Thursday, December 14, 2006

What Venezuelans did vote for: trade isolation

I could not resist to post the latest Veneconomy editorial about the foreign policy of Chavez. Well, perhaps I should correct this. Until December 3 I liked to say that there was not a Venezuelan foreign policy, that what we had in fact was a Chavez foreign policy. But apparently the hoi poloi in its infinite wisdom (stupidity?) has ratified that the a foreign policy that only brings delays, waste and lost opportunities is a good one. So I must swallow crow that is not mine and speak from Venezuela foreign policy again.

Anyway, the posted text below needs no further comment.


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This week brought good tidings for those who are interested in and feel that international trade is important for Venezuela. The U.S. Congress approved an extension of the Generalized System of Preferences (GSP) for the Andean countries, including Venezuela, until 2008. This system benefits Venezuela’s non-oil exporting sector by granting a zero import tariff for more than 192 products entering the United States in sectors such as chemicals, petrochemicals, steel, foodstuffs, plastics, farming, textiles and footwear, among others.

Unfortunately, however, the good news ends there. As for the rest, no matter where you look, the news is bad.

The impact of withdrawal from the G-3 and the Andean Community (CAN) is already being felt in the country’s international negotiations in terms of lost markets and higher prices for imports from the region.

Withdrawal from the Group of Three (G-3) eliminated the zero tariff facility with Mexico. This is affecting Venezuelan imports and has raised prices for local consumers. For example, not only have the prices of major appliances and sound and video equipment gone up by at least 30%, there is now a shortage of these items.
In the case of the CAN withdrawal, at least Venezuela is negotiating to continue some of the agreements that have so greatly benefited all the members of the Andean group. Unfortunately, however, negotiations with the country’s former partners have not gone smoothly and no agreement has yet been reached, in part because of the unrealistic terms Venezuela is seeking to impose. The situation is such that many analysts believe that the Venezuelan government is not interested in keeping up existing commercial ties with the Andean nations, especially with Colombia.

Then again, it would seem that the government is not telling the whole truth when it says that the withdrawal from the G-3 and the CAN is more than offset by membership in the Southern Common Market (Mercosur). First of all, because it is not at all clear whether Venezuela is actually a full member of Mercosur, a trade bloc in which it held observer status, because up to now only two of the four member countries (Argentina and Uruguay) have ratified its membership. In the second place, because the industrial and agricultural profile of the Mercosur countries is such that there is little that Venezuela needs from that market. Thirdly, internally Mercosur is beset by serious conflicts among its members and is noted for the lack of compliance with agreements. The CAN, on the other hand, can count among its strong points the great cohesion among its members and full compliance with the rules of origin, plant health standards, customs classifications, taxation and other rules governing international trade.

There can be doubt that, insofar as Venezuela is concerned, withdrawal from the Andean Group and the uncertainty surrounding its membership in Mercosur, will have serious consequences for the country’s economic development in coming years and offers nothing but lost opportunities.



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