There is no doubt that the Venezuela-Brazil rapprochement and all the efforts having being displayed with regard to our country's association to the South's ambitious integration scheme (MERCOSUR), point to an important turn in Venezuelan foreign policy and, most specially, in the integration policy that had been followed by former administrations. There are many evidences of the extreme priority and, accordingly of the relocation of this issue in our country's external agenda. A priority and relocation reflecting, to a good extent, the disproportionate attention being granted by President Caldera to the development more intense relationship with our huge and powerful southern neighbor and, as a consequence, to Venezuelan association to an "integration system" as MERCOSUR, turning around that country.

It is worth recalling that just a few days after his inauguration, our head of State met in the presidential residence of La Guzmania with his Brazilian colleague of then, Itamar Franco, in order to set a new frame for bilateral relations, and that as from that moment abundant logistic, human and time resources were channeled to hold meetings and to establish commitments of the most diverse nature. ¹

this proves two things: one, the extraordinary role played in this turn in attention by President Caldera's old aspiration to carry on with the "conquest of the South". Second, what appears to be a concerning change of course in our foreign policy, inasmuch as it reduces the attention and lowers the priority of economic and political cooperative aspects —at the same time underlining attention on aspects of friction and conflict— of our complex relations within more traditional and "natural" regional scenarios, when one bears in mind the numerous geo-streategic/economic, historical, human, and even of national vocation/orientation linking us to them: e.g., the Andean sub-region, the surrounding Caribbean basin and, most specially, the very same North American macro-region led by the United States.

Certainly, only the holding in time of this change of course will tell us if economic rapprochement to the Southern Cone constitutes one of the current administration's policies, one that could be —in the best of cases— moderated by subsequent administration or even by the other countries having integration links with our country, or if, on the contrary, this new orientation is truly a "State foreign policy" enjoying, in the words of Alfredo Toro-Hardy the widest consensus among the forces of the economy and public opinion sectors by virtue of its "high strategic character"²

However, recent actions within the Andean sub-region seem to indicate that the Venezuelan association-prone course vis-à-vis MERCOSUR, so strongly sponsored by Presidents Caldera and Cardoso, may be rectified or, at least, slowed down because of the interdependent relations of our countries with their Andean partners. Already the need to face the unilateral standing of Bolivia and Venezuela, both having openly chosen the 4 + 1 negotiation option (Bolivia or Venezuela versus Brazil/MERCOSUR) an the efforts by the governments of Ecuador and Colombia to prop the 5 + 4 negotiation option (or "block to block") had been evidenced in successes such as the meeting of the Andean heads of State on the occasion of the X Summit of the Group of Rio held in Cochabamba early in September, the meeting on the middle of this month of the Andean Council of Foreign Ministers in Lima, and the recently adopted decision of the "Andean Community" in Lima on going to its first encounter with MERCOSUR, to be held by mid October, with a joint position and with the consolidated proposal of shaping a FTZ between both sub-regional integration spaces.

Without seeking to reach hurried conclusion, it would seem as if the above cited facts somehow disregards the presumed nature of "State policy" of the current Venezuelan rapprochement to the South American trade block and prove that the previously assumed agreements, decisions and actions and the very same integration reality committing our country, do impose themselves or, at least, deserve being taken into consideration in any change of course designed and formalized "from the top". Let us hope that if these last events do not have a rectifying impact on the protected Brazilian-Southern orientation, of the current Venezuelan administration, it will not cause hard to repair damage in other international scenarios where Venezuela does have interests with inevitable strategic nature.

Now then, and beyond the understandable apprehensions being raised by this hurried rapprochement to the Brazil/MERCOSUR front, there is no doubt that it brings about great challenges —able to become threats or opportunities according to the adopted decisions and courses of action— not only for high national government spheres, but mostly for the countries several economic sectors. And these, as it is known, are the only ones being able to arrange "from the bottom" the integration commitments having been assumed "from the top" by our country's decision makers and negotiators; but also —and given the implicit complexity in functional integration of two or more national entities— and should be increasingly consulted and/or asked to participate widely in the diverse stages of any negotiation process pretending to reach objectives sustainable in time. Even more if an unavoidable reality is considered: on the one hand, that any economic integration arrangement substantially affect, whether you want it or not, the legal, political and economic space where economic actors move and interact and, consequently, their economic destiny; and on another hand, that such arrangements inexorably increase the number of competitors to be faced by national producers, and that they must have also a non trade set of issues (environmental, financial, social, labor, border and policy harmonization) of which the proper attention requires active cooperation between the several non governmental sectors participating in the economic action.

Having said this, it becomes essential to make a brief reference to MERCOSUR's origins, current situation and perspectives, as well as to the pivotal role of our southern neighbor in said integration scheme.

1. WHAT IS MERCOSUR? PRECEDENTS, CURRENT SITUATION AND PERSPECTIVES

The South's Common Market (MERCOSUR), was established on March 26, 1991 with the signing of the treaty of Asunción by the governments of Argentina, Brazil, Paraguay and Uruguay. The central purpose of the signatory countries of this regional intention agreement was to create a common market based on three columns: liberalization of intra-regional trade; the establishment of common external customs duties and political trade with regard to third party countries; and the coordination and harmonization of their members' macroeconomic policies and legislation, in order to eliminate the asymmetrical features that could hinder the common market's operation.

1.1. PRECEDENTS :

The origins of this recent expression of open economic regionalism go back as far as to the Minutes of Iguazú, a document signed in 1985 between Argentina an Brazil —at times when both countries were just commencing with their democratization processes— with the specific purpose of bilaterally increasing trade relations, industrial complementing action and technological cooperation. It is precisely on line with this first rapprochement initiative, that the governments of Argentinean President Raúl Alfonsín and of his Brazilian colleague Jorge Sarney, at their meeting in Buenos Aires on July 29 1986, entered an agreement for the establishment of a Program of Integration and Economic Cooperation between both their countries, and twelve protocols that would constitute said program's first phase.³

Already at that time, these agreements raised great interest and expectation, both at a binational level, as a sub-regional and extra-regional ones also. After all, this was a rapprochement between two traditional rivals whose power elites had put to practice since the nineteenth century —as it is rightly pointed out by Venezuelan international specialist Elsa Cardozo— a sub-regional logic of power balance, which led during a good part of this century to the wide and fluent shaping of geopolitical thinking and to studies on dependence and development. ⁴ This notwithstanding, it is evident that the boisterous failure of the "inward" import substitution and economic intervention development model, so well emblematized by the debt crisis and by deep macroeconomic unbalances, next to the new democratic governments' awareness of the need to undertake —no matter how timidly— the revision of the interventionist-developmental-protectionist inward and third world-multilateral outward, were both factors of great impulse for the innovative cooperation/integration agreements of the mid eighties between the two most important countries of South America.

1.2. RECENT EVOLUTION:

A most relevant step in the evolution and consolidation of MERCOSUR was the Ouro Preto additional Protocol to the Treaty of Asunción, signed in December 1994, since it contributes to the shaping of a customs union and perfects institutional operation. It was based on this legal ground that MERCOSUR began to act on January 1^st., 1995, as a customs union: zero duty for 85% of the customs duties' universe and a liberalization process until 1999 for the remaining 15%, and setting of a joint external tariff for the same goods with the same exceptions. In the same way, by means of this protocol standards of origin, a customs code and another one on disloyal practices, a classification of merchandise and customs evaluation standards and measure to guarantee loyal competence were adopted; a technical committee was created also charged with eliminating or harmonizing non tariff barriers.⁵

Currently, there is no doubt that this integration agreement constitutes a powerful sub-regional/regional economic axis and a first order pole of geo-economic attraction within the hemisphere's integration scenario. In this sense, Brazilian diplomat Rubens Antonio Barbosa brings some data accounting for this sub-region's trade expansion potential:

- in 1991, at the time of the signing of the Asunción Treaty, intra-regional trade rose to US$ 4.3 billion (of which US$ 4.3 billion were Brazilian exports)

- in 1992, the inter-MERCOSUR trade rose to US$ 6.5 billion (of which US$ 4.1 billion were Brazilian exports), and

- in 1993, this trade reached the figure of US$ 8,3 billion (with the Brazilian exports accounting for some US$. 4 billion.6

In the same manner, according to LAES figures, in 1993, trade within this sub-regional economic block represented 20% of its four partners' whole trade, and the growth of inter-MERCOSUR exports was five times higher than that corresponding to the whole Group's exports, which, besides, represented 20% of the same.

Press sources indicate that said intra-regional trade expansion has tripled in the last three years and that during the same period there was an increase of 25% in exports to third countries.

The former figures and percentages are an uncontested testimony of the dimensions characterizing this new and dynamic sub-regional integration system: a 200 million persons market, a GDP of 800 billion dollars, a per capita income of 4,300 dollars, a foreign trade above 100 billion, and relatively developed economies that, besides, absorb half of the regional foreign investment and account for half of Latin America's foreign debt. The former features make of MERCOSUR the fifth largest economy in the world, after the USA, the European Union, Japan and China.⁸

1.3 THE ARGENTINA-BRAZIL RELATIONSHIP AND BRAZIL'S INTRA-REGIONAL IMPACT.

One should add, however, that as well as the Andean Community (so called after the signing of the protocol of Trujillo last March) gravitates around the active Colombian-Venezuelan economic relationship (which accounts for more than 60% of the community trade), MERCOSUR's dynamism rests also on the geopolitical and geo-economic weight of Brazil and Argentina and on the close economic interdependence that has developed for the past ten years between both countries, during which time bilateral exchange increased nine times.

Yet another fact may be deduced from said intra-regional exchange's growth figures and that is that Brazil is this sub-regional economic space's main development and expansion engine. The pertaining data are eloquent: Brazil occupies half of the South American territory, it is the country having more neighbors —10 as a whole— after the Russian Federation, it has a population of roughly some 152 million inhabitants, and in 1994 it showed foreign trade figures of US$ 75 billion and a GDP of US$ 456 billion.⁹ This means that Brazil by itself accounts for 75% of the MERCOSUR population and for half of the sub-regional GDP. In the same manner, Brazilian trade with its MERCOSUR partners was approximately US$ 11 billion, a figure tripling the trade flow that was evidenced in 1990 between Brazil and the other members of this sub-regional block. One should not be surprised then that this country has been and keeps being this market's main impulse factor and that its decision to bless the association with any other country —be it called Chile, Bolivia or Venezuela— should have a decisive weight within that integration system.

The former does not mean that trade with MERCOSUR and even with Latin America should not be economically relevant for Brazil. Much to the contrary, both the other MERCOSUR members as the sum of these and the remaining members of ALADI —all South American countries plus Mexico—, currently absorbed important percentages of Brazilian exports. And these percentage, according to Brazilian Foreign Minister, Luiz Felipe Lampreia, place themselves at the range of 16% and 28% respectively.¹⁰

1.4 GLOBAL AND REGIONAL CHANGES AND MERCOSUR

Something is already an unquestionable fact: the two last decades and the current five years have been a period of deep change. The microprocessor has transformed and keeps transforming the world in a way that in many senses is comparable to the renaissance bound impact on the middle ages of the invention of the press in the XVth. century. The developments in the field of communications, transport and information technology are generating new industries and products at an unprecedented rate and speed and, accordingly, are exerting pressure for the adoption and introduction of novel approaches in the area of industrial organization, production management and techniques.

Aside from propitiating considerable advances in the dismantling of barriers to over the border circulation of goods, services and capitals, these developments have also meant a transcending turn towards "internationalization" of the economy. Production has been reorganized and brought to a new dimension at a global scale, something that is reflected in the nature, volume and reach of extra-national transactions. Such exchanges now imply a more complex and sophisticated range of activities and tend to be made by and between the linked parties. In effect, what we are observing is the beginning of the transition of exchanges between national economies interconnected to exchanges within an integrated global economy.

Although the above mentioned changes are more visible in the economic sphere, the interconnected medium and long term implications of these transformations with other spheres —political, social, cultural, and ecological— appear no less fundamental. This explains why globalization is much more than an issue of interest for trade negotiators or business planners. Mostly because it represents an "most powerful dynamism" of "interactive processes" that, as a set, conform a meta-process of "articulation of domestic-global relations, of entities and loyalties and of decision making processes" which is at the same time unequal and paradoxical ¹¹: globalizing-localizing in the economic area, centralizing-decentralizing in the political area.

Latin America has been one of the regions having most strongly felt the effects of globalization, at least as from the beginning of the last decade. Hence, years before the "noisy world geopolitical transformation" ¹² so associated to the fall of the iron curtain, the region's countries were forced to adapt to such process through the formulation and instrumentation of great internal adjustments and external liberalization/insertion strategies, aimed as a set to the recovery/modernization of its economies under the free market's logic and the reform of its legal and political institutions seeking to restore "good democratic governments." In the specific sphere of integration this new "reforming" approach implied a radical change in concepts, in orientation (from inbound to outbound) and in strategy (from the protection of domestic productive sectors to the dismantling of tariff and non tariff barriers and the expansion of competitive abilities of the Latin American economies by means of the establishment of " inter/transnational regimes with an "open regionalism" nature").

The most evident consequence of this change was the reactivating of old integration agreements and the proliferation of new ones for the sake of advancing open regionalism strategies that would contribute to the handling of intra-regional and extra-regional interdependencies, would reduce the disproportion between functionally integrated countries, and would reduce their ability to negotiate with external counterparts.

It was precisely within this context huge of global transformations and domestic, regional and continental adjustments and readjustments that MERCOSUR appeared: an internal South American system created, partially, to support domestic reform policies and plans undertaken by Argentina during the late eighties and by Brazil during the early nineties, but also as geopolitical and economic response and as a way of establishing regional countervail to the conditioned opening, association and harmonization initiatives being present in the trade and investment levels of the traditional hegemonic power of the western Hemisphere. This for the sake of going from there —and as it was proposed in 1993 by President Franco— to a South American Free Trade Area (SAFTA) warranting more efficient and competitive regional access to world markets and to the multilateral trade system, but to be used also as a "building block" for the hemispheric integration visualized in the Summit of the Americas, or as an alternative or protection measure against the eventual failure of this continental goal.

2. MERCOSUR AND VENEZUELA

From all that has been said one may deduce that MERCOSUR is at the same time a source of opportunities for and threats to Venezuela.

2.1. THE DIVIDED OPINION OF VENEZUELAN BUSINESSMEN

In fact, even the Venezuelan businessmen do not seem to have a uniform opinion with regard to the significance and the impact for the Venezuelan economy of an association with MERCOSUR.

In effect, some key representatives of the domestic business sector as CONINDUSTRIA are of the opinion that a liberalization agreement between Venezuela and MERCOSUR must be necessarily preceded by a careful analysis of its implications. This is so mostly because in spite of the fact that its benefits seem obvious for the oil industry and the electric sector, they do not look as clear for the country's other industrial sectors. A central concern of this first group is the effect that the strong competence coming from the larger and/or more efficient Brazilian producers may have on micro, small and medium businesses. Another not less significant one is that related to our smaller negotiating ability when faced to the MERCOSUR giants (Brazil and Argentina) which makes negotiation with other Andean countries more advisable and attractive. With this, as assured by these Venezuelan businessmen, not only would the Venezuelan negotiating vulnerability would be reduced, but use would be made also of the experience accrued in the G-3 negotiations with Mexico, where Venezuela and Colombia negotiated as a single country. It would avoid also dangerous setbacks in integration advancements with the Andean Community and, most specially, with Colombia. One should remember that our unavoidable western neighbor still Venezuela's first trade partner in the area of non traditional exports, even in spite of the political and economic crisis that has shaken both countries in recent times and of the no longer priority consideration of Colombia in Venezuela's foreign economic agenda.

For other businessmen, on the contrary, Venezuelan integration to the southern sub-regional market is necessary and beneficial. In principle because MERCOSUR's magnitude has a a significant widening effect on the national private sector's economic space and opens new and dynamic opportunities for our energy sector —oil and hydro-electric— in Northern Brazil. And then because our insertion into this market would provide us with greater negotiating capacity with Europe and would prepare us for the negotiation of the Americas Free Trade Agreement (AFTA) that should be in force in the year 2,005.

2.2 OPPORTUNITIES FOR VENEZUELA: NORTHERN BRAZIL

It is not too surprising that the most ardent defense of Venezuela's association with MERCOSUR is made by our most active Ambassador in Brasilia, Alfredo Toro-Hardy, as he has evidenced it in several statements and articles of his publish in Venezuelan press media.

In one of these articles titled "Why should we join Mercosur?" ¹³, Toro recognizes that Venezuela is a matter of priority for Brazil under reasons affecting the latter fundamentally. First, in view of the relative exclusion of benefits derived from MERCOSUR of Brazilian northern and northeaster states, and the close geography and economic complementing feature of Venezuela with this Brazilian sub-region. Just bear in mind, for instance, that Boa Vista, the capital of the neighbor state of Roraima is closer to Miami than to Sao Paulo, and that it is accordingly easier to place an article in Roraima from Puerto Cabello than to do it from Sao Paulo. It is all too natural, then that the government and economic sectors of Roraima be interested in offsetting their isolation from Brazil's most dynamic economic centers, with the securing of a more adequate outlet for competitive placement of their products in the U.S. market. Second, Venezuela's nature as an energy power represents the best guarantee for our gigantic neighbor that its northern states will have a safe source of energy.

This notwithstanding, in the same quoted article, our Ambassador to Brazil reviews why our economic relationship with MERCOSUR is so important. Toro mentions five factors in this respect:

First, that for Venezuela MERCOSUR means specially Brazil. This is evidenced by the huge potential for growth of our trade with this country, that in 1995 was —according to OCEI [Central Bureau of Statistics] figures— 1.2 billion dollars, with a deficit against us of 667.289 million dollars —if oil exports to this region are excluded— and of 200.964 million —if sales are added of 90 thousand barrels a day of crude to Brazil, sole buyer of oil in MERCOSUR—. It is important to note that in statements made during his recent visit to Caracas, the Brazilian Foreign Minister acknowledge that trade of petroleum products are currently the dorsal spine of the Brazil-Venezuela economic relationship., but then it is also a most recently started trade: not so long ago Brazil bought its oil from all the Persian Gulf countries and Venezuela sent all its exports to Notch America.¹⁴

The second factor to be considered —according to Toro-Hardy— is that Venezuela may draw great benefit from its access to Brazil's northern and northeastern markets. As an illustration, Toro mentions the significance that could be attached to the mere integration with the city of Manaos and its industrial free zone, in view of its high demand of goods and services (one should remember here that the distance between Manaos and Puerto Ordaz is almost the same as that between Boa Vista and Manaos). Also, and as Clodovaldo Hugueney, Brazil's Ambassador to Venezuela, well points it out, the complementing areas existing between northern Brazil and Venezuela are enormous for Venezuelan companies in areas such as the steel industry, construction, cement, electric materials, fertilizers and agricultural-industrial and food products.¹⁵

The third factor noted by Toro is that Brazil may become an important market for Venezuelan orimulsion. Mostly when one considers the electric power deficit affecting our neighbor. And this is so much so that a growth in demand is foreseen at a rate of 5% p.a. until 2006, for which reasons, investments will be required of some 6 billion a year until 2005. For our highest representative in Brazil, this extremely costly shortage affecting the neighbor country makes of orimulsion an "ideal solution" to face such shortage.

The fourth burdening factor in the Venezuela-Brazil-MERCOSUR rapprochement, is that the current Brazilian thesis of the "South American Energy Matrix" privileges South American suppliers above those from other regions, and this is an additional help in reaffirming Venezuela as a great supplier of hydrocarbons to Brazil.

The last but not least important factor mentioned by Toro-Hardy in favor of said association is that Venezuela could become a receiving center for important Brazilian investments, Mostly because this country's several business enterprises now covering the northern and northeastern markets from their southeastern plants, could find it far more profitable to supply these markets from Venezuela when considering certain competitive advantages of our country as our shorter distances and lower labor costs. Toro quotes a live testimony of the investing potential of this relationship with Brazil/MERCOSUR: after the signing of MERCOSUR 400 Brazilian companies established themselves in Argentina with investments of more than a billion dollars.

FINAL COMMENTS

As seen through the former pages, Venezuela's insertion into MERCOSUR offers great economic challenges that, according to the key designers and instrumentators of this policy, may be seen already as highly advantageous to Venezuela. However, and given that the preferred Venezuelan approach to the Brazil/MERCOSUR pole is still at its preliminary phase, that it is still at an exploratory level and that it may be subjected to future revisions and rectifications, it seems advisable to condition our adherence to said pole to the adequate treatment by political and non government sector leadership of certain fundamental questions:¹⁶

1. What degree of compatibilty is there between Venezuela's participation in Mercosur and other regional integration processes?

2. Is Venezuela able to absorb without much trauma all the political and economic costs of tearing apart a sub-regional system as the Andean one that, in spite of its slips, inconsistencies and fallbacks, is still receiving 40% of our non traditional exports?

3. Should the new integration project being experienced by the convergence of Andeans and Southerners be undertaken, or should MERCOSUR be left rather as its main motor?

4. As a consequence, should any negotiation of new or preexisting commitments in our integration agenda be subdued to the progress of our bilateral or group rapprochement to MERCOSUR or vice-versa?

5. In view of the fact that the USA are the first and most non renounceable trade partner of Venezuela —50% of our trade is with that country—, may our government and economic sectors play the MERCOSUR trump without risking key dimensions —or aspects within these dimensions— of their vital relationship with the hemisphere's and world's first economic power?

6. Considering that Venezuela is in the middle —in geopolitical and geo-economic terms— of the hemisphere's two poles of attraction, MERCOSUR and NAFTA, is there, or have thoughts been given to, a strategic political/economic plan at the level of high government, recognizing, defining courses of action and preparing diplomatic negotiating and decision making teams to face Venezuela's role as a "joint-country" between the North and South of the hemisphere, and, accordingly, in the eventual creation of THE AFTA?

7. Could the rapprochement to the Brazil/MERCOSUR pole be an essential part of that plan? Or, is such policy rather the result of hazard ridden coincidences of personal and political preferences, prejudices and interests of the main actors concerned?

8. And last, is Venezuela instrumenting today the strategic lines of an integration plan, or is it just playing with the enthusiasm the game of the "southern giant's" power elites in their realization of their demurred hegemonic project and, in the process, throwing away the political, economic and diplomatic capital that Venezuela has accrued vis-à-vis "the northern giant"? Are we, finally, undertaking the "conquest of the South", or is it the South that is conquering us?

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   * Venezuelan international scholar, with post-graduate degrees in public and international Affairs by Pittsburgh University. Currently, she is post-graduate professor of International Relations at the Faculty of Economic Science of the Central University of Venezuela (UCV), and an advisor to the Foreign Relations Commission (CARE). Since 1994 she is a regular column writer of the EL GLOBO newspaper.

   1. Pointed by: CARDOZO DA SILVA, Elsa, "Repensando políticamente al Mercosur desde Venezuela", Política Internacional, # 42, April-June 1996, p. 9.
   2. EL UNIVERSAL, Wednesday October 9, 1996, p. 1-12.
   3, CAMARGO VILLEGAS, Maria Zeila, Integracieon del Cono Sur: de la reteorica a la realidad", Nuevo Mundo, Year 17, # 1/2, January-June, 1994, and SELA, "El proceso de integración reciente de América Latina y el Caribe: Avances recientes", Latin American Economic System, XXI Regular Meeting of the Latin American Council, San Salvador - El Salvador, 10 through 13 July 1995, SP/CL/XXLO/DT # 29, p. 15.
   4. CARDOZO DA SILVA, Elsa, op. cit., p. 11.
   5. SELA, op. cit., p. 15.
   6. BARBOSA, Rubens Antonio, "O Brasil e suas opçòes internacionais: a articulaçào o universal e o regional", Politica Externa, Vol. 3 3, # 3, December 1994, p. 108.
   7. SELA, op. cit., p. 16.
   8 TACHNARDI, Maria E., "MELCOSUL: desafios e oportuniddes"., Politica Externa, Vol. 3, # 4, March 1995, p. 80.
   9. Ibid., p. 85.
   10 EL UNIVERSAL, Sunday October 13, 1996, p. 1-12.
   11. CARDOZO DA SILVA, Elsa, op. cit., p. 9.
   12. Ibid.
   13 TORO HARDY, Alfredo, "¿Por qué asociarnos al Mercosur?, EL UNIVERSAL, Thursday August 29, 1996, p. 1-5.
   14 EL UNIVERSAL, Sunday October 13, 1996, p. 1-12.
   15 ECONOMIA HOY, Friday September 6, 1996.
   16. In this part we pick up some of the questions raised by Cardozo in her article "Repensando políticamente al Mercosur desde Venezuela". Cfr. CARDOZO, E., op. cit, p. 12.