Skip to main content


Brazilian President Luiz InĂ¡cio Lula da Silva proposed the creation of a trilateral free trade agreement (FTA) between India, South Africa, and the nations of Mercosur at a reunion in Pretoria, South Africa on Wednesday Oct.17th.

The proposed treaty would create the world's largest free trade area and has been billed as a way to reduce these countries' dependence on developed nations. It would also create a strong political and economic block that would use its influence to push for greater UN reforms and more concessions from developed countries in international economic forums like the World Trade Organization (WTO).

The announcement came as a surprise in South America where several regional FTAs are currently dying of neglect. Mercosur itself has been unable to agree on common trade issues within its own borders or with its proverbial neighbor the Andean Community (CAN) next door. A total free trade area between CAN and Mercosur was supposed to have occurred by 2002, tops, but worries about sensitive national markets resulted in an 80 percent FTA with the remaining protections to be phased out by 2014.

With Brazil's support though, it may not matter whether the rest of Mercosur goes along with the proposed FTA or not. Brazil's population and economy dwarfs that of Argentina's, the second largest country in the block (Brazil's 2006 GDP was over US$1, 067 billion compared to Argentina's GDP of US$214.3 billion). If Mercosur is unable to agree on treaty conditions as a block, Brazil could decide to go it alone, making the participation of the rest of Mercosur an added bonus, but not a necessary condition for success.

Another option would be for Brazil and Chile to move forward on an agreement together, considering that Chile is currently negotiating a full FTA with India and could benefit from the added weight of Brazil in its negotiations.

South African President Thabo Mbeki is also expected to invite the nations of the South African Customs Union (SACU) Botswana, Lesotho, Swaziland, and Namibia to join the group as well. Whether or not Lula and Mbeki are able to convince their neighbors, the customs union will still have an enormous impact on global trade.

The treaty is not all about economics though. Brazilian President Lula and Indian Prime Minister Manmohan Singh both commented on the political potential of the group to spur deep UN reforms, including the addition of their nations as permanent members of the UN Security Council.

"Let us join our voices to support UN reform," said President Lula, "The issue has been debated long enough; the time has come to make decisions." Lula warned that without structural reforms the UN risks losing global credibility.

The leaders also discussed the potential for India, Brazil and South Africa (IBSA as the group is known) to become a voice for other developing nations of the "South" against the industrialized nations of the "north."

"These cooperation agreements have an impact on the populations of the world's poorest countries," said Lula, "this will not only benefit our countries, it will benefit all of humanity."
However, what the announcement means for the Union of South American Nations (Unasur) is unclear. It could be that Brazil is growing impatient with the slow progress of the new union. The issues discussed Wednesday in South Africa are the same as those discussed at the Brazilian sponsored South American Reunion of Presidents in 2000.

Brazil's focus on changing developed nation's agricultural subsidies and the international political status quo has driven its interests within South America over the last decade, however with little or no progress on the regional front, Brazil seems to be seeking out more serious partners abroad.

The announcement also complicates ongoing negotiations within the region by adding complexity to an already difficult issue. CAN member countries like Ecuador, Bolivia, and Peru are hesitant about FTAs with the larger Mercosur countries. Opening up the group to emerging global powers like India and South Africa could set the regional process back.

Whatever the case, the proposed treaty is yet another example of the changing global landscape. With just a little imagination one can picture a future world where current economic powers like the U.S. and the E.U. are forced to make tough concessions on national subsidies if they want to continue tapping the reserves of developing nations. Without a doubt, the great age of global decentralization has arrived.


Popular posts from this blog

Moving to the Suburbs: Reducciones in Recent Latin American Historiography

In 1503, the Spanish monarchy issued its first decree for the resettlement of indigenous groups in the Caribbean so that they would “live together” and “not remain or wander separated from each other in the backcountry.”[1]

As the European conquest spread to North, Central, and South America, these new settlements – known as reducciones and congregaciones in Spanish and descimentos in Portuguese – became sites of forced labor, evangelism, experimental agricultural, and refuge. Through a series of imperial policies decreed over the next decades and centuries of colonial rule, Spanish and Portuguese officials attempted to reshape the New World, including its human and natural landscapes. How colonial historians explain this process and indigenous peoples’ reactions to it is the focus of this essay.

In a review of the recent historiography of reducciones, several trends emerge that signal a shift in our understanding of the practice. As this paper will show, one common element is that …

77-Year-Old Wall Street Favorite to Face Fujimori in Peru Runoff

By Nathan Gill and John Quigley April 12, 2016 (Bloomberg) -- The victory by Pedro Pablo Kuczynski, a former finance minister, for second place in Sunday’s Peruvian president elections sets up a showdown between two business-friendly candidates, part of a regional backlash against left-wing politicians.
Kuczynski, a 77-year-old Oxford-trained political economist who’s spent more than 50 years championing debt control and free trade, won 21 percent of vote with 96 percent of the ballots counted, according to the electoral office. He will face Keiko Fujimori, who won 39.8 percent, in a second-round vote on June 5.
Click here to read the full story on Bloomberg News.

Bailout Risk Grows for Ecuador After Worst Earthquake in Decades

By Nathan Gill April 19, 2016 (Bloomberg) -- Before a 7.8-magnitude earthquake struck Ecuador on Saturday, the South American nation’s finances were already in tatters as the government struggled to meet payments to municipal authorities, oil companies and even cancer hospitals. Cut off from global bond markets, President Rafael Correa must now find enough money to rehouse thousands.
As volunteers continue to rescue victims from the rubble of collapsed homes and buildings on Ecuador’s Pacific coast, doubts are growing about the country’s ability to pay for the reconstruction. The nation is already in its worst recession since the financial system collapsed in the late 1990s, and international reserves are at their lowest levels in almost seven years.
Click hereto read the full story on Bloomberg News.