Year XLVIII, 2006, Number 1, Page 50
CHINA, MERCOSUR AND AN ABSENTEE: EUROPE
The dramatic events that shook Argentina during 2001-2002 had created serious rifts between the Member States of Mercosur.[1] The financial collapse of Argentina had pushed Brazil into taking a series of retaliatory measures against its neighbours along the Rio de la Plata. Quarrels thus broke out between all four Mercosur Member States on customs duties, with reciprocal stoppages in the supply of raw materials and basic goods, in a desperate attempt to safeguard their respective economies.
These retaliations were then followed by a political crisis between Brazil and Argentina, with the result that the slow process of integration seemed to have been halted for good. Furthermore the succession of three Presidents in Argentina a few months’ apart from each other had certainly not helped the country to escape its crisis and bring it more into line with the Mercosur countries.
The election of President Kirchner finally, and his choice to abandon the fixed peso-dollar exchange rate (that had led to the dollarisation of his country in the ‘90s), had had the effect of promoting a reconciliation between the two South American giants, the true motors of the subcontinent’s politics and economy and in particular of the Mercosur area.
The relaunch of the Argentinean economy, after a fierce negotiation with the Monetary Fund which at first did not appreciate the dedollarisation process, and the return to greater monetary stability, also by Brazil, must however be seen in a wider context that involves the United States and a new player on the scene: China.
The terrorist attack on the United States, in September 2001, caused the superpower to reduce the level of political attention paid in its own continent, traditionally considered “its backyard”, thus aiding on the one hand the birth of new protagonists at the continental level (Chavez in Venezuela and Lula in Brazil) and, on the other, giving the green light to a very aggressive commercial and finance policy by China.
One of the consequences of the American choice to focus its attention on the Middle East, reducing the pressure on the nearby Latin countries, has been the recent failure of President Bush during the Summit of the Heads of State of the Americas held in Buenos Aires in November 2005. During the summit the US President tried with meagre enthusiasm and in vain to revive the FTAA project (the free trade area launched in the ‘90s by Bush Senior), encountering clear opposition from Brazil and Venezuela and considerable indifference from the remaining countries, the only exception being Mexico, whose President Fox (already the ex-Chair of Coca Cola Mexico) was accused by Chavez and Lula of having sold out to the USA (an accusation already made when Mexico joined NAFTA, the free trade project that links the country to the USA and to Canada).[2] In reply to this attack, the USA decided to oppose Venezuela’s candidature for a seat on the UN Security Council, claiming President Chavez was an obstacle to “international cooperation”.[3]
With the shelving of the FTAA project, the United States are left without a de facto continent-wide strategy, as shown by the attempts to draw up bilateral agreements with individual countries (e.g. with Chile and Colombia). Even the pressures that the USA have always exercised on the area through the Monetary Fund no longer seem to be effective to the extent that Brazil and Argentina, after having rejected the re-entry plans proposed to them by the Fund, even decided to pay their debt off early.
This decision is partly due to a recovery of the economies of Brazil and Argentina, but also to substantial economic and financial aid from China. The Chinese government in fact plans to invest over 100 billion dollars in Latin America in the ten years between 2005-2015.[4] Even taking due account of devaluation, if we consider that the Marshall Plan led the USA to allocate 12.5 billion dollars to Europe over four years, we can get an idea of the importance of the Chinese investment.
China’s high energy demand to support industrial production is well known by now. Therefore Chinese investment in Ecuador’s oil sector should come as no surprise.[5] China, however, also has plans to invest in the mining industry and in strategic areas such as satellite systems and nuclear installations, particularly in Brazil. Over the course of 2006 it will invest 89 million dollars in Brazil’s satellites sector,[6] where a new nuclear power station will also be built using Chinese technology, whilst the Asian country will import uranium, which abounds in Brazil.
That something has changed in Latin America is also shown by the fact that Panama, a traditionally pro-USA country, always considered a satellite of the USA and the first country to introduce dollarisation, today sees China as the primary backer in the plan to widen the canal with an allocation of 6 billion dollars. What’s more these days it is Chinese company Hutchison Whampoa that manages traffic in the Straights, through which 5 per cent of global maritime traffic currently passes with tolls of up to 200 thousand dollars.[7]
Will the effects of this financial aid from China also be felt politically in the medium-short term? It would rather seem that way, considering the failure of the FTAA project. Some Latin American countries today pride themselves on their separation from US policy, to the point of deriding it, as Chavez, the President of Venezuela repeatedly does, or, more recently Morales, the new President of Bolivia, whose first act after being elected (December 2005) was to visit to the Cuban President Castro.
Over the course of 2005 this newfound “autonomist” spirit in Latin America has meant a renewed approach between Brazil and Argentina, which have begun talks again to promote the relaunch of Mercosur, even though a lot of differences still persist.
In fact, whilst Lula, the President of Brazil has openly shown his will to support a project of political, monetary and institutional integration, not only of Mercosur, but of the entire sub-continent as declared during the Cuzco Summit of Latin-American countries,[8] the Argentinean President Kirchner (with the support of Uruguay and Paraguay) shows greater prudence. Closer integration with Brazil in fact causes no small amount of fear due to the size and political “weight” that this nation has in the sub-continent. Argentina, together with Uruguay, therefore decided not to take part in the Cuzco summit, having known in advance that Lula would have put forward the proposal of a single currency for the whole continent, without having agreed this initiative with the other members of Mercosur. It must be remembered that already in 1997 the Central Bank of Brazil had looked into the idea of a single currency for Mercosur in 2012, but this was rejected at the time by the Argentinean President Menem who saw the dollar as being the single currency of the region.[9]
Recently therefore a special Argentina-Uruguay-Paraguay alliance has arisen within the Mercosur countries in order to contest the Brazilian proposal to create a Mercosur Parliament with an allocation of seats on the basis of the population of the individual countries. A set-up of this kind would clearly put Brazil at an advantage, long the most heavily populated country in the region (over 180 million inhabitants compared to about 40 in Argentina, 6 in Paraguay and 3 in Uruguay).
At the recent Montevideo Summit (December 2005) no agreement was reached on this specific point, deferring the debate to a mixed technical commission, which must formulate proposals that a Summit of Heads of State will have to approve. In any case the installation date of the future Parliament was adjourned to 2011 when, in the initial plans, it was to have already been installed in 2006.[10]
These delays will not help the integration process in the region, which is also impeded by American interference: in a recent Argentinean-Brazilian bilateral summit, the problem was addressed of the possible bilateral agreement that the United States is proposing to draw up with Uruguay, in the effort to create tensions and divisions within Mercosur.[11]
Added to all this is the fact that, 15 years since its conception, Mercosur will soon experience its first enlargement when Venezuela becomes an effective member in 2007.[12] Chile and Bolivia are still associate countries up to now, but they give Mercosur a further economic boost towards the Pacific to the detriment of Atlantic trade that has historically privileged Europe.
In a moment of weakness in US foreign policy in its own continent, it is clear that Europeans have preferred to “flee”, abandoning significant investment opportunities in strategic sectors. Spain, Italy and France, for example, abandoned activities in the mining sectors (Bolivia, Ecuador), machinery and telecommunications (Argentina, Brazil, Chile).[13] In just the two-year period 2000-2001 Italy, Spain and Germany reduced their investments by 118 billion dollars.[14] European investments conversely have predominantly turned towards the Eastern European countries, in sectors that are certainly not strategic, to support lower labour cost production, such as for example in the engineering sector.[15] This is a further demonstration of the lack of enthusiasm in Europe to invest in research and development: a choice, however, which weakens it both domestically and internationally. Aided by the weakness and absence of the European Union, China has been able to guarantee a market for itself today with a great potential and it is easy to foresee that, besides economic advantages, in the near future, it will also acquire political advantages, which will ultimately shift the political-economic axis of the world towards the Pacific, thus further weakening the role of a Europe that is increasingly absent in the geopolitical theatre.
Chinese economic and commercial activism in Latin America which, moreover, is also emerging in Africa,[16] should be forcing the European Union into a time of deep reflection about its international marginalisation. In the past Europe, in moments of crisis, has been able to find the strength for a relaunch, but today it appears lost, and cannot react to a decline, and an apparently irreversible one, that has come about in the course of just one decade.
We therefore need a radical political choice to be made, at least by a Core of Countries, which can make a clean break with the delays and the indecisions and turn things around overcoming the paralyzing division. The time factor is becoming crucial, so rapid is the process of decline that Europe is experiencing. Unless a break is made from the political gradualism which characterises the process of European integration, the European Union risks going through the same crisis that the Republic of Venice experienced immediately after the discovery of the Americas: first marginalisation, then decline and finally outright collapse.
Stefano Spoltore
[1] Created in 1991 thanks to an agreement between Argentina, Brazil, Paraguay and Uruguay with the objective of economically and politically integrating Member States.
[2] The North American Free Trade Agreement came into effect on 1 January 1994.
[3] Ansalatina, 16 February 2006. This position, held by the ambassador to the UN, John Bolton, can be seen in a more general view of the American government that considers Venezuela a nation “that is a friend of the rogue states”, especially after the trade agreement it signed with Iran.
[5] Corriere della Sera, Milan, 8 January 2006; Il Sole 24 ORE, Milan, 15 January 2006;
La Repubblica, Rome, 18 February 2006.
La Repubblica, Rome, 18 February 2006.
[9] See Il Federalista, Pavia, XLIII (2001), p. 132 and L’Espresso, Rome, 29 May 1997.
[11] Ansalatina, Brasilia, 16 January 2006. Note how from 2001 until today the Presidents Kirchner of Argentina and Lula of Brazil, started the custom of having six-monthly bilateral meetings, to address the most pressing political issues, although, as we have seen, there are no lack of differences between the two. This type of bilateral meeting brings to mind the Franco-German ones.
[14] Limes, Rome, no. 4/2003, p. 61. More precisely they went from investments of 293 billion dollars to 175 billion dollars. In the same two-year period, on the other hand, Japan increased its investments in the region by 6 billion dollars: another sign of how the flow of commercial trade is increasingly shifting towards the Pacific area.
[15] tutto.ilsole24ore.com, 20 February 2006; Liberazione, Rome, 13 July 2004 and Alternativaeuropea, Pavia, no. 15, January 2006.
