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CARACAS, Saturday January 19, 2013 | Update
 
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ECONOMY

For Mercosur, democracy outweighs economic prowess

Experts believe that Venezuela's uncertainty affects the nation's business climate

Concern that enterprises within the regional trade bloc could be turned off by investment risks in Venezuela, resulting from the two current legal stances, grows (Photo: AFP)
MARIELA LEÓN |  EL UNIVERSAL
Saturday January 19, 2013  12:00 AM
In becoming a full member of the Common Market of the South (Mercosur), Venezuela adopted standards and agreements applicable to the regional bloc, including Ushuaia Protocols I and II, which establish that democracy is "an essential condition for furthering integration processes."

Those protocols, signed by members as well as by any other country joining the bloc, set forth that in the event of a "rupture in the democratic order" of any of the nations adhering to those documents, "all other Parties shall conduct the corresponding consultations amongst them and with the affected state." Also, "the nature and scope of the measures to be applied, taking into account the seriousness of the existing condition," will be assessed.

Should there be a breach in the democratic order, according to the above, the ensuing actions could entail "from suspension of the right to take part in the different organs of the integration processes to suspension of the rights and obligations inherent thereto."

In the case of Paraguay, when than nation's Congress impeached then-president Fernando Lugo in June 2012, Mercosur countries unanimously approved to suspend that nation from the bloc's meetings, but not from the benefits derived from being a member of that regional bloc.

Experts on integration believe that Venezuela's current situation may be viewed from two different legal spectra as to how government will be run, provided that President Hugo Chavez failed to be formally sworn in on January 10, as required under the National Constitution. One of those stances was upheld by the Supreme Tribunal of Justice, the country's top court, indicating that "it would have support from presidents from Mercosur countries with interests similar to those" of the Venezuelan leader; therefore, "it seems highly unlikely" for a consultation process to be launched with respect to the "continuity" of authorities.

Nevertheless, "enterprises behind these regional trade blocs could focus on the risks inherent to doing business with a country facing such legal uncertainty" and seek application of the protocols.

According to Eduardo Porcarelli, professor of Law of Economics and Integration at the Central University of Venezuela, "the topics of Democracy and Human Rights are increasingly intertwining with economic and trade issues under integration and trade agreements. The most pressing issue is that interpretations on the concept and development of democracy are quite diverse."

The expert pointed out that "regardless of the position adopted by either group on the latest events in Venezuela, the business climate is definitely affected in light of contrasting criteria. Entrepreneurs favoring long-term productive investments are not very likely to undertake risks and are prone to tread lightly, prior to venturing into a specific country.

Shifting laws

"Recently," he pointed out, "Venezuela adopted Mercosur Ruling 66/12, thus setting a timetable for embedding the bloc's standards within Venezuelan law. Therein lies the first legal issue."

He noted that "even though the country is under the obligation to add these laws completely within four years, it is important to preserve internal procedures. Schedule I to that ruling specifies that Venezuela has already adopted 135 decisions, 67 resolutions and nine guidelines, many referring to the institutionalism of Mercosur. Schedule II to be adopted prior to March 31, 2013, however, establishes that Venezuela is under the obligation of adopting 82 decisions, 244 resolutions and 75 guidelines, encompassing standards on securities markets, competition, trade defense, customs, patents, consumer defense and others that should have been consulted in Venezuela with the appropriate sectors, but this has yet to be done."

Translated by Félix Rojas Alva
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