Bolivia in the Mercosur: what are the real benefits?
July 17, 2015 will certainly be in the history of Mercosur as a marked date for regional integration. The 48th Mercosur Presidential Summit, held in Brasilia, gave the Plurinational State of Bolivia the long-awaited full member status.
The five members of Mercosur signed the Accession Protocol. The parliamentary ratification of Paraguay, Bolivia and Brazil is still pending, as in due course did Argentina, Uruguay and Venezuela.
It is possible to draw two key interpretations with respect to this highly awaited outcome. On the one hand the political and institutional dimension and, on the other, the economic one.
The political dimension of an integration process puts institutions at its core. In this regard, participants transfer loyalty and authority to a more powerful entity in order to regulate their relations within a larger space or unity. Accordingly, integration is defined as the process by which two or more governments, with the support of common institutions, adopt joint measures to foster their interdependence and gain mutual benefits. Consequently, integration is conceived as a process, with no predetermined final goals, but as a goal to pursue in itself. Advancing towards this objective brings us to a winding road: economic integration. Isaac Cohen Orantes defines it as the process by which two or more countries come to the gradual or immediate abolition of discriminatory barriers between them with the aim of establishing a single economic space.
The original conception of an enlarged Mercosur, aimed at gathering the majority of Latin American countries, is gaining a new dimension with the presence of Bolivia, since it integrates the protectionist triad together with Argentina and Venezuela. On the other hand, Uruguay and Paraguay push for a greater openness to the world, which involves reviving bilateral negotiations with the EU with regard to the Free Trade Agreement (FTA). For its part, the delicate domestic political situation in Brazil leaves the country with no significant role to play when it comes to raising a flag in favor of the FTA. It is known that Rousseff looks at it favorably, but admitting it publicly would imply a clear break of the political honeymoon she has maintained so far with Argentina. Thus the Argentine government firmly believes that the adhesion of both Venezuela and Bolivia represents a giant step towards integration under the flag of the Mercosur unity.
The truth is that today the Mercosur is an imperfect customs union, since trade tariffs among the parties were eliminated and a common external tariff (CET) has been fostered, but a consensus on 100% of tariff positions is still lacking. The CET indeed has a number of exceptions for many products. This situation weakens the institutional strength expected from Mercosur in terms of negotiations with other regional blocs.
Tabare Vazquez stressed the evident lack of free movement of goods, services and factors of production, as instead required by art. 1 of the Treaty of Asuncion. Neither customs duties nor non-tariff restrictions have been eliminated. And even less has been realised in terms of the other major objectives set by the founding Treaty, such as, inter alia, the coordination of macroeconomic fiscal and monetary policies.
For its part, the Bolivian government expects substantial business advantages for the domestic supply of non-traditional products. Nevertheless, the Confederation of Bolivian Private Businessmen (Confederación de Empresarios Privados de Bolivia - CEPB) opposes to the indiscriminate entry of manufactured goods, mainly from Brazil and Argentina. Before a public debate is launched, Bolivia will seek to obtain from Mercosur: 1) a preferential regime enabling the Bolivian manufacturing to enter the Brazilian and Argentine markets under the same conditions as Paraguayan factories; 2) that the Bolivia’s dual membership of the Andean Community (CAN) and Mercosur is respected; 3) the lifting of non-tariff barriers applied to the supply of Bolivia in the regional bloc; 4) supplying all Bolivians with raw materials and consumables for a competitive production, not conditioned by the internal supply of Mercosur; and 5) the creation of conditions protecting the national industry.
In economic terms, the main exchange between Bolivia and Mercosur occurs in the gas sector. According to the Bolivian Institute of Foreign Trade (Instituto Boliviano de Comercio Exterior -IBCE), from January to May 2015, Bolivia exported 302 products to Mercosur for $ 1.923 million, of which gas accounts for 94% of sales. The remaining 6% consists of powdered milk, fresh bananas, crude oil and natural barium sulfate, among others.
One of the major problems and, at the same time, challenges for the regional bloc is the lack of commercial dynamism due to a strong protectionism which is partly explained by non-tariff barriers.
The intra- and extra-Mercosur trade mark the weakness of this bloc. Member countries tend to trade on an individual basis with other blocs or countries outside the region: this is the current real weakness of Mercosur. What is needed is a reorientation of the regional integration initiatives, that should work in order to allow the legal and commercial dimensions to advance jointly.
It has to be noticed that a top-down perspective prevailed in the integration process. This was conceived according to a general legal perspective, hoping it would result in a sectoral trade integration. The goal is to focus on the productive complementarity among the Mercosur countries, in order to negotiate more effectively with other regional blocs such as the European Union and the Pacific Alliance. Therefore, it is a regional integration framework that has to be promoted and enhanced.
By Gretel Ledo
MA in International Relations, Europe and Latin America (University of Bologna). Lawyer, political scientist and sociologist. International analyst and parliamentary adviser on foreign affairs and the Mercosur Parliament.