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LATIN AMERICA: Wobbly 'Axis of the South'
By Mario Osava
RIO DE JANEIRO, Jan 27 (IPS) - Building a "strategic axis" between
Argentina, Brazil and Venezuela appears to have the political backing of the
presidents of the three countries, to judge by the frequency of their
meetings. But there are serious doubts surrounding the projects that are to
give shape to the planned integration.
Presidents Néstor Kirchner of Argentina, Luiz Inácio Lula da Silva of
Brazil, and Hugo Chávez of Venezuela are to meet again on Mar. 10 in the
western Argentine city of Mendoza, for the third time in three months, to
review progress on several joint initiatives. These were decided on in
Montevideo in December, and on Jan. 19 in Brasilia.
Building an 8,000 kilometre pipeline to carry Venezuelan natural gas to
Argentina, crossing Brazil from north to south in a decisive step towards
South American energy integration, is the most concrete of the projects. It
is expected to be completed in six years.
At the meeting in the Brazilian capital earlier this month, the aim of
setting up a South American Defence Council to begin to move towards
military integration was announced, as was a proposal to create a "Bank of
the South" to promote economic development and infrastructure to support
regional integration.
In addition, cooperation between the three South American countries extends
into the social area, with priority given to "eradicating illiteracy in the
region," education, science and technology policies, and also activities by
public television channels.
These are merely "silly fantasies," according to an editorial in the
Brazilian newspaper Valor Econ- mico, which said that the Bank of the South
and the Defence Council were "useless," while the gas pipeline still
requires feasibility studies.
Chávez was the instigator of these ideas. He was the only person in Brasilia
to talk to the press and announce the projects, and he was the sole source
of information about the Defence Council, which was not mentioned in the
joint declaration issued by the three leaders.
A mega-project like the gas pipeline runs counter to the advances made with
respect to liquefied natural gas (LNG), a means of supply that has the
advantages of greater flexibility, less vulnerability and lower
environmental costs, Giovani Machado, with the Energy Planning Programme at
the University of Rio de Janeiro, told IPS.
The "Pipeline of the South," as Chávez calls it, would cost approximately 20
billion dollars, but this is only an estimate. A technical team is supposed
to define the details of the project and report in July.
Such a costly undertaking requires complex "financial engineering," and
fixed infrastructure, like the pipeline, will always be subject to the
"geopolitical risks" that abound in Latin America, and to the ups and downs
of demand in unstable economies, Machado observed.
The market for LNG is growing fast, lowering the cost of this alternative.
LNG is preferable because it reduces the risks of sudden changes in
circumstances, which in contrast are increased by dependence on a limited
number of suppliers, and because Brazil's population and industry are
concentrated in coastal areas, near the ports, Machado remarked.
It would be better for Brazil not to get involved in this "adventure," even
if the feasibility of the gas pipeline is established, said the expert, who
suggested that it would be more convenient to build the pipeline "step by
step, in modules," starting by supplying Manaus, the capital of the state of
Amazonia, and then other large urban areas, gradually moving southwards.
Although Machado said the project would be an important step in South
American integration, he warned of the need to develop consumer markets. The
presence of large areas where there is no demand along the pipeline route
might render it uneconomic, he said.
The pipeline is a complex project, "too big," but it could be a motivating
factor for integration, benefiting national industries that would supply
construction equipment and services, commented Theotonio dos Santos, a
professor of international economics at the Fluminense Federal University in
Niteroi, near Rio de Janeiro.
In his view, the other ideas are entirely feasible, although they have been
condemned by conservative media outlets.
"Obviously Venezuela has plenty of dollars from its oil industry to deposit
in a future Bank of the South, but Argentina and Brazil also have disposable
income from the positive trade balances posted in the last few years," he
told IPS.
A regional development bank, in addition to already existing institutions
like the Andean Development Corporation and the Financial Fund for the
Development of the River Plate Basin, would be important for "potentiating"
South America's role in the world economy, he stated.
This region is particularly strong in commodity exports. Chile, the source
of more than half of world copper exports, could "set the price" for the
world market, but does not do so, noted Santos. Argentina and Brazil also
play decisive roles in the soy and beef markets, he added.
Industrialisation would be promoted by greater integration of the regional
market, which would allow production on a large scale, and by the creation
of a financial system for development, said Santos.
According to the economist, integrating regional security is also possible,
because of the current wave of leftwing or nationalist governments in South
America, and because the armed forces, even "rightwingers," have realised
that the United States is not "a friendly country," and puts a low priority
on Latin America.
This awareness has grown, he said, ever since the Malvinas/Falklands War in
1982, when Washington backed British dominion over the South Atlantic
islands. Argentina fought for sovereignty over the islands with Latin
American support, and continues to claim them through diplomatic channels.
(END/2006)
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