Argentina began rationing its natural gas supply to Chile in 2004, not only call into question how long Chile will remain an associate member of Mercosur, but also suggest alternatives to Bachelet’s current integration agenda.

Allan Wagner, secretary-general of the Andean Community of Nations (CAN), told IPS in late June that the time is right for Chile to return to the bloc, which it left in 1975, when the country was under the dictatorship of General Augusto Pinochet (1973-1990).

Wagner made the comments following Bachelet’s Jun. 24 meeting in Santiago with Peru’s president-elect Alan García, who assumes the presidency for the second time Jul. 28.

Wagner, who served as Peru’s foreign minister both in the first García administration (1985-1990) and under outgoing President Alejandro Toledo, said the possible addition of Chile would strengthen CAN, in the wake of Venezuela’s “unfortunate” withdrawal in June in protest to Peru and Colombia’s free trade agreements with the United States.

CAN was founded as the Andean Pact in 1969 by Bolivia, Chile, Colombia, Ecuador and Peru; two years later Venezuela joined.

In a Jul. 3 statement to IPS sent from Madrid, Wagner said President Bachelet would announce Chile’s return to CAN Jul. 28, coinciding with García’s presidential inauguration. However, the former foreign minister emphasised that Chile is not yet planning to become a full member.

Chile will most likely seek associate-member status with CAN, similar to its relationship with Mercosur. It does not intend to withdraw from the latter, despite pressure from the rightwing opposition coalition.

In the meantime, the Mercosur summit Thursday and Friday in the central Argentine city of Córdoba could potentially establish a conducive environment for the Chilean agenda. The event has become more than a simple South American mini-summit, as it stands to have a strong political bearing on the economic conflicts currently dragging the agreement down.

Kirchner is playing host to the presidents of the bloc’s full members: Luiz Inácio Lula da Silva (Brazil), Nicanor Duarte (Paraguay), and Tabaré Vázquez (Uruguay), as well as Hugo Chávez, representing Venezuela, which is in the process of becoming the fifth full member.

Also invited are Bachelet and President Evo Morales of Bolivia, also an associate member, and Colombia’s newly re-elected president Álvaro Uribe, Ecuador’s Alfredo Palacio, Peru’s Toledo and Cuba’s Fidel Castro.

The stage is thus set for a convergence of CAN and Mercosur, following Venezuela’s leap from one bloc to the other, and is also favourable for renewed declarations of faith in the new South American Community of Nations, which unites the countries of both blocs.

Bachelet, Chile’s Minister of Foreign Affairs Alejandro Foxley and ambassador to Buenos Aires Luis Maira are hoping the South American Community will become the forum in which the region can revive the Latin American unity agenda as well as concrete physical integration initiatives, and move beyond current economic conflicts.

Founded in December 2004 in the Peruvian city of Cuzco, the South American Community of Nations includes 12 countries: the five Mercosur members, the four members of CAN, and three countries that are not full members of either bloc (Chile, Guyana and Surinam).

According to Maira, like Bachelet a member of the Socialist Party, this broader context is a more appropriate place for South America to outline specific physical integration targets, in the form of 10 to 12 projects focusing on two basic needs: energy systems and the construction of interoceanic bio-corridors.

Within such a framework, Chile’s “dual participation” in CAN and Mercosur would serve the country well, as it depends on natural gas from both Argentina and Bolivia and is seeking to position itself via interoceanic bio-corridors as an important port of entry and export in South American trade with the Asia-Pacific region.

A CAN alliance would give shape to the Chilean president’s stated aim to prioritise relations with neighbours and enable the country to forge new ties with Bolivia and Peru to overcome age-old territorial conflicts.

The Andean Community is also an important economic interlocutor for the country, as it imports from Chile goods such as salmon, refined oil products, pulp, wine and lumber.

Between January and May of this year, 12.5 percent of Chile’s industrialised exports were destined for Andean economies. In the meantime, just 9.1 percent of exports went to Mercosur countries, with whom Chile maintains a negative trade balance, particularly with Argentina.

But in the Chilean Foreign Ministry’s overall calculations, economic factors seem to have taken a backseat to efforts to win the commitment of Mercosur members to politically support integration.

On Jul. 13, Foxley called Argentine Foreign Minister Jorge Taiana to warn him that Chile would be taking the issue of gasoline surcharges beyond the realm of commerce, and asked for a statement from Buenos Aires addressing the Kirchner administration’s commitment to integration.

It will be difficult for Kirchner to take a stand on the matter. Even as foreign criticism of his economic decisions mounts, Argentina’s president has seen domestic support rise, according to recent opinion polls that show 60 percent of respondents back his re-election in 2007.

Bachelet is facing the opposite situation; popular support for her government has plummeted, as measured by polls that point to, among other issues, the economic impact of energy problems and criticism of her weak stance on Argentina’s failure to uphold integration agreements in this sector.