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Economics

South American Union

6 December 2004

South American Union

By Gwynne Dyer

It’s not even a free trade area yet, but when it grows up it wants to be just like the European Union. The whole history of the continent is against it, of course, but then Europe’s previous history didn’t leave much room for optimism either.

On Thursday, 9 December, the leaders of every South American country except the three Guyanas will gather in Ayacucho, Peru to sign the preamble to the Foundation Act of the South American Union (SAU). They chose Ayacucho because that was where South American patriots defeated the last Spanish royal troops and ensured the independence of the Spanish-speaking half of the continent exactly 180 years ago this month — but the single, united republic that Simon Bolivar dreamed of was swiftly defeated by the realities of geography.

The Portuguese-speaking half of the continent has always been a single country, because communications are relatively easy in Brazil, but the mountains and rivers that divide up the rest of the region ensured that there would be nine separate Spanish-speaking republics (with about the same total population) in the other half. It has truly been “180 years of solitude,” to adapt Gabriel Garcia Marquez’s famous phrase, with land travel between the various South American countries generally more difficult than in any other continent except Africa. Now they want to change all that.

The original concept of the SAU came from Brazil’s last president, Fernando Henrique Cardoso, who invited the other South American presidents to Brasilia in 2000 for a first-ever continental summit, but the idea has been vigorously backed by his successor, President Luis Inacio “Lula” da Silva, and by Venezuelan President Hugo Chavez. Both men, unsurprisingly, are on the left: South American solidarity has grown more attractive as the United States has moved right and many South American governments have moved left. But there is more to it than that.

South Americans were acutely conscious that as the rest of the world moved into trading blocs, their continent was being left behind once again. The European Union, the North American Free Trade Area (NAFTA) and the Association of South-East Asian Nations (ASEAN) were old news, but Washington’s proposal for a hemisphere-wide, US-led Free Trade Area of the Americas (FTAA) threatened to extinguish any prospect of a common South American future and goaded many local patriots into action.

Last month’s announcement that the ASEAN leaders and China, Japan and South Korea were contemplating a broader East Asia Free Trade Area raised the stakes considerably, for such a trading bloc, especially if it also included India, would embrace about half the human population and a good third of the world’s economy — the fastest-growing part, at that. If the FTAA were anywhere near ready, the lure of belonging to such a large trading bloc might trump the attraction of a mere South American Union, but it is not.

The Bush administration has been totally distracted by Iraq, and there have not even been substantive negotiations on the FTAA for two years. The Central American Free Trade Area (CAFTA), lowering tariff barriers between the US and six smallish Central American and Caribbean countries, was supposed to be a stepping stone towards the FTAA, but even that deal now faces probable defeat in the US Congress over a piddling question of sugar quotas. So the runway was clear for the SAU.

The South American Union is not meant to be just a free trade area, either, although that will be the first major step in the process. Its founders are talking about a parliament for the whole continent, and even about a common currency in the end. Their model is explicitly the European Union, which grew to its present scope of 450 million people in 25 countries speaking 18 languages by similar stages over five decades. They believe that South America, with 400 million people in ten countries speaking only two languages, can do it even faster. They may be right.

The ceremony at Ayacucho is a modest start: the ten presidents are signing a two-page preamble to a constitution whose contents will only be discussed in detail at a conference that is still six month away. However, this month should see the signature of a free trade deal between the two existing trading blocks in South America, Mercosur and the Community of Andean Nations, which together include all the SAU members except Chile. That is a real signal of intent.

It will obviously be years before anything resembling a true South American common market, let alone a unified political space, begins to emerge from the negotiations, and at least two countries, Chile and Uruguay, are openly sceptical about the prospects for success. In fact, if the United States could drag its attention away from the Middle East and re-focus on its ambitions for its own hemisphere right now, it would probably be able to seduce some potential SAU members away with special one-to-one free trade deals with the US and wreck the whole plan.

But there is little sign of that happening soon, and after a couple of years the momentum towards the South American Union will start to build up. After centuries off in the corner, South America may be joining the world at last.

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To shorten to 725 words, omit paragraphs 6 and 7. (“Last…SAU”)