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Reginal integration

Key role for Bolivia

by Marion Hörmann
The map of South American trade relations is confusing. On the one hand, there is UNASUR, which was formed to integrate the existing alliances of Mercosur and CAN. On the other hand, the ALBA coalition wants to expand cooperation with the goal of social equity. Bolivia, Venezuela and Ecuador belong to both UNASUR and ALBA. On top of all this, the USA is striving for a free-trade agreement with partner countries in South America. UNASUR members Peru and Colombia are in favour of this approach, whereas Bolivia and Venezuela vehemently oppose it. [ By Marion Hörmann ]

Two hundred years ago, Simón Bolívar, the Liberator, dreamed of continental unity for South America. He was unable to realise this vision politically, but it has become a lasting topic of Latin American debate. Attempts are made again and again to achieve greater cooperation and integration. Shortly before D+C went to press, heads of state and government were discussing a Latin American union in Mexico. The summit made the scenario of alliances even more confusing without promising much real-world progress.

The USA plays an important role. It has already signed free-trade agreements with Mexico and subsequently with Central America. Washington has similar intentions for South America, but has met with more ­opposition than consent in the region. In view of the USA’s pan-American ambitions, two integration initiatives are underway in parallel in Latin America. They are
– UNASUR (the Union of South American Nations), a setting that protects the hegemonial roles of Argentina and Brazil, versus
– ALBA (the Bolivarian Alliance for the Peoples of America), an integration project that emphasises “Bolivarian thinking” in the sense of state control over natural resources and the promotion of social equality.
Debate on both initiatives is politically and intellectually exciting, particularly as some countries are involved in both. Accordingly, proponents of both sides are turning to the Banco del Sur (BANSUR), a regional development bank which is supposed to counterbalance donor-dominated financial institutions such as the IMF, World Bank and Inter-American ­Development Bank (see box below).

UNASUR and ALBA were both formed in late 2004. UNASUR’s mission is to integrate two existing economic and trade associations, namely Mercosur (“Mercosul” in Portuguese) and the Andean Community of Nations (CAN). UNASUR basically follows the pattern of conventional trade integration. ALBA, in contrast, is by definition opposed to conventional trade deals. Its stated goal is to make trade serve broad and sustainable prosperity as well as social justice rather than to expand trade merely for the sake of it.

Conventional approaches

Mercosur was started 18 years ago. This association was originally intended as a joint market between Argentina, Bra­zil, Uruguay and Paraguay. Its past record is mixed; there have been difficult and constructive periods. As a political alliance, Mercosur has fostered inter-governmental coordination, but its interim goal of a customs union has not been achieved. Clear progress was made in the fields of energy, science and technology, social issues and culture.

The origins of the CAN go back to an agreement signed in 1969 and was called the Andean Pact until 1995. Its current members are Bolivia, Peru, Ecuador and Colombia. Even though it is older, CAN’s development has been less dynamic than that of Mercosur. Both Chile and Venezuela joined CAN but left after some time, only to now take part in UNASUR once again.

Bolivia plays a key role within the CAN and also became an associate member of Mercosur before the UNASUR process started. Bolivia benefits from both alliances in different ways. CAN brings economic advantages and Mercosur political ones. According to the rhetoric of the Bolivian government, ALBA is more important. Bolivia became a member of ALBA in 2006 but there may yet be legal complications because Parliament has not ratified the agreement.

An alternative “dawn”

Initially, ALBA consisted of only two members, Cuba and Venezuela. The first “A” originally stood for “alternative” rather than “alliance”. The acronym ALBA was a clever choice, as “alba” means “dawn” in Spanish. Ecuador, Nicaragua and several Caribbean islands have also joined ALBA in the meantime.

From the outset, the focus was on taking account of political, social, economic and legal asymmetries. ALBA emphasises complementarity over competition. Accordingly, weaker partners – depending on their levels of development – are supposed to enjoy preferential treatment. Grand plans are typical of ­ALBA. For example, there is a Continental Plan against Illiteracy, as well as a Latin American Plan for Free Health Care for those who do not enjoy access to such services.

Other items on the ALBA agenda include
– the development of communications and transport,
– standards governing environmental protection and resource management,
– strengthening Latin American investments in the region,
– intergovernmental coordination with a view to international and multilateral negotiations,
– the avoidance of consumption patterns which compromise the environment or are simply not rooted in regional traditions, and
– the protection of Latin American and indigenous cultures.

Many western observers suspect ALBA of crude populism. This is not least of all because Venezuela’s President Hugo Chávez has a tendency towards boastful grandstanding. On the other hand, issues such as the rights of indigenous people really matter when it comes to nation building in the Andes. Evo Morales, Bolivia’s first indigenous head of state, is in charge of a country that is deeply ­divided in social terms. Even his critics admit that he is doing his best to hold this troubled country together. Unlike his recent predecessors, he not only held office for an entire electoral term, but was even triumphantly re-elected.

From Bolivia’s viewpoint, ALBA’s scorecard for the years 2006 to 2009 is mixed. The greatest success is seen in cooperation in the education and health sectors. For these sectors, Venezuela made $ 130 million available to the economically much weaker Bolivia, with 30 million being labelled a grant and 100 million a loan.

In contrast, ALBA has not been a success in trade terms. While Bolivia’s overall foreign trade increased by 240 % in the years 2006 to 2009, the country’s ­exchange of goods and services with its ALBA partners has not grown. With a share of almost 99 %, Venezuela is by far Bolivia’s most important trade partner in the group. Bolivia basically exports oil commodities to Venezuela and imports fuels and ­lubricants in return. Venezuela’s protectionist policy prevents trade from increasing. ALBA has not helped Bolivia to make up lost ground in industrial development.

The outlook for Bolivia

For some time, Bolivia has been pursuing regional ­integration and this attitude is reflected in the country’s membership in the WTO, CAN and UNASUR. Moreover, Bolivia has an observer status in the talks about a free-trade agreement between the USA and Colombia, Ecuador and Peru. The EU currently still grants Bolivia a preferential trade status (steadily falling), but the USA no longer does so.

In spite of all “alternative” visions, foreign trade is crucial to Bolivia’s prospects for development and growth. Bolivia depends on revenues from gas and mining exports as well as migrants’ remittances. High commodity prices have lately allowed the country to build up foreign exchange reserves, but this does nothing to alter the disadvantages of its asymmetrical integration into the world economy. Bolivia mainly exports goods with a relatively low added value and is exposed to the high volatility of commodity prices.

It is improbable that ALBA member Bolivia will completely lose sight of its traditional trade agreements. Bolivia actually assumed a leading role in the CAN after Venezuela left. By pressing ahead with talks with the EU, Bolivia prevented the organisation from collapsing at the time. Morales uses the forum the CAN provides, trying, for example, to urge the USA ­towards agreements that would take social aspects into ­account. Though Morales fights against what he calls the “death policy” of free trade, he has made it clear that his country will remain a member of the CAN.

Bolivia is a landlocked country. Economically, the relationship with its CAN partner Peru is particularly important, both in regard to infrastructure and investments. The governments of the two countries are, however, at odds in politico-economic terms. One ­reason is that Peru favours free trade with the USA. ­Bolivia tends to have more in common politically with Ecuador, however, there are very few economic points of contact.

The future of regional cooperation and integration in South America is still wide open. UNASUR and ­ALBA will probably be the most dynamic alliances in the near future. The tense relations between Venezuela and Colombia may well turn out to be UNASUR’s greatest handicap, and it remains to be seen to what extent ALBA pronouncements result in real-world change. Bolivia’s attitude will in any event be crucial. This country is traditionally seen as a mediator between the Andean countries and the rest of South America. It ­also plays key roles in both major alliances.