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Mercosur muddle over Paraguay deepening
by Staff Writers
Asuncion, Paraguay (UPI) Sep 18, 2012

disclaimer: image is for illustration purposes only

Mercosur divisions are growing as landlocked Paraguay accuses fellow founder members Argentina, Brazil and Uruguay of undermining its small resource-dependent economy.

The political and trade bloc suspended Paraguay when its Senate impeached former President Fernando Lugo and removed him from power, appointing his deputy Federico Franco as president.

Mercosur dubbed the change a constitutional coup and suspended Paraguay, also a founding member, from membership. Mercosur then rushed through ratification of full membership for Venezuela, which had been blocked because of objections from the Paraguayan Senate.

Paraguayan officials say Venezuela's speedy admission to Mercosur has added insult to the injury of Paraguay's suspension. It has also split political groups within Mercosur into those who say Paraguay is being unfairly treated and those who back its suspension.

Efforts to have Paraguay suspended from the Organization of American States failed when OAS argued it will give Franco time to have elections to elect a new government.

Latin American analysts cannot agree on the causes of the resulting muddle. Mercosur explained Paraguay's suspension as a noble ideological gesture and an appropriate punishment for what it saw as an undemocratic impeachment.

Increasingly, however, Paraguay's suspension and Venezuela's admission is emerging as a diplomatic and economic ploy designed to reap maximum profit from Venezuela's voracious consumer market.

Oil-rich Venezuela is struggling to shake off recession caused by drought, power shortages and a spate of nationalizations but is not short of cash as crude oil continues to fill the treasury's coffers.

Critics say Argentina, Brazil and Uruguay have been all too keen to secure their market share in Venezuela's import-oriented economy.

In the meantime, critics point out, Paraguay is facing economic ruin as it depends on transit routes that pass mostly through countries it no longer sees as friends, mainly Argentina and Brazil.

Paraguayan government officials said they were considering to lodge compensation claims against Argentina, Brazil and Uruguay.

The compensation Paraguay would seek will be both on economic and moral grounds, officials said.

"Paraguay has the right to demand moral reparation for the offenses infringed upon the dignity of the Republic, as a State and as a member of the international community, as well as claim compensation for the economic losses and damages suffered," the Foreign Ministry said in a statement.

Analysts said the Mercosur member states that acted against Paraguay, Argentina, Brazil and Uruguay, were powerful economies but their positions were unsustainable. Sooner or later they'll have to make peace with Asuncion, said the analysts.

As a landlocked nation Paraguay is dependent on the good will of neighbors but also is a considerable exporter of commodities its neighbors may not go without for long.

Franco in media comments accused the pro-suspension lobby of trying to turn the economic group into "an ideological club of friends." Paraguay plans to continue opposing Venezuela's confirmation as a full member and has accused the government of President Hugo Chavez of financing "terrorist groups" in Paraguay.

During Lugo's impeachment, Paraguay accused Venezuelan Foreign Minister Nicolas Maduro of trying to finance a coup that could reinstall Lugo, a Chavez ally.

Mercosur founding members are: Argentina, Brazil, Paraguay, Uruguay. Venezuela, associate member since 2008, became a full member in July 2012. Bolivia and Chile are associate members and Colombia, Ecuador and Peru want to join.

Paraguay's continued suspension has dismayed political groups and governments who see the split as potentially damaging. The row has also dashed hopes of early progress on free trade accords that Mercosur has been exploring with the European Union and other economic blocs, including Arab countries.


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