One last tango in Cancun
How does Latin America fit into the new alignment of nations on world trade issues? Hisham El-Naggar wonders in Buenos Aires
Reactions to the resounding collapse of the World Trade Organisation (WTO) meetings in Cancun last week were as varied as the interests of the nations from which they emerged. More important than individual national reactions were the differences between blocks of countries that aligned on particular issues. For Latin America and the rest of the world, the prevalence of these camps in Cancun attest to just how problematic globalisation is.
Situating the WTO trade liberalisation talks in Cancun was perhaps a telling choice. The place, pleasant enough as Caribbean resorts go, is arguably a prime example of the escapist kitsch fostered by globalisation. If you want to get to know Mexico, don't visit Cancun.
Unlike Mexico City, a wondrous urban text whose monuments narrate the struggle of a nation born out of the destruction of a glorious civilisation by brutal Spanish conquerors and colonialists, Cancun is little more than an overdeveloped playground for present-day invaders. From the mouths of these loud, beer- drinking global "northerners", English is more often heard than Spanish. Hamburger joints abound. As a showcase for globalisation, you could hardly do better.
As it turned out, the locale -- sandy beaches and tequila galore -- did little to calm economic nerves, overwrought by the persistent recession in developed countries that has translated into stagnant growth worldwide. In such circumstances nobody was in the mood for compromise. It is thus unsurprising that hard-line positions prevailed.
What is surprising, however, is that a new alignment of developing nations, known as the group of 22 (G-22) hardly looks like it is here to stay. This block, composed primarily of middle-income countries with sizable economies, is likely to be an enduring aspect of international commercial relations.
Brazil and Argentina were among the more prominent Latin American countries in the group. China and India, whose enormous markets make international investors drool, were also in it, as was Egypt.
What makes the Latin American position intriguing is the ongoing regional process of integration, which has seen Mexico, Chile and most of Central America irreversibly committed to the North American Free Trade Area or other arrangements which bind their economies to that of the United States.
At the same time, another regional body, Mercosur, resembles another new common market. Grouping several South American countries, Mercosur is notable for the simple reason that it includes Brazil, the eighth largest economy in the world. A huge question in Latin American trade relations is whether Mercosur will slowly drift towards the North American magnet or steer clear of an integration process vigorously led by the US.
However, with the Brazilian economy in the doldrums and Argentina, the second largest member, struggling to return to normalcy after declaring the world's largest debt default, Mercosur has taken its knocks.
Despite past differences, recent overtures of reconciliation between these leading Mercosur states should have enabled them to represent a solid front within the G-22 at Cancun. However, Argentina's recent moves in the International Monetary Fund (IMF) arena made its loyalties at the WTO meetings rather murky. Argentina's negotiations with the IMF on a recent agreement were thorny, with many European countries insisting that the IMF not be denied its pound of flesh. As it turned out, the United States sided openly with Argentina and an agreement that is less anti-growth than previous proposals was signed. As a result, Argentine opinion views the move favourably and Argentine-American relations became noticeably more cordial.
Support by Brazilian President Luis Inacio Lula da Silva would have aided, morally if not practically, in the evolution of the agreement. Apparently miffed that Argentina was to be saddled with a budget surplus amounting to a mere three per cent of GDP, as compared to the 4.5 per cent Brazil had to swallow in its IMF agreement, Lula remained taciturn during the tense negotiations.
At Cancun, Brazil was an outspoken critic of the developed countries' position, which called on developing countries to open up their economies and would not budge on the scandalous subsidies which they maintain in order to keep their inefficient agricultural sectors afloat. Argentina, on the other hand, was diplomatically low-key.
But Brazil did not sink the Cancun talks alone. The whole of the G-22, which accounts for a whopping percentage of the world's economy, refused to swallow the hypocritical medicine of the developed world.
Lula was justifiably exultant that Brazil's leadership was highlighted in an international context. But even as Latin America's colossus, Brazil is far from able to dictate an agenda to the wealthy nations, particularly to the US.
At Cancun did Brazil gain brief international notoriety while neglecting its own regional flank? Is Argentina drifting away, making Brazil's plan to expand Mercosur rather shaky?
This is unlikely. Argentina will always have an interest in siding with Brazil if Brazil attacks the subsidies which stifle the growth of Argentina's highly competitive agricultural products. But Lula would do well to think of Argentina as a key ally and to publicise this neighbourly esteem. His upcoming visit to Argentina next month would be an opportunity for Argentine President Nestor Kirchner and to demonstrate their mutual amity before the world's cameras.
