Venezuela: Four years to adopt Mercosur rules

In a double political move, Mercosur, at its presidential summit on June 29, agreed to suspend Paraguay from the group until elections are held in that country and to admit Venezuela as a full member to the regional bloc

Venezuela had been waiting for that decision since July 2004, when the country was accepted as member of Mercosur by the governments of its member countries. However, Venezuela's accession as a full member depended on the approval by the national Congresses of the signatory countries. Brazil, Argentina and Uruguay agreed to Venezuela's accession, but Paraguay's Congress opposed on several occasions.

Upon signing of the Accession Protocol to Mercosur, on July 31st, Venezuela will have a period of four years to adopt "in a gradual manner the rules and the Common Foreign Customs (ACE)," of the regional bloc, related sources informed.

This accession means that "Venezuela will enjoy all rights and assume all duties" of Mercosur and "will adhere to all Treaties" inherent in that formally constituted market, "such as the Treaty of Asunción, the Protocol of Ouro Preto, Los Olivos, and others)," some analysts experts in international trade pointed out.

President Hugo Chávez, after welcoming the decision made by presidents of Mercosur member countries, announced at Ministerial Council the creation of a presidential commission to deal with aspects related to the accession of Venezuela to the common market. Chávez said that the commission could be comprised of ministers and representatives of the national economy, including from the private sector," which produce and work."

President Chávez explained that "the commission will be a workgroup that will be responsible for assessing the strategic aspects of the national economy and the markets that will be open for Venezuela in the large South American region, under the principles of respect for asymmetries and technological gaps and complementariness of productive chains."

Experts interviewed stated that the diminished local productive apparatus and the contracted non-oil exports render the country less competitive and place it in a disadvantageous position vis-à-vis countries with a higher economic and commercial weight like Brazil and Argentina.

Rodrigo Cabezas, president of Parlatino, pointed out that Venezuela's accession "poses a challenge for the economy because it should strengthen its industrialization strategy for exports, by setting up a scientific-technological platform that will make it possible for the country to become specialized in this area and in accordance with comparative and competitive advantages present in areas such as petrochemistry, oil, steel and iron and aluminum."

In the Horizon

By the same token, analysts pointed out that Venezuela will more rapidly relief from tariff burdens its trade with Uruguay and Paraguay, considering the smaller size of those economies; however, in qualitative terms, the main export products from those countries are agricultural, and if their strengths vis-à-vis Venezuela in this sector are considered, Venezuelan products would be affected.

Concerning Brazil and Argentina, analysts believe that Venezuela presents some important weaknesses concerning the clothing, footwear, metalmechanic, agroindustrial, petrochemical and metallurgical sectors.

Mercosur tariff structure is different from that currently applied by Venezuela relative to third parties, analysts added: while Venezuela uses four tariff levels (5, 10, 15 and 20), in addition to the 35% levels for the automotive sector, Mercosur tariff structure has 11 levels, including agriculture, for instance. This would force Venezuela to place some of its locally produced agricultural products at lower tariff levels than those currently applied, which would result in a significant vulnerability in terms of tariffs.

Analysts argue that, given the size of Mercosur market and the little developed infrastructure that links Venezuela with the countries of the bloc, transportation costs may play an important role in terms of difficulties for our products to penetrate that market.

To date, Venezuela's balance reports a deficit with respect to each one of the countries parties to Mercosur.

Translated by Álix Hernández