Currently, the South American countries are all part of the Union of South American Nations — nominally. Aside from UNASUR not rolling off the tongue as easily as its archetype, the EU, it got its start from a very different place. The states of South America may actually be better off than the post-World War II Europe that created the EU; paradoxically, that means that strengthening UNASUR will be even harder.
UNASUR was built in 2008 in order to unite the two major trade blocs of South America. The first was Mercosur, a bloc that resembles the EU most closely. Created in 1991, Mercosur declared a lift on customs duties, external tariffs, similar trade policies, and right of free movement among the four countries in the bloc: Brazil, Argentina, Paraguay, and Uruguay. In 2012, Mercosur voted to include Venezuela in the bloc and suspend Paraguay over a coup d’etat, establishing a precedent in Latin American trading blocs of imposing economic consequences on states that violate democracy.
The second of the two blocs that UNASUR seeked to unite was the Pacific Alliance. According to the Council on Foreign Relations, the Pacific Alliance’s member states of Mexico, Chile, Colombia, and Peru have a combined GDP of around 2 trillion dollars, slightly less than Mercosur’s 3.4 trillion. In 2013, those states signed the declaration of Lima and removed 92% of their trade barriers, with the goal of 100% duty-free trade by 2020. They have also created a joint stock market known as MILA, and have created joint diplomatic initiatives, which mostly take the form of shared embassies in several African and Southeast Asian countries. The other major thing to know about the Pacific Alliance is that it has 55 observer states, including, of course, the US. The US, according to the World Bank in 2015, accounts for only about 10% of Mercosur’s trade but takes up 50% of the Pacific Alliance’s trade.
There are several other trade unions within the Latin American region, such as the Andes Community or the very clunky Bolivarian Alliance for the Peoples of Our America (ALBA for short), but for the most part, the two blocs outlined above were the most obvious choices to conduct a merger. Together, Mercosur and the Pacific Alliance account for 93% of the region’s GDP, according to the World Bank. However, the two blocs aren’t integrated well under UNASUR, with Mercosur holding onto their tariff system and the Pacific Alliance’s MILA stock exchange still only including Alliance countries.
Furthermore, despite hopes at the signing of the UNASUR Constitutive Treaty in 2008, the impact of the agreement doesn’t resemble the impact of the EU at all. Where the EU has made it so that most member states have other member states as their largest trading partner, the World Bank tracks that trade within the UNASUR countries has barely risen in the decade it has existed, even though their trade with the rest of the world has. If the goal of UNASUR is like the goal of the EU — to promote peace and prosperity in the region — they have a long way to go.
The key to the EU’s success was not just the widespread economic woes — South America has that in spades — but the uniformity of the issue. Each country in 1950’s Europe was experiencing the rebuilding process at the same time, and none of the countries were markedly stronger than the other. After World War II, even with the Marshall Plan providing funds, direction was needed to coordinate those funds. Six European countries founded the European Coal and Steel Community — creating a common market for two of the most important European industries — which then transitioned 5 years later into the European Economic Community in 1957. Countries were slowly added on throughout the latter half of the 20th century, and the Schengen Agreement was created, allowing free travel among nations. However, none of this would have happened if the original six countries that created ECSC didn’t have an incentive to be as fair as possible and also to trade with each other as much as possible.
The same is not true for South America, where the Wilson Center reports that Brazil accounts for 60% of the region’s GDP and 40% of their economic output. If Brazil doesn’t want a multi-national institution or a pan-South American currency, any efforts for UNASUR to establish something similar to the EU’s central bank (like they tried in 2008) will fizzle out (like it did in 2011). In fact, despite Mercosur being meant to direct trade and coordinate policies, Brazil has registered over one hundred separate exceptions to what is meant to be a common set of tariffs.
A better version of UNASUR, especially with a common currency, could be very good for Venezuela. Should they choose to ditch their own hyperinflated currency, which is currently officially estimated at around 53 million percent, they would enjoy a currency that isn’t backed by just one industry in one country, and would presumably be less susceptible to inflation related to heavy money-printing. The Venezuelan hyperinflation crisis was started in part due to tanking oil prices — an industry that OPEC says accounts for 99% of Venezuela’s exports — and exacerbated by mismanagement of the nationalized oil industry. The other factor was the Venezuelan government printing new money to pay off its debts, a practice near-universally condemned among economists. This is one instance where the bureaucracy of international governance and agreements would have kept financially irresponsible decisions from being made.
Of course, this whole plan for a new currency would hinge on a strong international trade bloc to manage it. A bloc that UNASUR, fragmented by its sub-blocs and defanged by Brazilian interests, couldn’t be. While ambitious plans like a “Bank of the South” have been proposed and built (though there have not been any deposits), and talks of a parliament for Latin America have occurred, nothing of substance has occurred — though theoretically, UNASUR should, with universal ratification, be able to make all of these things happen. This description of UNASUR makes it seem near useless, which is only true on the economic front. Diplomatically, UNASUR has made it so that there have been almost no wars between South American countries, famously resolving the Andes Dispute. However, even that track record is facing failure; UNASUR, founded in part at Maduro’s predecessor’s insistence, is now facing opposition by a new Prosur (Forum for the Progress and Development of South America) bloc created solely as the opposition. The bloc includes Argentina, Brazil, Colombia, Chile, Ecuador, Paraguay, and Peru — and of the 12 UNASUR members, all but Venezuela are invited to join. The US has not outright funded Prosur — but it has clearly picked a side when it comes to Venezuela, standing against Nicolas Maduro.
Members of Prosur, such as Colombian President Ivan Duque, see UNASUR as an “accomplice to the Venezuelan dictatorship,” and half of the South American countries have suspended membership to UNASUR in favor of joining Prosur. Most notably: Brazil. While the most important country in any Latin American trade bloc it is in, Brazil is also an uncertain choice when it comes to arbitrating a divide over democracy. In January, Brazilians elected Jair Bolsonaro, a man called “Trump of the Tropics,” who rolls back environmental regulations on pesticides and hunting, and supports burning the Amazon to make room for industry in an era of climate activism, and has been described by a writer for the Brazilian Report as “a facist-in-waiting.” He is, perhaps shockingly, also a backer of Venezuelan opposition leader Juan Guaidó.
Brazil is the least trade-dependent country on the continent according to World Bank data, and the second-largest economy in the Americas. It even briefly surpassed the UK in 2012. For the most part, Brazil is unquestionably the most powerful player — in Latin America. The problem is that Brazil’s main competitors in its largest industry, cattle, are all above Brazil’s economic weight class. The country had initially thrown its lot in with BRICS — Brazil, Russia, India, China, and South Africa, a group of emerging economies that cover 40% of the world’s population and 25% of its land — but while the BRICS New Development Bank seemed promising at first, it hasn’t increased the membership it needs to grow, and Brazil, in general, has not benefited from its chosen globalization strategy of leveraging its natural resources on a global stage. As the price of soybeans plummeted in 2014, Brazil’s economy went down with it. Bolsonaro’s policies regarding the burning of the Amazon for land are driven nearly entirely by concern for agribusiness, which accounts for almost 25% of the Brazilian GDP. Among industries like sugar and coffee, Brazil is also the world’s largest beef exporter, with the US and India at its heels, and cattle-ranching specifically is the cause of 80% of the deforestation in the Amazon.
This is important because Brazil is now facing international pressures to stop burning the Amazon, with Norway and Germany halting donations and France calling for emergency talks, but it can’t without hurting the growth of one of its largest industries — a large reason why they’ve rejected 20 million USD in aid from the G7 summit. Brazil also finally has an incentive to trade; the same incentive that drove trade since the dawn of time. Venezuela has something Brazil wants, and Brazil has quite a lot of things that Venezuela wants. Despite Brazil also being a net exporter of oil alongside Venezuela, it still has to import light crude oil from Saudi Arabia due to problems with Brazilian refineries. On the other hand, before Venezuelan oil production tanked, they produced quite a lot of light crude oil of their own, with facilities that Brazil may be interested in investing in, especially with the promise of free trade and lower transportation costs. On Venezuela’s end, any agribusiness would be welcome for their desolate shelves, and that newly opened market may be just the business boom that farmers — the same farmers currently burning Amazon acres in hopes of more land — have needed for years.
Brazil has the means to transform Prosur from a purely political entity into a very healthy trade bloc, in a way that would relieve international pressure and scrutiny on them, and also boost an economy for a discontented people. Furthermore, it would give them a more centralized institution in Latin America which they could leverage into a leadership position over the continent. This would give Brazil a lot more agency and authority in their home, with a stronger ability to set terms when it comes to issues like intercontinental migration or transportation infrastructure — another reason Bolsonaro is pushing for deforestation is so that he can build a highway through what is currently Amazon rainforest. A strong shared economy in Prosur would be key to developing the diplomatic and political norms, like a Latin American parliament or a shared NATO-esque defense, that would make Prosur closer to achieving the original UNASUR’s goals for peace and freedom across Latin America.
US intervention is a constant threat that hangs over Latin America’s head since the Cold War anti-communist interventions of the 50s, so an intervention originating on the continent will probably even be seen as welcome by most people involved and the international community. The combined military pressure of the other 11 countries in Prosur, united by Brazil, would be enough to depose Maduro more cleanly, whereas waiting it out with Venezuela isolated from Latin America could potentially be a long and messy process — especially since, like many Latin American countries, Venezuela does not rely much on trade within the continent.
Currently, the goal of Prosur should be to remove Maduro and put the favored Guiado in charge instead. Guiado, who is presumably not an idiot, would also probably end up opening Venezuela up to Prosur to gain access to goods that his country desperately needs and foreign investment in state refineries in order to fix them from their current state of disrepair. That’s where Brazil comes in — a share in Venezuelan light crude oil would take care of their dependence on Saudi Arabian oil, and also possibly allow them to expand further into Asian markets currently dominated by Arab oil. Furthermore, a stronger Prosur with better trade within the continent would bolster local economies and could contribute to Venezuela diversifying its economy, preventing future problems from occurring when oil prices plunge in the future. Latin America’s sensitivity to Middle Eastern upheaval could also be dulled by an oil trade within the continent as well. The collective bargaining power of Prosur could also help it stand up more to the US economy and free it from US intervention and dollar diplomacy, gaining more independence from the North American economy.
(Featured image: The Misery, by Venezuelan painter Cristóbal Rojas. Sourced from Trivium Art History)