Paraguayan president Federico Franco explained Paraguay’s recent leadership shift and aired foreign affairs concerns to UN Secretary General Ban Ki-moon Sunday afternoon. Franco is currently attending the 67^th United Nations General Assembly in New York City.

“The Secretary General was well aware of events in Paraguay. He asked about the killings at Curuguaty which triggered the impeachment, and we gave him an extensive report on the Senate debate and the political consequences,” recounted Franco.

“I was impressed by how well-informed Ban Ki-Moon was about the situation in Paraguay. The information he used was correct,” reflected Minister of External Relations José Félix Fernández in a conversation with 780 AM.

Franco also voiced dissatisfaction with Paraguay’s suspension from Mercosur last June and the acceptance of Venezuela last August, made possible by Paraguay’s absence. “Paraguay is not going to accept the interference of Venezuela, and this is also of concern for the other neighbouring countries,” said Franco.

Paraguay’s suspension came as a reaction to the ousting of former president Fernando Lugo and current President Franco’s ascension last June. The suspension has meant sanctions from member nations until Paraguay’s next scheduled election in April of 2013.

For his part, Secretary Ban asked President Franco to continue to contribute Paraguayan troops to UN peace missions in countries such as Haiti, Syria, and Cyprus and praised the Franco government for their promotion of women’s rights.

Secretary Ban has not made an official statement regarding the meeting.

Franco arrived in the United States with his wife yesterday. The trip is his first representing Paraguay to the United Nations, as well as his first abroad as head of state.

Franco will attend a dinner hosted by US president Barack Obama this evening and is also scheduled to meet with president of the Inter American Development Bank, Luis Alberto Moreno, economist Jeffrey Sachs, and Duncan Neiderauer of the New York Stock Exchange.

Uruguayan President José Mujica will greet the first Venezuelan ship to sail under the Mercosur free trade agreement later today in Montevideo.

A press release by the Venezuelan government stated that the ship gave “life to the agreements signed following the inclusion of Venezuela in Mercosur” and was a symbol of the “consolidation of an economic platform that includes long term growth, with benefits for the Venezuelan people and its brother countries”.

The freighter, named José Leonardo Chirinos after an early Venezuelan independence fighter, is delivering 14 metric tons of urea and more than 50 thousand litres of glyphosate, chemicals used to make fertilizers.

The ship left Cabello Port in the northeast of Venezuela on 24^th August and stopped in two ports in Brazil before setting course towards Montevideo.

Mercosur is the regional free trade agreement that regroups Argentina, Brazil, Uruguay, and recently, Venezuela.

Venezuela became a full member of Mercosur on 31^st July 2012 after several years of lobbying to enter the free trade zone had been paralysed by Paraguay’s veto. Venezuela’s change of luck came after the 22^nd June parliamentary coup in Paraguay led to the country’s suspension of Mercosur, opening the way for Venezuela’s candidacy to be accepted.

The Paraguayan government has announced its intention to appeal Mercosur sanctions before the International Court of Justice in the Hague. Meanwhile, opposition group Paraguay Resists announces plans for a Social Forum next week.

The Paraguayan government, headed by President Federico Franco, rejects its suspension from Mercosur and the sanctions imposed on the country by other Mercosur nations. Parguay was suspended from Mercosur on 29th June, when the other three member states at the time – Argentina, Brazil and Uruguay – determined that the ousting of former President Lugo on 22nd June constituted a violation of the group’s democratic clause. The suspension was intended to hold until the country’s next elections, scheduled for 21st April 2013.

The nation hopes to challenge its suspension on the grounds that the move violates national treaties and subjects Paraguay to international isolation. Paraguay holds that the suspension was a violation of the Treaty of Ouro Preto, which established that “no country can be sanctioned when one of the four signatory states is absent.”

According to MercoPress, Paraguayan Minister of Foreign Affairs José Félix Fernández Estigarribia stressed that at present “there are no negotiations” between Paraguay and the other Mercosur member states with regards to the possible lifting of the country’s suspension.

The Paraguayan government also refuses to accept the entrance of Venezuela into the regional bloc, a move that was formalised last week. Venezuela’s admission was made possible through Paraguay’s suspension, as Paraguay was the only member state that had not ratified the addition of the bloc’s new member.

Minster of Foreign Affairs Fernández Estigarribia revealed that the government is presently waiting for a report from a Spanish jurist that will allegedly strengthen the government’s case. The official also stated that the government already has two judicial opinions on the case, but that the reports are contradictory.

The case could face significant challenges, however, in that neither Argentina nor Brazil may accept the jurisdiction of the International Court of Justice to resolve this case. Paraguay already tried to challenge its suspension before the Permanent Revision Tribunal (TPR) of Mercosur, but the body rejected the petition.

Meanwhile, the Paraguayan opposition announced the creation of a Social Forum organised by the group Paraguay Resists. The motto of the forum, which will take place 14th and 15th August in Asunción, is “Sovereignty, Democracy and Participation”. Attendees will debate the public policy of the current administration, while also coordinating pacific resistance.

Venezuela was accepted as a full member of Mercosur on 31^st July, after a 6-year wait. Argentina, Brazil, and Uruguay welcomed the oil rich nation with open arms; however, Paraguay remains suspended from Mercosur and was unable to vote, leading to accusations of illegality around Venezuela’s acceptance. We took to the streets of Buenos Aires to ask the public what they thought about Mercosur’s new member.

Portraits by Amy Cooper Goodrich

Graciella Bie, 64, architect, La Plata

The incorporation of Venezuela into the bloc seems like a really good thing to me. I think it’s a really interesting development in terms of strengthening all of South America and I think it’s going to be good for the region, especially in terms of oil.

I don’t agree that it was wrong to make the decision without Paraguay. Paraguay broke their constitution in ejecting Lugo so they don’t deserve to vote. Mercosur should still be able to function as in institution while turning their back on Paraguay. It’s not personal, it’s about the bigger picture. In the current context it’s necessary to stick together as a body, like Europe is doing, I think it’s excellent.

Juan Vicente Tapia, 62, caretaker, San Telmo

I think all the countries in South America shoud be united and the inclusion of Venezuela in Mercosur is a good thing. Paraguay have done something undemocratic in ousting the president by force and they don’t deserve to vote or to be involved in Mercosur at the moment. Venezuela deserve to be full members, all of the countries in South America should be together and united, just like Europe, like Asia. I love peace and I would like for all of the world to be united, I wish we could get rid of the borders.

Lucia, 45, lawyer, Montserrat

I think the inclusion of Venezuela is a good thing, at the very least it makes economic sense and there aren’t too many issues within the country apart from problems with insecurity which doesn’t affect the whole country. Economically it has to be beneficial, uniting the countries in this region in an economic bloc and bringing together the banks and the resources in the region is a good move.

Some people are saying it’s illegal but I don’t think it is. I don’t think it’s illegal at all. I think that the bringing together of these countries is inconvenient for other areas, for other markets, and that’s why people have a problem with it.

  Samanta Bermúdez, 19, student, San Telmo

Really I think that all international blocs, like in Europe and Mercosur are bad because some countries are left out. I don’t think it really helps anyone to separate countries like this, it ends up creating big issues with differences in social class, and generates bigger conflicts. I think countries end up feeling resentful and it leads to big conflicts and even wars in the long run. For me though, as an Ecuadorian, it is really good to be able to travel freely between countries without needing loads of documents, so there are some good things.

Santiago Del Campo, 32, antiques shop owner, San Telmo

It seems like a good thing to me, it’s the financial and industrial strength that’s missing from Mercosur, it’s going to be valuable to have a partner with such a strong oil resource. In the current economic crisis it will be useful to have an ally with such a good oil industry and I think it will help the region a lot.

It is a strange time for Mercosur at the moment with the situation in Paraguay. Ultimately though the people didn’t vote for the current president so it’s not democracy. The people in power at the moment don’t represent the Paraguayan people so I think it’s right that Mercosur have suspended them and it’s good that Venezuela have become a new partner.

Hugo Chavez and Dilma Rousseff in Brasilia 2011. (Photo: Roberto Stuckert Filho)

In a special summit held in Brasilia on 30^th July, Venezuela formally became a full member of Mercosur and will officially participate with all rights and obligations in the trade bloc beginning in mid-August.

Mercosur had consisted of the same four, full member nations since the signing of the Treaty of Asunción in 1991, but after Paraguay’s Congress ousted former leader Fernando Lugo from power in a two-day impeachment process, Brazil, Argentina, and Uruguay cited a rupture of the democratic order in the country and suspended its fourth founding member.

Until elections in April 2013— or at least until the full restoration of democratic order in Paraguay— the country has effectively lost its membership privileges in the organisation.

Meanwhile, the ousting of Paraguay provided a convenient moment for Venezuela´s entry— an event the Paraguayan Ministry of Foreign Relations called an “unacceptable outrage” and “a gross violation of the Treaty of Asuncion.”

Venezuela had been trying to join Mercosur since 2004, but Paraguay’s Senate ironically cited a lack of democracy in order to block its full membership, and members agreed upon the country’s associate member status with the Protocol of Adhesion of Venezuela to Mercosur in 2006.

Mercosur: Past and Present

Mercosur Members (Image: Camilo Sanchez)

Mercosur, or the ‘Common Market of the South’, is an economic organisation that promotes the free movement of goods, services and people among South American member states. Preceded by the creation and subsequent dissolution of other common markets such as the Latin American Free Trade Association (LAFTA), the current body burgeoned from the Integration and Economics Cooperation Program of Brazil and Argentina, and eventually became a broader agreement between additional regional economies.

Throughout its short history, the organisation has faced a myriad of challenges, such as how to integrate member countries with vastly different economic policies, how to ensure smaller countries have a fair say, or how to manage the economic crises in Brazil and Argentina, with varying degrees of success.

“The emergence of Mercosur was faster and a lot less careful than that of the European Union,” says Ricardo Romero, a professor at the Universidad de Buenos Aires who specialises in Brazilian politics.

Most recently though, the disproportionate economic growth of the region and the organisation’s failure to increase trade with international markets have led some analysts to question its relevance.

Although Mercosur lists the elimination of customs duties and restrictions on the movement of goods between member countries as one of its principal goals, members of the trade bloc have instituted a slew of protectionist measures and failed to normalise trade relations among each other. The Council on Foreign Relations notes that Argentina blocked and delayed imports from Brazil in order to protect its trade surplus, and Brazil retaliated by imposing barriers on imports from Argentina.

Venezuela in Mercosur

The incorporation of the fifth sovereign member, however, significantly alters the composition and modus operandi of Mercosur by reinforcing the inward focus of the trade bloc.

“You will see the strengthening of sectors within a continental framework,” says Romero. “Venezuela´s incorporation signifies a deepening of the internal market and regional consolidation.”

Until now, Uruguay and Paraguay wielded a lesser influence on Mercosur compared to Brazil and Argentina, but the union of Brazil, South America’s superpower, with the agricultural giant of Argentina and the oil titan of Venezuela, significantly increases the likelihood of expanded regional relations and heralds the onset of a new, powerful trifecta.

“Venezuela has the capacity to supply oil to the region, and the region has a need for oil,” Romero also said, while noting the convergence of three fertile basins: Río de Plata, Orinoco, and Amazon.

Oil Installations in Puerto La Cruz – Venezuela (Photo: Jumanji Solar)

According to The World Factbook, oil revenues account for approximately 95% of Venezuela´s export earnings, 40% of federal budget revenues, and around 12% of its GDP. As of 2010, the country produced 2,375 million barrels of oil a day.

Argentina and Venezuela have already signed an agreement to explore oilfields in both countries and develop an energy plan between their oil companies, partially state-owned YPF and state-owned PDVSA respectively.

Other agreements extend beyond the region´s natural resources. Before the last Mercosur summit in the Brazilian capital even began, Venezuela agreed to purchase six Embraer 190 airplanes from Brazil.

Greater access to the lucrative markets of each country will enable the bloc as a whole to become more dependent on fellow member states and less reliant on foreign powers. As such, President Dilma Rousseff of Brazil has stated that with the incorporation of Venezuela, Mercosur has become the fifth largest economy in the world, behind the United States, China, Japan, and Germany.

On another level, the political parties of individual member states have historically determined the economic organisation’s agenda and repeatedly put their own interests before those of the region.

Venezuela’s inclusion, however, binds four ideologically compatible countries even closer together and could theoretically provides a plane for the bloc to work towards common goals.”

“From a political standpoint, the changes are extremely clear,” says Alejandro Rossi, a political scientist also at the Universidad de Buenos Aires.

Charismatic Chavez giving a speech. (Photo: Bernardo Londoy)

Venezuelan President Hugo Chávez from the United Socialist Party, who has nationalised key energy companies and is a close ally of Cuba, joins the left-leaning governments of Rousseff, José Mujica in Uruguay, and Cristina Fernández de Kirchner, a president who has introduced strong and controversial economic controls in Argentina throughout the past year.

“It is as politically important for Chávez to enter Mercosur as it is for Argentina to find an ally in Venezuela for many of the policies that it is starting to carry forward,” says Rossi. “Argentina is trying, or is at least poised to make, what is called the grand fatherland of South America, and Chávez is a representative of a Latin American thought more independent than that of other international centres.¨

The Future Ahead

Proponents of economic liberalisation fear that the incorporation of Venezuela in Mercosur could isolate South America from the rest of the world, and leads them to question whether the organisation will be able to grow as much as Rousseff would like, since Chávez is adamantly against free trade. Trade disputes between Argentina and Brazil suggest that full members will have to overcome the temptation to protect their individual economies before larger attempts at continental protectionist policies even have a chance to be successful.

Meanwhile, Ecuador and Bolivia have already expressed interest in joining Mercosur as full members.

Since it is an election year in Venezuela though, Hugo Chávez might be winning no matter what happens to the trade bloc.

Click here to find out what Argentines think about Venezuela joining Mercosur.

Ecuador is looking to become a full member of Mercosur according to Cristina Fernández de Kirchner, who announced the country’s intention in her speech yesterday.

President Fernández briefly stated that the country planned to push forward in its goal of becoming an official member of Mercosur.

Ecuador, Bolivia, Chile, Colombia, and Perú, are currently only associate members of the economical and political agreement, which promotes free trade and the movements of goods and currency.

Mercosur’s full members include Argentina, Brazil, Uruguay, Paraguay, and Venezuela. However, Paraguay is currently suspended, while  its newest member’s acceptance, Venezuela, is the topic of hot debate.

At a Mercosur summit in December of 2011 in Montevideo, Ecuador President Rafael Correa said, “we’re hoping to become a full member,” although no substantial efforts have been made thus far to try to gain acceptance into the agreement.

Venezuela waited roughly six years before finally being accepted as the fifth country. In order to enter the new bloc, the potential new member must be approved by the Congress of each of the existing member-states, and the Paraguayan senate had kept Venezuela’s application blocked.

Correa remarked that his country’s good relationships with all of the other member countries should help speed the process.

Bolivia is also looking to become a member according to Brazilian news sources.

“The idea is to have a more open discussion so that Ecuadorians and Bolivians can become a part of Mercosur,” says the Brazilian State News Agency.

The President of Brazilian’s Special Advisor for International Affairs, Marco Aurelio García, plans on visiting Bolivia to discuss the country’s current position.

“We will be looking at how to create more opportunities for countries that are not formally included in Mercosur,” says García.

With Venezuela’s recent acceptance both Ecuador and Bolivia are renewing their intention to become full members.

Following the Mercosur meeting in Brasilia, Argentine President Cristina Fernández de Kirchner and Venezuelan President, Hugo Chávez, signed a cooperation agreement to develop a strategic energy plan between state oil companies YPF and PDVSA.

Venezuela officially joined Mercosur yesterday at the summit, following Paraguay’s suspension.

The meeting took place on Tuesday at the Argentine embassy in the Brazilian capital. After signing the accord, Cristina Fernández stated that Mercosur “should aspire to become the fifth global economy behind the US, China, Germany and Japan.”

The agreement ratifies a decision to identify opportunities and coordinate strategic participation for planning in the distribution of hydrocarbons, both in Venezuela and in Argentina.

In addition, projects already implemented will be optimised for both parties and new ones will be launched.

For this purpose, according to the text of the agreement “an Energy Cooperation Strategic Plan will be nominated so that closer links can target the companies to increase crude production in both countries”.

As part of the union, YPF will be incorporated to the Ayacucho Areas 6 of the Orinocco shale deposits currently in production while PDVSA will join “oil and gas exploitation projects” in Argentina.

The two companies are expected to come up with a portfolio of projects in the form of a proposal with the objective of collecting funds for short, medium, and long-term execution of the different initiatives.

PDVSA will participate in petrochemical and technology transfer projects or in any other form of cooperation to which both sides agree. The administration and procedures of different projects will be the responsibility of Venezuela’s Oil and Mines ministry and the Argentine Federal Planning Ministry.

The agreement solidifies the close friendship and cooperation links between the two countries.

Venezuela officially joined Mercosur today at a Brazilian summit attended by leaders from South America including Cristina Fernández de Kirchner of Argentina, José Mujica of Uruguay, and Hugo Chávez of Venezuela.

The meeting, which formalised Venezuela´s full incorporation into the organisation, lasted approximately an hour and a half and was held behind closed doors at the Planalto Palace.

Venezuelan membership comes after Paraguay was suspended from the voting bloc on 22^nd June following the removal of Fernando Lugo, in what the former president referred to as a coup d´état by his vice president, Federico Franco.

According to La Nación, Chavez stated, “This will give strength to Mercosur, because it involves the union of the world’s largest oil and gas reserves with the block that is the largest producer of food on this planet, the primary reservoir of biodiversity, of fresh water. It is a perfect equation. It was missing Venezuela, what Bolivar called the axis of the sphere, to round out and strengthen the sphere from the Caribbean to Patagonia.”

While many news outlets analysed the entry of Venezuela into the organisation, reports surfaced that Hugo Chavez would use the visit to get a health check-up. The leader has undergone three operations since last summer.

Today, President Cristina Fernández de Kirchner is travelling to Brazil for tomorrow’s extraordinary Mercosur summit where the regional economic bloc will formalise Venezuela’s admission.

Venezuela’s admission to the group was approved on 29th June, when Mercosur met in Mendoza. At that same meeting, Paraguay was suspended from the organisation, on grounds that the removal of former President Lugo violated the bloc’s democratic clause, the so-called Ushuaia Protocol.

The process of Venezuela’s admission to Mercosur began over six years ago, when the country signed an Adhesion Protocol on 4th July 2006. Paraguay’s suspension paved the way for Venezuela’s entrance into the organisation, as Paraguay was the only nation that had not yet ratified the country’s admission.

Tomorrow’s meeting will be held in Brasilia, and President Fernández will be joined by her Brazilian and Uruguayan counterparts Dilma Rouseff and José Mujica. Venezuelan President Hugo Chávez will also be in attendance.

In advance of tomorrow’s summit, ministers from all four countries are meeting to discuss the technical procedures and timetable for Venezuela’s incorporation. For example, the bloc will have to decide on a deadline for the new member to apply the Common Foreign Tarriff (AEC), which is a common tariff that all Mercosur members must apply to external countries. Venezuela also has the right to construct a list of products that it requests be exempted from the AEC.

A special task force will also be launched to supervise Venezuela’s trade liberalisation, another step required for the country’s incorporation.

The addition of Venezuela will be the first change in the composition of Mercosur’s membership since the union was formed with its initial four members over 20 years ago on 26th March 1991. With the addition of Venezuela, the Mercosur bloc will now incorporate nearly three quarters of the Gross Domestic Product (GDP) of South America.

The Minister for Federal Planning, Public Investment and Services, Julio De Vido, announced that oil company YPF and Venezuela’s petroleum company PDVSA will be working together along with Argentina’s state-owned energy company Enarsa.

Governments of both countries agreed that the working alliance will open up opportunities to extract crude oil in Venezuela’s Faja del Orinoco as well as non-conventional resources in Vaca Muerta, an oil and gas field in Argentina’s Neuquén Province. It is hoped that the new plan will create a 60% increase in YPF’s oil refining capabilities over a five-year period.

YPF’s five-year plan contemplates the creation of 132 new mine shafts over 40 square kilometres in Vaca Muerta, with plans to produce 55 million barrels of oil, a number that they expect could be increased twofold in the following five-year period. PDVSA has shown interest in investing on exploration in Vaca Muerta.

Together, PDVSA and YPF also plan to expand the oil refinery in La Plata, invest US$1.5bn into a petrochemical complex in Bahía Blanca, and build a “regasification” plant for YPF and Enarsa.

The announcement of the collaborative union comes days before the official incorporation of Venezuela into regional trading bloc Mercosur, due to take place on 31st July.

“Mercosur will be a powerful economic bloc with Venezuela’s incorporation,” said Venezuela’s foreign minister, Nicolás Maduro, on state television (VTV).