MercoPress. South Atlantic News Agency

Paraguay becomes observer of the Alliance of the Pacific, despite Brazil and Mercosur

President Santos made the announcement

The Alliance of the Pacific announced this week that Paraguay had been accepted as an observer of the regional group. Colombian president Juan Manuel Santos chair and host of the alliance summit in Cali made it official during the reading of the final declaration.

The decision was celebrated by Paraguayan authorities since apparently there was very strong lobbying from Brazilian diplomacy to prevent such an advance alleging “Paraguay remains suspended from Mercosur and Unasur since June a year ago when Fernando Lugo was removed from office”.

The condition of observer is a previous step to becoming full member since any aspirant must have free trade agreements with the four founding members of the Alliance, Chile, Colombia, Peru and Mexico that favour open markets, foreign investment and lesser government interference in the economy.

The Paraguayan media said opening to the Pacific has been the main decision of the country’s foreign policy in the last half century, “taking distance from a stalled Mercosur and looking to the dynamism of Asia and the Pacific”.

The Paraguayan Foreign ministry in a brief release said that the opportunities of such an initiative are ‘enormous’ and reflect “an adequate perception of reality towards renewed cooperation and collaboration dimensions among the peoples of the continent”

“The government and the people of Paraguay celebrating the success achieved express their grateful acknowledgement to the governments of Mexico, Colombia, Chile and Peru for the confidence and support received for the fulfilment of such an incorporation”, says the release.

“The incorporation constitutes a projection towards more intense links with a region such as the Pacific Asia, which is the symbol of the global dynamic process of the last few years and which together with Europe constitute Paraguay’s main trade and cooperation partners”, added the release from Asuncion.

Likewise Uruguay another full member of Mercosur and which is already an observer of the Alliance of the Pacific and was represented at the Cali summit by Vice-president Danilo Astori, anticipated that it would begin the process to become a full member.

Astori said that one of the conditions is to have free trade agreements with the four founding members, “and Uruguay complies with that condition, plus the fact it opens an incredible window to the Pacific and to Asia”.

Uruguay and Paraguay, both full members of Mercosur have become increasingly disenchanted with the workings of the group, founded in 1991, which they claim has turned into a “two member club”.

Likewise the two large countries with different degrees have been implementing protectionist measures or limiting access to their markets with a negative impact on the smaller economies of Uruguay and Paraguay.

Paraguay although landlocked by Brazil and Argentina feels even more frustrated since they have been suspended following the removal of Lugo, despite an almost unanimous political impeachment by the Senate, as indicated by the Paraguayan constitution for these cases.

Furthermore taking advantage of Paraguay’s suspension the other members immediately accepted the incorporation of Venezuela as full member, which until then was being kept on hold by the Paraguayan Senate, distrustful of the deceased Hugo Chavez.

Besides Paraguay has the long pending demand against Brazil and Argentina referred to the Itaipú and Yaciretá hydroelectric dams supposedly shared but that when it comes to MW and dollars, most of the benefits are for the big neighbours.

The two smaller Mercosur partners also complain that the block has become increasingly political and much less trade oriented. Uruguay has long been trying to open other options but has been limited because agreeing with third parties, requests the unanimous approval from the other full members of the block.