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Bolivia aims to join Mercosur trade bloc

With an existing trade deficit, some analysts don't believe Bolivia is ready to join South American common market.
Last Modified: 02 Jan 2013 12:37
Adaptation to Mercosur's legislation is a key issue for Bolivia to take its place in the trade bloc [Reuters]

Rio de Janeiro, Brazil - To go down fighting in the Andean Community (CAN), with a combined market of 92 million consumers, or move up to the big leagues of Mercosur, with 275 million? This was the dilemma faced by Bolivia's foreign trade strategists when it came to pursuing full membership in the bloc formed by its neighbours to the south.

The contrast is remarkable: last year, Bolivia's exports to its partners in CAN - Colombia, Ecuador and Peru - totalled $774m, resulting in a trade surplus of $88m.

In the meantime, Bolivia purchased $2.427bn in goods from the countries of the Southern Common Market (Mercosur), while its sales to the bloc - excluding the main export, natural gas - were a mere $232m, according to figures from the National Institute of Statistics.

It should be kept in mind, as well, that these figures refer to trade with the founding members of Mercosur - Argentina, Brazil, Paraguay and Uruguay - and do not include Venezuela, which did not become a full member until mid-year.

This sizable trade deficit reflects an already consummated "invasion", which many fear will be exacerbated by Bolivia's entry as the sixth full member of the bloc.

"Before Bolivia has even entered Mercosur, the bloc has already entered Bolivia, and it is doing so to a growing extent," through bilateral trade agreements, observed Gary Rodríguez, general manager of the Bolivian Institute of Foreign Trade (IBCE).

Fear of a trembling private sector

When natural gas, which represents 96 percent of Bolivia's exports to Mercosur, is added to the equation, the balance is reversed, leaving Bolivia with a $1.69bn trade surplus.

But gas exports are based on operations and agreements between national governments and do not involve the private sector, stressed Rodríguez at the IBCE headquarters in Santa Cruz, where he shares the same concerns and the same office tower with powerful business owners in the eastern Bolivian province of the same name.

His greatest concern is for the future of Bolivian private companies. Last year, for example, $30m worth of shoes were imported from Brazil. In conditions such as these, "we won’t be able to continue manufacturing ourselves", said Rodríguez, who fears that the Bolivian market will be flooded with these and other goods in the event of a devaluation of the Argentine peso and Brazilian real against the dollar.

But Mercosur membership, the path chosen by the government of leftist President Evo Morales, could open up new prospects for Bolivian business owners - "especially those involved in big agribusiness in eastern Bolivia", said Tullo Vigévani, a professor at Paulista State University in Brazil.

The need of an adaptation process

CAN has been showing signs of weakening for decades, and the Pacific Alliance recently established by Chile, Colombia, Mexico and Peru "does not offer very promising horizons for Bolivia", since these countries are also oil and gas producers, and their economies "are closely integrated with the United States", explained Vigévani, a specialist on integration processes, and particularly on Mercosur.

Joining Mercosur would help Bolivia "avoid isolation" and open up the possibility of tapping into a large regional market. Nevertheless, concerted efforts by the governments of the countries involved to ensure balance will likely be required, based on the prior experience of Mercosur itself, he added.

This assessment is backed by Jerjes Justiniano, the Bolivian ambassador to Brazil. "If we join Mercosur, we will have significant opportunities to grow as a nation and to improve working conditions," he said.

In any event, Vigévani stressed that the incorporation protocol signed by Morales on December 7 at the bloc's summit in Brasilia falls far short of signifying full membership in Mercosur, its customs union and its common market. This will require a lengthy period of negotiations which could stretch out for years.

The analyst pointed out that Venezuela signed the same agreement in 2006, and only became a full member six months ago. Venezuela's full entry came after Paraguay - whose legislature was the only one in the bloc opposed to it - had its membership suspended due to the ousting of President Fernando Lugo, which the other members considered a violation of the Mercosur "democratic clause".

There are a number of complex issues that must be dealt with in order for Bolivia to take its place in the trade bloc, such as adaptation to all of the legislation created by Mercosur in almost 22 years of existence, and the country's current status as a full member of CAN.

According to Vigévani, it is "legally impossible" for Bolivia to be a full member of both CAN and Mercosur, as its government intends.

Rodríguez, however, hopes that the Bolivian government will keep its pledge to maintain its trade agreements with CAN while complying with its new commitments to Mercosur.

Positive perspectives arise

Whatever the case may be, Bolivia's entry into South America's biggest trade bloc fulfils a destiny that dates back almost half a century: in 1969, the La Plata Basin Treaty was signed in Brasilia by Bolivia and the four founding members of Mercosur, Vigévani recalled.

In political terms, Mercosur will be strengthened as "an axis of South American and Latin American life", he said. However, the "solidity" of its incorporation will depend on the response of Bolivian institutions, so that the decision comes from the state and not only the current government, and reflects a national consensus, he stressed.

Vigévani also believes that Bolivia's full membership would be advantageous for the combined economy of Mercosur, by fostering closer relations and helping to avoid obstacles such as those which recently affected the production and purchase of gas by Argentina and Brazil, paralysing infrastructure and industrial projects that would have been beneficial to all.

With regard to the Morales administration, the Brazilian expert believes that it has renewed its priority focus on regional integration, after briefly placing its faith in the alternative of closer ties with the Asia-Pacific region, particularly China.

Although the Bolivian economy may be small, with a total gross domestic product of some $25bn (around one percent of Brazil's GDP), its incorporation will enhance the consistency of the economy of all of the Mercosur countries, while giving the bloc greater political weight, he concluded.

Additional reporting by Franz Chávez in Santa Cruz, Bolivia.

A version of this article was first published by Inter Press Service news agency.

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