NEW (and OLD) BLOCS IN LATIN AMERICA Luis Angel Madrid April 2010.

NEW (and OLD) BLOCS IN LATIN AMERICA

Luis Angel MadridApril 2010

Working Plan

1. The travails of the Organization of American States (OAS & OEA)

2. The ALCA (FTAA) that never was3. MERCOSUR 4. Still alive: The Andean Community (CAN)5. America without the North Americans: UNASUR6. ALBA (and it mutations) 7. A new organizations

BUT, BEFORE MY (BIASED) ASSESSMENT

The good

• Vibrant democracies (with some few exceptions)

• Rapid recovery from the global crisis: 4% in 2010 after -2.3% contraction in 2009 (flexible foreign exchange regimes & countercyclical fiscal stimulus)

The bad

• Economic growth still dependent on commodity prices & exports (weak internal demand): few sources of revenue

• Widespread inequality: the higher income concentration in the world (5% of population gets 25% of income; 30% receives 7.5%)

• Concentration of output: Brazil & Mexico 2/3 of total!

The ugly

• The return of the strong-man rule: Venezuela, Nicaragua, Ecuador, Honduras (almost) & Argentina (an open question)

• Drug trafficking & widespread corruption• Crime in the rise: 36 murders/100.000

habitants (US: 12 & Canada 2.5)

The urgent business

1. Investing in high-quality education & innovation2. Stop borrowing? 3. Abandoning the export-led economic model?4. Fighting corruption?5. Finding new sources of revenue (widening their

tax base) or reducing overdependence on a single export commodity?

6. Strengthening the protection of property rights?

INNOVATION IN L.A2009-10 2008-09

Costa Rica 41 48

Chile 42 39

Brazil 68 50

Mexico 69 61

Argentina 75 60

Colombia 90 75

Venezuela 124 101

REGIONAL INTEGRATION (OUT THE WTO)

(ALMOST) DEAD?

WHAT EVER HAPPENED TO THE OAS?(1948- ….)

Steady decline:

–Fiasco in the Honduras crisis (2009)–Helpless before a divided continent–Tried to recast itself as the backbone

of the Free Trade Area of the Americas (FTAA or ALCA)

THE FAILED EXPERIMENT: THE ALCA (FTAA)

• Launched by Messrs Bush,Sr & Clinton to unite the entire continent (34 countries) in a free trade area by January 2005

• Collapsed in 2003 & buried in 2005• Why? Brazilian & Venezuela the main

suspects ….

MERCOSUR: DAMNED BY GREAT POWER POLITICS

• Divided by crisis and quarrels (Argentina vs. Uruguay; Argentina vs Brazil; Paraguay against everybody)

• Brazil the uncaring giant on its new role as BRIC country even courting Iran.

• Membership application of Venezuela: stranded in the no-man land

• UNASUR as the future?

CAN: THE ANDEAN COMMUNITY

• Exhausted model: incapable of reaching the custom union level

• Eroded by politics & political factions (Evo Morales of Bolivia & Correa of Ecuador)

• Replaced by bilateralism?• Waiting to be digested by UNASUR?

THE ALBA: CHAVEZ AND FRIENDSBOLIVARIAN ALLIANCE FOR THE PEOPLES OF OUR AMERICA

MEMBERS

Venezuela, Cuba, Bolivia, Nicaragua, Dominica, Honduras (?), Ecuador, San Vincent & the Grenadines, Antigua & Barbuda.

CREATION

• December 2004 by Venezuela and Cuba as an alternative against ALCA (FTAA)

GOALS

To obtain “The Second Independence” (from US!)

INSTRUMENTS & ACHIEVEMENTS

• People´s Trade Agreements …..• None except by the ALBA Bank & Petrocaribe

(selling Venezuelan oil under credit: 40%; 60% 25 years)

THE DREAM OF PRESIDENT LULA: UNASUR

HISTORY

• Born in 2004 as the Community of South American Nations (under the European model)

• In 2008 morphed in the South American Nations Union (UNASUR)

What for?

• Grandiose plans: oil pipelines; highways, etc• Achievements: a stage to vent grievances over

the US-Colombian Military Agreement (2009) but defused the Bolivian crisis

• The real objective: to foster Brazilian regional hegemony excluding Mexico?

AND FINALLY ….

• The Community of Latin American & Caribbean States

• Born in Mexico (February 2010)• Founded by 32 states

My conclusions (or questions)

• Is it possible to integrate in the region without (or against) the US?

• Will all these new organizations lead anywhere? To an Europe-style integration?

• Does regionalism foster economic development?

• In the deep bottom: can you trade without the old model (capitalism, private sector, private investment, private banks)?

MANY THANKS