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The Obstacles to Latin America's UNASUR

Source: STRATFORApril 24, 2007 02 38 GMT



Andean Community of Nations (CAN) Secretary-General Freddy Ehlers said on Monday that trade blocs CAN and Mercosur should merge to form the Union of South American Nations (UNASUR).

Dreams of South American integration have inspired many such proposals since Simon Bolivar helped lead independence movements in six of the continent's current nations in the early 1800s. Despite a recent resurgence of enthusiasm for the idea, it is unlikely to make significant formal progress over the next decade.

The heads of state of all 12 South American countries lent their support April 17 to the formation of UNASUR while attending the first South American Energy Summit on Margarita Island, Venezuela. But they failed to meaningfully address the three things that doom such an effort -- conflicting economic models, contradictory regional ambitions and geography.

UNASUR is a new name for an old idea, most recently called the South American Community of Nations when proposed at the third South American Summit in December 2004 in Cusco, Peru. The Cusco Declaration called for a common parliament, market and currency and aimed to create in stages a political and economic union similar to the European Union, to be complete by 2019. The capital was to be in Lima, Peru, while a South American Bank was to be based in Brasilia, Brazil. Complete integration between CAN and Mercosur into the South American Community of Nations was expected by 2007.

This obviously did not happen, but apparently it is time to try again. This time the capital is to be in Quito, Ecuador. A small, permanent secretariat is to be quickly put in place instead of a parliament. Though this is a better chance to create a decision-making body, it remains unlikely that participating countries will submit themselves to such a body, and they do not have enough in common to reach agreements by total consensus.

Ehlers' proposal is likely untenable. Although CAN is a barely functioning body whose members would love to integrate into something more meaningful, Mercosur is a semi-functional body dominated by Brazil, which is not likely to be as eager to merge an entity relatively under its control into a larger entity over which it might have less sway. But UNASUR faces far more serious obstacles en route to its creation.

This is where EU successes and failures could be instructive.

The European Union demonstrated that it is much easier to form an economic union than a political one. The union emerged from an organization designed to enable joint economic policies among a small group of Western European nations that had relatively similar market dispositions.

However, South American countries have different economic priorities and models. Their divergent attitudes toward market economies -- as observed in pro-market Chile, Peru, Uruguay and Brazil on the one hand and market-antagonistic Venezuela, and to some extent Bolivia and Ecuador, on the other -- make it unlikely that UNASUR would make meaningful progress toward common trade policies, common regulatory or accounting practices or a common currency.

Until recently Mercosur was made up of three generally market-friendly countries and one weak one, all sharing significant trade flows; however, together they failed to enforce significant agreements or achieve collective action on trade. Incorporating more members in a grander endeavor would not make these objectives any more obtainable, especially if members that are dismantling their private sectors were added.

Furthermore, Europe had two countries with regional ambitions: France and Germany. The European Union was made possible by the wartime demolition and subsequent partition of Germany, leaving Western Europe with a single large power to set its terms: France. At least two South American countries have strong regional ambitions: Brazil and Venezuela. Both would like to be the father of continental integration, and neither wants another parent in the family. Either of them can effectively veto strong moves by the other, and likely will. Regarding policy they are not too similar, one is not about to dominate the other and neither is likely to be severely crippled by outside forces any time soon. Argentina, Chile and Colombia also are significant players in their own right, and they are not lining up together to tip the balance one way or the other.

Brazil likes Mercosur because it is a forum that cannot do anything without its approval. But Brazil's leadership might be diluted if UNASUR gets off the ground -- in fact that is what Venezuelan President Hugo Chavez is counting on. UNASUR would have to function by unanimous agreement, which would probably paralyze it, or by majority, to which Brazil is unlikely to submit.

The main obstacles to South American integration go deeper than these political arrangements, and in fact have helped to create them; these obstacles are the Amazon forest and the Andes Mountains. These geographical features have prevented effective trade and/or warfare between the Andean countries and the countries in the Plata River and Atlantic seaboard areas.

The division between Brazil's image for the region and another contender's is not merely a contemporary phenomenon dependent on the particular visions of the region's current leaders. Rather, the region's fate was set by the Treaty of Tordesillas in 1494 which, sanctioned by the pope, divided the region between the Spanish and the Portuguese along a north-south meridian granting the Portuguese most of the Atlantic seaboard. The Portuguese colonists eventually pushed inward more quickly than the Spanish colonists on the Pacific side of the continent, which had the Andes to contend with. Inevitably, Brazil emerged as an immense nation with tremendous resources, its own language and a strong sense of identity. Brazil is not about to agree to any strong regional accord that it does not control. And regardless of whether Venezuela is the contender of the day, Spanish-speaking South American countries are likely to band together to make sure Brazil does not dominate.

However, although the political rifts in the region remain as divisive as ever, the geographical barriers are gradually lessening. Tunnels are being built through the Andes, while roads, railroads and pipelines are crossing into the continent's interior. There is even a proposed project to connect the Amazon River across Peru to an Ecuadorian port on the Pacific Ocean, and another to build a highway across Brazil, Bolivia and Peru to connect the two oceans. Portions of this latter project already have been built. It will take a great deal more than these initial infrastructure projects to unite the continent, but they will be the true start -- rather than a meeting by a few people giving an old project a new name.


Stratfor

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