Mercosur is going through "isolation", warns Cardoso

The United States decision of signing trade treaties with several countries from Latin America has led Mercosur into “a kind of isolation”, thinks former President Fernando Henrique Cardoso. He believes such isolation’s effect on Brazil could be worse if not for Brazil’s great increase of productivity in the last 15 years and favorable international scenario. “The moment favorable global scenario disappears”, warns Cardoso, “lack of treaties will be a problem.” The following is the Interview.

Agência Senado – After Brazil has changed its political guidelines, how would you appraise Mercosur’ current situation?

Cardoso – I am not sure there has been a change in political guidelines. Brazil’s aim was always to privilege Mercosur. Yet, how is that supposed to happen? At this point things get a bit complicated; it is not a matter of rupture between current and former government, it is a wider issue. I don’t believe there has been an effective decision for integration in Mercosur’s creation as Europe had. We haven’t transferred quotas of political power and sovereignty from any member to a supranational organ. We haven’t been able to make fusion of capital, which would have favored an amalgam between member countries. We haven’t distributed production process according to geographic zones, as it was uniform. We kept concentrating, and thus Argentina raises its taxes, in order to favor its national industry and match Brazil’s.
Agência Senado – Or it faces issues with Uruguay, on paper mill’s installation.

Cardoso – That’s right. We have reduced Mercosur to its commercial aspects. There wasn’t a productive integration, once we did not make a decision.
Agência Senado – In your opinion, how can we do it?

Cardoso – Now it is a bit late. Multinationals and Brazilian companies, which are powerful, have concentrated investments in Brazil. They have settles in Brazilaiming to reach Mercosur’s market. But it has produced imbalance, and of course other countries resent it. There were no investments in other countries at that period; especially in Argentina, which had conditions to absorb such investments. There is now a big issue that makes other countries dissatisfied with Brazil, which has made more progress than others.
Agência Senado - Then the answer would be going back to the project of a free trade area or strengthening integration?

Cardoso - I was always for strengthening integration. There is another problem, along with Mercosur issue there was FTAA (Free Trade Area of the Americas), and here lies the great difference between my government guidelines and current government’s ones. My government set conditions, in which Brazil considered the formation of a free market. Though conditions were rough, Brazil sought integration in FTAA. Now, after Miami Summit, it has been decided that each country would take what it wanted from the menu. As a result, the United States, which lost interest in FTAA, decided to sign bilateral treaties. And it did so. Such fact has isolated not only Brazil, but also Mercosur, as the United States signs treaties with Peru, Colombia, Chile and Central America, it takes from us the advantage we would have in trade with these countries due to Latin American Integration Association (Aladi).
Agência Senado – Is FTAA being made without Brazil?

Cardoso – Yes, it is. And the worst part is that other countries are becoming more competitive and matching Brazil. Brazil’s industrial production is basically absorbed by the United States and Latin America. If we lose preference in Latin America to the United States, there will be consequences. At this point, there was certain isolation. I think a positive decision Brazil has made was to let WTO (World trade Organization) decide over some important issues, because we would probably have more advantages in global level than in regional’s. Now we shall wait for Doha Summit’s results. Still Brazil is quite isolated. Why does it have affected us so much? There are two reasons. There has been a huge increase in agricultural and industrial production. A revolution has been made in the last 15 years. Also, international scenario is favorable. The moment favorable global scenario disappears; lack of treaties will be a problem.
Agência Senado – Do you think the bloc may be taken by ideologies due to Venezuela’s adhesion?

Cardoso – I really hope it doesn’t happen; it would be very bad to Mercosur. But there is always a risk. We always aimed to integrate South America. Venezuela is welcome to the bloc, but the country must not bring conflicts into the bloc.
Agência Senado - Some opposition sectors are concerned of the possibility that Venezuela’s adhesion may retard negotiation to the formation of FTAA and treaties With European Union (EU). Do you agree with them?

Cardoso – I think there will not be negotiations regarding FTAA formation. Neither Brazil has shown interest, nor has the United States, which now has chosen to make bilateral treaties. But Venezuela’s adhesion may retard negotiation with EU. Thus Brazil needs to reassume Mercosur’s leadership. Leadership cannot be imposed; Brazil must be persuasive and make use of its weight in Latin America. Brazil has an important weight, but it must use such weight without being arrogant. Here I make a criticism: Brazil has been an arrogant and not very efficient leader.
Agência Senado – Is FTAA dead?

Cardoso – It is rather paralyzed. The United States lost interest in FTAA.I don’t believe American Congress may give the President, permission to sign treaties, as it might have done in the past. The United States is being cautious. It seeks limited treaties.
Agência Senado – Is it possible for Mercosur and the United States to sign a treaty

Cardoso – It would be good. We have tried to do it several times but The United States wasn’t very interested. Its problem regards Brazil, and Brazil’s regard the United States. It would be useful but I have never seen opportunities to do it.
Agência Senado - Paraguay and Uruguay have made complaints over what they call asymmetries and sometimes say they may leave Mercosur. What do you think of that?

Cardoso – Uruguay aims to make a direct agreement with the United States. It claims Brazil has made an agreement with Mexico regarding automobile sector, and see no reason why Uruguay cannot make an agreement on meat. Indeed, if countries with different economic conditions gather in an union, there must be compensatory mechanisms, as Europe’s. The problem is neither Brazil nor Argentina has an effective position as Germany and France had to Portugal and Greece. I don’t think Mercosur sought to please Paraguay and Uruguay. Mercosur's main problem is member economies' lack of integration.
Agência Senado – What can be done now, in order to resume Mercosur's original project?

Cardoso – First, we may not accept bore in Mercosur. Argentina is going through a withdrawal in integration. Argentina is a large country with a powerful economy, great culture and educated people. Why does it have to compete with Brazil in doing refrigerator and stoves? It is an industry from other times. Why doesn’t Argentina invest in more modern sectors, as softwares? Maybe it could do it along with Brazil. Mercosur lacks concrete economic policy much more than it lacks trade treaties.(Agência Senado)