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Brazil & Southern Cone - July 2016 (ISSN 1741-4431)

Mercosur in crisis over Venezuela

The Southern Common Market (Mercosur) regional trade bloc is once again facing an institutional crisis. The founding member states (Argentina, Brazil, Paraguay, and Uruguay) disagree over whether the troubled new member, Venezuela, should assume the bloc’s pro-tempore presidency as it is scheduled to do in July. Uruguay, the current pro-tempore president, insists that it must pass on the presidency to Venezuela as per the bloc’s internal rules. But Paraguay and Brazil are adamant that a country engulfed in a deep political and economic crisis such as Venezuela cannot effectively lead Mercosur. The disagreement is dominating Mercosur’s agenda, preventing it from addressing some pressing issues such as the conclusion of the trade negotiations with the European Union (EU).

 

The current crisis stems from the dire political situation in Venezuela, where the government led by President Nicolás Maduro continues to refuse to recognise the opposition-controlled national assembly, and the calls to hold a presidential recall referendum this year show no signs of being resolved by 12 July, when Uruguay was scheduled to host a Mercosur heads of state summit and formally hand over the rotating presidency. Although Argentina and Uruguay have been supportive of the efforts to promote a dialogue between the Maduro government and the opposition, Paraguay and Brazil have toughened their stance on Venezuela in recent months.

Paraguay has accused Venezuela of falling foul of Mercosur’s democratic provisions since 2012, when following the impeachment of the leftist former president Fernando Lugo (2008-2012), Venezuela moved, along with Brazil, Argentina and Uruguay (at the time all governed by ideologically aligned leftist governments) to suspend Paraguay from Mercosur for what they considered to be a breakdown in democratic order. Paraguay’s continued criticism of Venezuela and calls for it to be suspended from the bloc under the centre-right government led by President Horacio Cartes is no surprise.

But the decisive change in stance in Brazil follows the unexpected installation in May of the centre-right interim administration led by Michel Temer to replace that led by the left-leaning suspended president, Dilma Rousseff, while she faces impeachment. The Temer administration has been clear that it will not offer unconditional support for the Maduro government as the Rousseff administration had done; and that Venezuela has to start assuming all the responsibilities that come with Mercosur membership, including upholding the bloc’s democratic values. Like the Cartes government, Brazil also said that a country “lacking internal peace” was not fit to lead Mercosur

This lack of consensus prompted Uruguay to suspend the 12 July Mercosur heads of state summit until further notice. Announcing the decision on 27 June, Uruguay’s foreign minister, Rodolfo Nin Novoa, said that it was taken after consulting about the matter with his Argentine counterpart, Susana Malcorra. Although Argentina’s President Mauricio Macri has also been more critical of the Maduro government than the preceding Cristina Fernández administration (2007-2015), Malcorra is an advocate of showing leniency towards Venezuela. Nin Novoa said that the decision answered to the “particular political conditions” not just in Venezuela but also in Brazil, after Temer said that he would not attend the July summit – opting to remain in Brazil to deal with the domestic political crisis instead.

Yet Nin Novoa insisted that the handover would take place as planned during a Mercosur foreign ministers’ meeting to be held instead of the summit. Nin Novoa said that any concerns member states had about Venezuela could be discussed at that meeting. However, this elicited a negative reaction from Paraguay and Brazil. Paraguay’s foreign minister, Eladio Loizaga, called for a meeting with his Brazilian, Argentine and Uruguayan counterparts to be held on 11 July to discuss the issue and to arrive at a consensus position ahead of the full Mercosur meeting. This call was ignored by Uruguay. But the government led by President Tabaré Vázquez was unable to ignore the proposal made by Brazil’s new foreign minister, José Serra, during a 5 July official visit to Montevideo.

After meeting with Vázquez and Nin Novoa, Serra told the local press that “I proposed that we leave the decision for mid-August, when Venezuela will have to meet all the requirements to form part of Mercosur as set out four years ago but which it has only partially met”. Serra said that this included “various norms” such as exchange rate levels and quantitative controls. But he also said that pushing back the presidential handover would allow the Mercosur partners to analyse Venezuela’s “nebulous” political situation.

Despite Serra’s proposal, Nin Nova reiterated Uruguay’s determination to handover the presidency. To this effect, he announced that Uruguay had accepted Paraguay’s proposal to hold a foreign ministers’ meeting on 11 July to discuss the issue but on the condition that Venezuela’s foreign minister, Delcy Rodríguez, also attended. The meeting proved to be fruitless. While Loizaga and Brazil’s deputy foreign minister (who attended in lieu of Serra) agreed to meet Nin Novoa and Argentina’s deputy foreign minister (who attended in lieu of Malcorra), the Paraguayan and Brazilian representatives refused to meet Rodríguez. This prompted an angry reaction from Rodríguez, who in a press conference accused Paraguay and Brazil of “mistreating” Venezuela.

Rodríguez said that the transfer of the pro-tempore presidency could not be subjected to “any kind of consensus, conditioning or vote”, and that Venezuela would assume the presidency “in coming days”. But this was rejected by Loizaga, who said that Mercosur’s statutes stipulated that all decisions must be reached by consensus. This led Nin Novoa to call a meeting of the Mercosur market council (CMC), the bloc’s top political body, which groups its foreign and economy ministers, for 30 July to try to arrive at a consensus.

The problem is that the impasse is preventing Mercosur from addressing things like the regional economic slowdown (keenly felt in Brazil and Argentina), the calls for greater flexibility to sign trade deals with third parties (long demanded by Paraguay and Uruguay and now Brazil), the plans to forge closer ties with the Pacific Alliance (Argentina’s initiative), and the conclusion of the negotiations with the EU. Concluding the negotiations that began in 1999 has been declared a priority by both Mercosur and the EU in the wake of the United Kingdom’s vote to leave the EU (‘Brexit’) (see sidebar). And while Nin Novoa has noted Venezuela’s assumption of the Mercosur presidency should not affect the negotiations as the Andean country is not part of them, it is clear that the internal crisis is currently concentrating all the attention of Mercosur’s members.

  • EU and Mercosur keen on sealing a deal

Commenting on the state of the trade negotiations between the EU and Mercosur, Bert Koenders, the foreign minister of the Netherlands, said that the EU was interested in signing a deal “quickly”. Noting that the impact of Brexit on the negotiations was still uncertain, Koenders said that the EU wanted to expedite the signing of a “strategically important” deal for the EU that had been stagnant for almost a decade. Koenders would not be drawn on the controversy within Mercosur over whether Venezuela should be handed the pro-tempore presidency, saying that it was not up to the EU to intervene. But Koenders did express relief that it had been agreed that Uruguay would continue to lead the bilateral negotiations this year.

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