Mercosur: Diversifying Partnerships

By Andrés Serbin*

Mercosur Summit

A seminar at the 53rd Mercosur Summit. / Sabrina Pizzinato / UCIM / Creative Commons

Mercosur’s signing of a memorandum to increase economic and commercial cooperation with the Eurasian Economic Commission (EAEU) signals the trading bloc’s interest in diversifying its trade and political relationships beyond the western hemisphere.  The presidents of the Mercosur countries – Brazil, Argentina, Uruguay, and Paraguay –signed the agreement at the 53rd Mercosur Summit, held last month in Montevideo.  At a ceremony at which he accepted the rotating presidency from Uruguay, Argentine President Mauricio Macri emphasized the need for Mercosur to open not just to the Pacific Alliance, but also to Central America, Asia, and Africa.

  • Proposals for closer cooperation with the EAEU have been under study for many years, since Russia first created the Commonwealth of Independent States (CIS) from among the former Soviet republics (except the Baltic countries) after the end of the Soviet Union in 1991. The CIS was intended as a post-Soviet space under Russia’s leadership that would reconnect its members within a “Eurasian” geopolitical region distinct from both Europe and Asia.  The EAEU, formalized in 2015 under the leadership of Russia and Kazakhstan, now also includes Belarus, Kyrgyzstan, and Armenia.  Mercosur ministers agreed to sign the memorandum during meetings immediately before the summit, stating that enhanced cooperation and coordination with the EAEU – with which Mercosur would account for a combined 6.5 percent of world GDP – was consistent with efforts to strike a similar arrangement with the European Union.
  • Mercosur’s decision comes amid international tensions over trade and protectionism, but it cannot be divorced from the ideological, cultural, and geopolitical elements of the vision for “Great Eurasia” of which Russian President Vladimir Putin has spoken (and which Chinese President Xi Jinping has shared). The tensions between Russia and Ukraine, and Western pressures in retaliation, were a key driver of Moscow’s push for formalization of the EAEU as a potential interlocutor with the European Union while at the same time putting a brake on U.S. presence in the region.  Western analysts have debated the power of “neo-Eurasian” identity as a tool of geopolitical projection beyond the creation of a new economic bloc.  China is also a factor in Russia’s calculations.  The “Shanghai Cooperation Organization” (OCS) fostered by both countries and Beijing’s “New Silk Road” project, through Central Asia and to the EU, have also increased the salience of “Great Eurasia.”  Russia and China have increased cooperation in trade, in technology (including military) and against terrorism and extremism.  Through the EAEU and OCS mechanisms, they have extended contacts all the way to India and Pakistan and, potentially in the future, Iran and other countries.

Mercosur’s trade with the EAEU is asymmetrical in favor of the Latin American countries, with the exception of Brazil (with which it is more balanced), according to EAEU officials.  The EAEU has high internal tariffs and limited internal trade – except in bilateral trade between Russia and Belarus – but there are already tariff exemptions for Mercosur members.  Food appears to be the biggest Mercosur export to the region.  Experts believe that trade between the two blocs can be significantly increased, and that a free trade agreement can be signed before the completion of the EU-Mercosur FTA, which has been under negotiation for 20 years.

Although many Western analysts remain doubtful about the success of efforts to form a “Great Eurasia,” Mercosur apparently has determined that engagement with it is low-cost and potentially beneficial.  Beyond the possibility of expanded trade, the memorandum of cooperation signed in Montevideo suggests Mercosur sees a geostrategic interest in signaling openness to such collaboration.  The right-leaning governments of Latin America and the Caribbean are likely to remain generally aligned with the United States, but they have learned the importance of trade diversification over the past two decades.  Setting tradition and ideology aside, most are trying to interact with whomever can bring good deals to their countries in terms of trade, investment, and cooperation.  In the context of Russia and China’s interest in a “Great Eurasia,” Mercosur’s increased outreach to EAEU also reflects an important piece in a strategy to undertake the necessary diversification of its foreign policy in a changing world.

  •  The United States may not appreciate the wisdom of Mercosur’s approach. Eurasia is a blind spot for Washington, which focuses on Russia’s actions in Europe and China’s in Asia – but not in Central Asia itself or as a bridge to India, Pakistan, Iran, Turkey, and the Arab world.

January 7, 2019

* Andrés Serbin is an international analyst and president of the Regional Coordinator of Economic and Social Research (CRIES), a network of more than 70 research centers, think tanks, NGOs, and other organizations focused on Latin America and the Caribbean.  This article is adapted from one published by Perfil.com.

Guatemala: Is CICIG Dead?

By Ricardo Barrientos*

Iván Velásquez and Jimmy Morales

CICIG Commissioner Iván Velásquez (left) and Guatemalan President Jimmy Morales (right). / República / Creative Commons

Guatemalan President Jimmy Morales and his political allies – the group of government officials, congressmen, judges, mayors, and entrepreneurs whom opponents call the Pacto de Corruptos that support his efforts to shut down corruption investigations by the Comisión Internacional Contra la Impunidad en Guatemala (CICIG) – may be winning the current battle, but the war is not yet over.  Undoubtedly, the government has achieved some hits, trumpeted by Morales in speeches and in the victory celebrations of the newly elected Congress Directive Board that supports him.  CICIG’s opponents have:

  • Prevented CICIG Commissioner, Iván Velásquez, from entering the country, even after the Constitutional Court and Attorney General, Consuelo Porras, explicitly stated that he is free to enter whenever he wants.
  • Lobbied in Washington to gain U.S. support for Morales, exploiting access and friendships with U.S. Vice President Pence and other officials close to President Trump such as UN Ambassador Nikki Haley and U.S. Senator Marco Rubio. They have used the “Bidkov affair” – involving a prosecution instigated by CICIG and the Attorney General’s investigation into the purchase of false Guatemalan identity documents by a Russian family opposed to President Putin – to feed opposition to CICIG.  (Rubio accused CICIG of doing the Russian president’s dirty work.)  Morales and his backers have also used the decision to move the Guatemalan embassy from Tel Aviv to Jerusalem and other unrelated actions to punch important buttons within the Trump administration.
  • Achieved some progress in swaying Guatemalan public opinion through an anti-CICIG social media campaign aimed at stimulating nationalistic feelings and fueling the view that CICIG Commissioner Velásquez, a foreigner, went too far. They have even raised old Cold War flags, saying that Velásquez is a Communist and that the fight against corruption is a question of “red ideology.”
  • Consolidated their control over the Guatemalan Congress, securing enough votes to reject initiatives that would remove Morales’s immunity and allow investigations against him to proceed.
  • Further strengthened opposition to CICIG among factions of the private sector.

A more careful analysis, however, reveals cracks in Morales’s victory chariot.  He and some of his ministers are not only in grave danger of being charged with disobeying the Constitutional Court ruling; the Attorney General and CICIG have continued their work, albeit with a much lower media profile, and are producing results.  U.S. support for Morales’s efforts to destroy CICIG may diminish after Democrats take over the U.S. House of Representatives and begin scrutinizing his “impressive” claims about deporting ISIS terrorists from Guatemala and seizing drug shipments.  The U.S. Congress may now uncover an ugly truth: drug trafficking and migrant flows are increasing.

  • More importantly, Morales and his Pacto do not yet appear ready for elections scheduled for June-August 2019. (The new government will take office in January 2020.)  They are floating proposals for a constitutional amendment to allow for a presidential reelection, which would ensure them continued immunity, and to dissolve the Constitutional Court, or to make it a crime to criticize members of Congress.  Measures like these take a lot of time and energy.

The ferocity of Morales’s attacks against CICIG may not be fueled by confidence of victory but rather by a deep and desperate fear of justice after January 2020 – a basic survival instinct of people who know they have crossed a line.  The final outcome of all this will be, as it should, in the hand of voters.  The real issue for Guatemala might not be the fight between Jimmy Morales and CICIG, but rather between the Pacto and the huge number of voters beyond their grasp who are sick and tired of the corruption and impunity.  U.S. policy toward Guatemala has shifted from supporting CICIG and its efforts to investigate corruption and build Guatemalan institutions committed to the rule of law, to turning a blind eye in thanks for an apparently compliant ally and for completely unrelated reasons, such as the location of the embassy in Israel.  While Washington applauds the government’s (still unfulfilled) promises to stanch the northbound flow of migrants, it allows one of the biggest causes of migration – corruption and impunity at all levels of society – to continue unabated.

November 21, 2018

*Ricardo Barrientos is a senior economist at the Central American Institute for Fiscal Studies (ICEFI).

The Politics of the Brazilian World Cup

By Luciano Melo

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The 2014 World Cup, scheduled to begin in just 66 days, at this point poses greater risks for President Dilma and her administration than it does benefits.  When the Brazilian government presented its preliminary budget for the event in 2007 – around US$14 billion, or an estimated billion dollars for each 70,000-seat stadium – President Lula was perhaps the most popular president Brazil had ever had.  Despite the mensalão vote-buying scandal several years earlier, Lula was a “man of the people” with a strong personal magnetism.  Brazilians were seeing themselves as an emerging power with a dynamic economy.  Dilma, Lula’s chief of staff, was anointed his successor; she easily won the 2010 election; the Workers Party’s continuity in office seemed assured for the foreseeable future; and the World Cup would be a crowning jewel.

The scenario today looks far grimmer for Dilma.  Her support in the polls dropped from 43 to 36 percent just last month, underscoring her lack of charisma, and the largest Brazilian companies – Petrobras and Eletrobras – have lost half of their market value under her administration.  Cost overruns on World Cup projects have tripled and now exceed the annual budgets for both health and education ($35.6 and $28.8 billion, respectively).  Massive protests last year raised doubts about Dilma’s governance.  The armed forces are being deployed to maintain order in urban slums.  Brazil is now ranked 72nd in the Corruption Perception Index 2013 (a decline from 2012), and press reports indicate that nobody believes that World Cup construction companies have been chosen through a transparent process.  Economic analysts deem budget cuts and taxes increases inevitable – and austerity is in the cards no matter who wins the October 2014 elections.

World Cups and Olympic games are important for governments seeking to boost their image before international and domestic audiences.  If the Olympics in London 2012 aimed to sell England as a beacon of innovation, and the winter games in Sochi marketed Putin’s Russia as a powerful and modern state, the World Cup was Brazil’s opportunity to project itself internationally as a global player with a vibrant economy.  It was to show that high levels of violence and corruption are part of the old days.  Mismanagement and other problems so far suggest those objectives are beyond reach.  Domestically, if Brazil fails to win the cup, we will again see thousands (if not millions) of people protesting in the streets, and Dilma’s prospects of securing a second term will be complicated.  Should Brazil win, however, a soccer-induced surge of national pride may assist her re-election despite public concerns about the cost of the tournament and other economic woes.  But the reprieve probably would be short-lived.  The military move into the favelas is an ad-hoc measure, since organized crime has spread to surrounding urban areas and is likely to reemerge as strong as ever once the events are over.  The middle class and the private sector will continue to pressure the government to fix woefully inadequate public services and improve the business climate – even more challenging with austerity budgets.  The national soccer team could help Dilma win a second term, but the celebration is destined to have a short life. 

Brazilian and Mexican Press Criticize Russia but Remain Focused on the Home Front

By CLALS Staff

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Latin America’s low-key reaction to events in Ukraine and Crimea suggests that opinion makers are distracted by domestic issues and perceive such far-off developments as having little bearing on the region.  The Brazilian press has noted the “pathetic and weak” leadership of the United States and Europe and said Russia was creating a “Soviet Union light” with nationalist rather than communist undertones.  Commentators have criticized Russia’s propagandistic narrative, in which criticism of Russian expansionism and interventionism is countered with examples of the American and European bloody history.  They have said Putin’s motives are a clear and explicit demonstration of power, where Crimea is a non-negotiable territory.  They have variously called Obama’s diplomatic responses “flaccid” and his speech about Putin’s motives an “unintelligible declaration.”    Prior to Putin’s military moves, President Dilma Rousseff asserted that the protests in Venezuela are different from those in Kiev, where an “institutional rupture” is taking place, and she has been relatively quiet since.  There have been minor considerations on how a European crisis affects the Brazilian economy, since Europe absorbed 20 percent of Brazil’s exports last year.

The Mexican press has loudly criticized Putin’s actions.   Commentators have described Russia as a “monstrous creature who combines state capitalism and a corrupt oligarchy.”  They have accused Putin of threatening world peace over strategic interests.  They note that Putin holds considerable leverage over Europe (via its supply of vital energy resources) and the United States (in negotiating over Syria and Iran), and they say that he appears likely to get his way in the Crimea.  Some have denounced Putin for attempting to turn the clock back to Russia’s imperialist days, and describe this tendency alongside the United States’ inability to shape events as signs that both are declining world powers.

Both Brazil and Mexico have a full plate of domestic issues monopolizing political attention.  In Brazil, the middle class and elites remain upset about corruption surrounding the ruling PT, and many Brazilians continue to seethe over the scale of public expenditures that have constructed soccer stadiums rather than solid institutions for providing education and health.   The cost of preparations for the World Cup, set to start in three months, as well as the fortunes of the Brazilian team in that crucial tournament, have great implications for the fate of the Dilma administration.  Insofar as international issues reach the national agenda, Dilma appears most concerned with domestic political developments in Venezuela, where UNASUR has offered to play a mediating role.  In Mexico, President Peña Nieto and the media appear seized with security issues – ranging from the spectacular arrests of drug traffickers to the troubling emergence of “self-defense” groups – and the president’s ambitious economic reform agenda.  The Cold War-style East-West maneuvering over Ukraine hasn’t registered deeply in either country or elsewhere in Latin America.