Brazil & Southern Cone - September 2013 (ISSN 1741-4431)

Following his inauguration on 15 August as Paraguay’s new president, Horacio Cartes has taken the first steps towards mending the country’s fraught relations with its regional neighbours. Achieving this, while obtaining ironclad assurances from these same neighbours that Paraguay’s sovereignty henceforth is respected fully, is the most complex and challenge immediately facing the novice administration and one that could make or break President Cartes’s five-year term.

After Paraguay’s congress in June 2012 impeached former president Fernando Lugo (2008-2012), the country was ostracised from both the Union of South American Nations (Unasur), the main regional political talking shop, and from the Southern Common Market (Mercosur), the main regional trade bloc. Brazil and Argentina (which along with Paraguay and Uruguay founded Mercosur and also play key roles in Unasur), maintained that the lightening (yet constitutional) impeachment represented “a break in the democratic order” that went counter to the respective Unasur and Mercosur democratic clauses. On that basis, Paraguay was temporarily politically suspended from the blocs, pending ‘restoration’ of the democratic order.

These decisions were fiercely contested by the interim administration that replaced the Lugo government. Led by Federico Franco, the new Asunción administration rejected that the democratic order had been interrupted and took the line that the suspensions were arbitrary and illegitimate. Unasur and Mercosur were not swayed. The regional blocs chose not to recognise the Franco administration and suspended diplomatic relations, warning that relations would only be restored upon the establishment of a new elected government. (A scheduled general election was due in April 2013).

Cartes’s August inauguration meant that the necessary political conditions for Paraguay’s political rehabilitation, as demanded by its neighbours, were met. The general ‘assumption’ in the region was that a line could quickly be drawn under the whole affair.

However, even before he took office Cartes took a strong line and adopted Franco’s argument in warning that Paraguay’s full return to the regional fold would only take place upon assurances from Paraguay’s neighbours that its sovereignty would be better respected in the future; and that all the issues that had led to and resulted from Paraguay’s suspension be appropriately addressed and resolved in regional forums.

To start with, Cartes demanded that Venezuela’s “irregular” entry as a full Mercosur member be annulled, given that it was hastily approved and without Paraguay’s consent, just after its suspension. Mercosur rules stipulate that all decisions must be unanimously approved by member states before they can be adopted. Paraguay had blocked Venezuela’s full Mercosur membership for years on the grounds that the Andean country failed to meet the bloc’s democratic standards.

Secondly, Cartes demanded that Mercosur’s pro-tempore presidency, which was stripped from Paraguay upon Lugo’s impeachment, should be returned as a token gesture. Problematically, Mercosur’s presidency (lasting six months) currently is held by Venezuela. Cartes maintained that Paraguay would not return to Mercosur under Venezuelan leadership of the group.

The region reaches out

Despite Cartes’s tough rhetoric, South American leaders have made clear efforts to reach out to Paraguay in a bid to try to normalise relations. Brazil’s President Dilma Rousseff, Argentina’s President Cristina Fernández, Uruguay’s President José Mujica and Peru’s President Ollanta Humala (who at the time was presiding over Unasur) all attended Cartes’s inauguration, restoring diplomatic relations in the process. Pointedly, Venezuela’s President Nicolás Maduro (who has been declared persona non grata by Paraguay’s congress) was not invited. This prompted Maduro’s closest allies to cancel their attendance at the last minute (see sidebar). However, Maduro himself sent a congratulatory letter to Cartes in which he expressed hopes that the two countries could begin rebuilding relations.

While both Fernández and Rousseff previously had said that Cartes’s demands on Mercosur would be “impossible” to meet, the two held private conversations with Cartes in Asunción before the inauguration in which they expressed their willingness to find a concerted solution. In his inauguration speech, Cartes effusively thanked both women for their presence and said he had a “clear disposition to maintain and enhance the cordial and fruitful bilateral relations with our neighbours”. Soon afterwards, Fernández, Rousseff and Mujica each invited Cartes to visit for further discussions. Uruguay, for instance, suggested that Paraguay could take on the pro tempore Mercosur presidency for the first half of 2014.

Hedging his bets

Cartes welcomed these diplomatic overtures but stood his ground, reiterating that although the suspension had been lifted, he could not yet foresee Paraguay’s formal return to the bloc. This is important – as it means that at the moment Mercosur cannot make any decisions (for instance in trade talks), as Paraguay, though no longer technically suspended, is not sitting in on Mercosur meetings, and so the consensus-making decision process is effectively paralysed.

Cartes added that his government would seek to ‘de-Mercosurise’ Paraguay’s foreign relations, meaning that he would look beyond Mercosur to develop closer political and commercial ties with other countries and trade blocs, namely the Pacific Alliance, at which Paraguay secured observer status during its suspension from Mercosur (see below).

Taking decisive steps

Shortly after his inauguration, Cartes had an early opportunity to pursue his foreign policy aims at the 30 August Unasur heads of state summit in Paramaribo, Suriname. Cartes’s attendance marked the effective end of Paraguay’s suspension from Unasur; and while he failed in his efforts to include a clause in the final summit declaration pledging respect for member countries’ sovereignty over their domestic affairs, he used the summit to engage with his peers, including Venezuela’s Maduro.

Cartes’s followed up the Suriname trip with his first official visit: to Argentina. In a one-day visit on 10 September he and President Fernández revised the bilateral agenda and discussed Paraguay’s full rehabilitation in Mercosur. In a joint press conference, Fernández said that Cartes’s decision to accept her invitation was a “gesture that will help to reconstitute Mercosur”. Cartes said the visit was a “fundamental step” towards mending bilateral and regional relations; and he commended Fernández’s “political will” to find a concerted solution to the Mercosur controversy. However, he was clear that from his point of view the issue would only be resolved by “fully respecting the legal rules and not via any sort of bartering or backroom deal”- an allusion to rumours that the current differences could be resolved by offering certain concessions to Paraguay in exchange for its recognition of Venezuela as a full Mercosur member.

While Cartes returned to Asunción after just a few hours in Buenos Aires; his foreign minister Eladio Loizaga remained on for a meeting with his Argentine counterpart Héctor Timerman. Afterwards Loizaga suggested that it might be “possible” for Paraguay to reincorporate into Mercosur by year-end (when Venezuela’s pro-tempore presidency ends), although like Cartes he was clear that it would be on Paraguay’s terms.

What does Cartes want?

Ultimately, in return for retroactive approval by Paraguay of Venezuela’s membership, Paraguay (possibly backed by Uruguay) seems to be angling for some kind of reform package, potentially to put the two Mercosur minions on a more equal footing with the (now three) sharks (Argentina, Brazil and Venezuela). One key suggestion is for a potentially ground-breaking reform to allow individual member states to negotiate their own bilateral free trade deals with third parties, which is not currently permissible under Mercosur rules but has long been a demand of Uruguay, Paraguay and also some Brazilian industrialists frustrated by Argentina’s stance in long stalled trade talks with the likes of the European Union and the US, for instance.

Significantly, for his next visit Cartes chose Chile over other Mercosur partners (see sidebar). While Paraguay was suspended from Mercosur, the Franco administration applied to be and was accepted as an observer at the Pacific Alliance trade bloc (comprising Chile, Peru, Colombia and Mexico), which since its formal launch in June 2012 has quickly emerged as the main rival regional integration project to Mercosur, to some nervousness in Brazil. At the time, Franco’s move was taken as sign that Paraguay was preparing to leave Mercosur. Chile’s President Sebastián Piñera, who also attended Cartes’s investiture, invited him to Santiago after Cartes expressed an interest in further developing relations with the bloc. On 16 September Cartes went to Chile for a two-day State visit. In contrast with his trip to Argentina, which produced no concrete results, he and Piñera inked a new agreement aimed at boosting bilateral trade and facilitating Paraguay’s access to Pacific ports/trade routes. The message from Cartes to Mercosur – ‘make me an offer’.

• Last minute snub

Cartes’s refusal to invite Maduro to his inauguration prompted Bolivia’s President Evo Morales and Ecuador’s President Correa (both of whom want to follow Venezuela into Mercosur), to decline their invitations, indeed failing to dispatch any representatives at all in their stead. Bolivia gave no official explanation but Ecuador’s foreign minister, Ricardo Patiño, complained: “We believe that not inviting a sister nation (i.e. Venezuela) is not healthy to improving the level of understanding in South America”.

• Mercosur talks to continue

On 13 September, Foreign Minister Eladio Loizaga confirmed that President Cartes had accepted a formal invitation from President Dilma Rousseff to visit Brasília on 30 September. He will also visit Uruguay’s President José Mujica in Montevideo in October, date unspecified.