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As soon as he arrived from his trip to Brazil, at the beginning of August, where he made Venezuela’s incorporation to Mercosur (Southern Common Market) formal, Hugo Chávez announced that several international companies were interested in investing in his country. The president believes that these are the first results of an effort that, he says, began even before he took office in 1999.
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Chávez gathered his team in the airbase of Maiquetía to announce that the American company General Motors, the Japanese companies Yamaha and Samsung, and the French company Renault wanted to install plants in the country. He remembered the conversations he had, soon after his first election, with former presidents Carlos Menem, from Argentina, and Fernando Henrique Cardoso, from Brazil. “I told them I wanted to see Venezuela affiliated to the bloc”, he said. “But their answer was cold. Only after the victories of Lula and Kirchner there was a balance of power in favor of integration and change”.
Venezuela signed the country’s candidacy protocol for the first time in 2006, but the Brazilian parliament strongly opposed it. The approval came only in 2009, after much negotiation between the Brazilian government’s supporters and their opponents in the Senate. Argentina and Uruguay were already beyond that stage. Venezuela’s acceptance, though, was barred by Paraguay’s deputies and senators, although it was supported by President Fernando Lugo. Since every decision in Mercosur must reach a complete consensus , the matter reached an impasse.
Ironically, the impeachment of the Paraguayan president made the process easier. The country was suspended from Mercosur for breaking the democratic clause and temporarily lost his veto right in the regional trade block. It was only necessary consensus among the three other countries in order to approve Venezuela’s integration into Mercosur.
“We weren’t accepted because of the systematic opposition of the Paraguayan congress”, says Maximilien Arvelaiz, Venezuela’s ambassador in Brazil. “The members of the parliament that boycotted our entry were the same that staged the coup against Lugo”. Nevertheless, new problems appeared after the acceptance.
Some of the main business organizations of Venezuela, such as Fedecámaras (Venezuelan Federation of Chambers of Commerce), Conindustria (Confederation of Venezuelan Industries), Favenpa (Venezuelan Chamber of Manufacturers of Automotive Products), which usually oppose the government, took the news suspiciously. They all have similar arguments: they complain that national companies, apart from PDVSA, are not strong enough to compete inside Mercosur and might even lose their space in the local market.
The government promised to create a fund to improve the national production capacity, investing initially $500 million dollars. Venezuela announced its first export trade inside Mercosur on August 8. It’s a load of 82,000 tons of glass vessels to Brazil and Argentina, produced by state company Venvidros (Glass Company of Venezuela).
The entrance in Mercosur, nevertheless, was only the latest fact of a radical change in Venezuelan international politics. At the beginning of his government, in 2000, Chávez took his first step to help the country’s foreign affairs when he hosted, in Caracas, the second OPEC (Organization of the Petroleum Exporting Countries) Heads of State summit. For the first time, the presidents of Algeria, Indonesia, Iran, Nigeria, Qatar, United Arab Emirates, Iraq, Libya and Kuwait gathered at the same time in Venezuela. This meeting was decisive to control the world oil supplies and to force its price to increase worldwide.
“Even though Venezuela is one of the founders, it used to aim its trades at Western Europe and the United States,” says Arvelaiz. “Since this meeting, the government decided to open up its international relations, progressively breaking a dynamic that was only interesting to the Western powerful countries. The low oil prices were ruining the producing countries, benefiting only the multinational companies and the consuming countries”.
Chávez likes to say that he works for a “world that has several centers, a multi-polar world”. Apart from OPEC, he’s also made lasting alliances with Iran, Belarus, Russia and China to make this idea possible. Venezuela has increasing commercial relations with these countries, apart from making financial deals, industrial projects and pacts for military cooperation. The United States continues to be a big client, especially when it comes to oil sales, by the government aims at diversifying his partners as much as possible.
The main focus of this strategy is Latin America. “We want to consolidate a sovereign and integrated block, and to do that we are investing in regional initiatives such as Unasur (Union of South American Nations), Alba (Bolivarian Alliance for the Peoples of Our America) and Celac (Community of Latin American and Caribbean States).
Alba is probably the most audacious investment of the Venezuelan president, proposed in the 3rd Caribbean Community Heads of Government summit, also at the beginning of his government. “This neoliberal model can’t be the basis of our integration,” he said at the time. “We want a model that really integrates us. We either join forces, or sink together.” The alliance, founded in 2004, includes Venezuela, Cuba, Ecuador, Bolivia, Nicaragua, Dominican Republic, Saint Vincent and the Grenadines, Antigua and Barbuda.
The pact allowed for the creation of mutual enterprises and a regional monetary zone. Part of the commercial relations between the members is already made with “sucre”, a new currency shared by these countries. As opposed to other regional blocks, Alba is not aimed at commercial trade or customs pact, but at establishing a mechanism of mutual economic help, social politics and cultural exchange. It unites what can be called “the hard core” of Chávez’s allied governments.
Even though Brazil is not a part of Alba, the country is one of the greater Venezuelan partners. The trade balance among the neighboring countries, according to the Brazilian Ministry of Development, Industry and Foreign Trade figures, increased about 300% in the last 14 years, from $1.46 billion dollars in 1998 to $5.8 billion dollars in 2011.
Brazil is ahead of Venezuela in those figures: its exports to Chávez’s country were multiplied by six in the period, striking $5.15 billion dollars in 2008. Another historical mark: Brazil went from being the fifth biggest exporter to the Venezuela to the third, only behind the United Stated and Colombia.
Petroleum and its related revenues represent 65% of Venezuelan sales to Brazil. The rest is a sum of derivatives of crude oil, aluminum, iron, steel, minerals and electric energy. Venezuela buys from many products from Brazil, especially basic food items, such as sugar, meat, chicken meat, eggs, coffee and grains. The increase of the Brazilian cooperation with Venezuelan agriculture also pushed up the sales of machines, tractors, trucks and tires.
Besides the improvement in commercial relations, the investments of Brazilian companies in Venezuela also increased significantly, which are in charge of several important infrastructure works. The projects are especially concentrated in building houses, steel plants, agricultural irrigation systems and refineries. Some are financed by BNDES (Brazilian Development Bank). Others, by private lines of credit arranged by the investing companies themselves.
There is also a gigantic mutual enterprise in Brazilian land. Over hedge and ditch, forced by both governments, Petrobras and PDVSA are joining forces to build, in Pernambuco, the Abreu e Lima refinery. In spite of the delay in the Venezuelan investment and of difficulties to consolidate the project’s financing, the plan is fleshing out and might develop into a powerful oil and related revenues refinery.
Now that Venezuela is part of Mercosur, the rhythm of this integration will likely be accelerated and institutionalized. One of the initiatives that should benefit from this is the Bank of the South, a monetary fund proposed by Chávez and Lula to finance local projects, through the deposit of international reserves by the member countries. Another strategic effort is the development of energy infrastructure, integrating hydroelectric sources and hydrocarbons, especially gas and oil.
Translation: Kelly Cristina Spinelli