The US has tried hard to undermine the South American subregional trading blocs with both carrot and stick tactics. Until last week the blocs had been showing a remarkable ability to hold together. All of a sudden, last week the two big blocs, Mercosur and the Andean Community (CAN), seemed on the verge of falling apart, wrecked, ironically enough, by the actions of two of their own members who had been among the most vocal advocates of the building-block approach to regional integration: Argentina and Venezuela.
Argentina has taken Mercosur to the brink over its dispute with Uruguay about the construction of two cellulose plants on the river Uruguay. At provincial and national level, the Argentine governments encouraged the action of environmentalist protesters who blocked bridges connecting Argentina and Uruguay (recent verbal requests to call off this action have sounded unconvincing in the light of other government comments).
President Néstor Kirchner has said he will take the dispute to the International Court of Justice at The Hague. Uruguay has protested that Mercosur has a dispute-settlement mechanism of its own and that its members are bound to resort to it before turning elsewhere.
Indeed, on 7 April it formally called for an urgent meeting of the bloc's governing council, suggesting that it takes place between 18 and 21 April. The request had to go through Argentina, which is currently occupying the rotating presidency of Mercosur. Buenos Aires chose to drag its feet.
This did not work in its favour. On 10 April the World Bank released a study which, while recommending some alterations to the design of the cellulose plants, determined that they pose no environmental threat - the argument raised by Argentine protesters to oppose their establishment. This greatly strengthens Uruguay's case.
When at Uruguayan insistence its request for a council meeting went before a meeting of negotiators in Buenos Aires on 20 April, the delegations of Brazil and Paraguay backed the request. Argentina chose to ignore it and when Uruguayan Foreign Minister Reinaldo Gargano made public the fact that it enjoyed the other members' support, Argentina surprisingly denied this, claiming that this did not emerge from the results of the meeting.
It went on to argue that support for Uruguay's request would have required full consensus and that this had not been forthcoming.
Last straw?
Uruguay responded by making public the minutes of the Buenos Aires meeting, which proved that what Argentina meant was that it was the only one preventing such a consensus. Gargano warned that not assembling the council would 'harm the institutional framework' of Mercosur. President Tabaré Vázquez complained that 'Mercosur is not working'.
If this is not the proverbial straw that breaks the camel's back, it is close. Economy Minister Danilo Astori said that it was necessary for Uruguay to 'improve the road towards its economic insertion outside the region, proactively seeking mechanisms of trade and investment expansion which will allow Uruguay to develop its full potential'. The circumlocution is a reference to seeking a free-trade agreement with the US, which Astori has been strenuously urging. He is not alone: an opinion survey conducted by Interconsult and released in early April show 58% of respondents in favour of negotiating an FTA with Washington. It also shows 46% in favour of leaving Mercosur and seeking alternatives elsewhere.
Blow to the CAN
It was 19 April when, in a meeting with his peers from Bolivia, Uruguay and Paraguay in Asunción , Venezuelan President Hugo Chávez proclaimed that 'the CAN is dead,' and announced that Venezuela would withdraw from the bloc the following week. By the time he got back to Caracas he had decided to speed up the timetable. Notice of Venezuela's decision to pull out was sent to CAN headquarters on 22 April.
Chávez 's argument is that the CAN was effectively destroyed when Colombia and Peru signed free-trade agreements with the US. Withdrawal, he argued, would allow Venezuela to adopt the necessary protection measures to prevent a massive influx of cheap US goods via Colombia. 'We regret it enormously,' he said, 'but that thing [the CAN] is no longer of any use. It was destroyed by the empire.'
Allan Wagner, secretary-general of the CAN, pleaded for calm. Peruvian President Alejandro Toledo urged Chávez to reconsider, on the grounds that his decision would harm the CAN at a time when it is negotiating a free-trade agreement with the European Union. There were also adverse reactions from among those perceived as eager followers of Chávez 's lead. In Peru, nationalist presidential candidate Ollanta Humala expressed regret at Chávez 's decision.
In Bolivia, President Evo Morales (who in Asunción had echoed Chávez 's dictum that the CAN was dead) said he disagreed with Venezuela's 'sovereign decision'.
On 24 April Morales took matters a step further. He called for an Andean summit to overcome the crisis created by Chávez 's pullout, suggesting that it might be a good idea for Colombia and Peru to shelve their agreements with the US for now. Chávez responded almost immediately, applauding Morales's initiative, but Colombian President Alvaro Uribe dismissed his proposal to suspend the existing FTAs. His foreign minister, Carolina Barco, has suggested that Colombia might seek Brazil's assistance as a mediator (though Chávez says there is no dispute to mediate).
Prospects for a reconciliation do not look good. When Evo Morales becomes the head of the CAN's presidential council in June (succeeding Chávez ) he may find an organisation just turned 37, but with two fewer members than when it was founded as the Andean Pact in May 1969 (one of the founding members, Chile, withdrew in 1976). On the other hand, the organisation has seen one member, Peru, pull out and later negotiate a phased reincorporation five years later.