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If Venezuela joins the Mercosur economic bloc, will it follow the rules?

Venezuela could find its often renegade diplomacy reined in if and when it joins Mercosur. But the likely big winner would be Brazil.

By James BosworthGuest blogger / December 22, 2011

Venezuela's President Hugo Chavez (L) and Brazil's President Dilma Rousseff chat during the Mercosur trade block summit in Montevideo, December 20. Uruguay is hosting a two-day Mercosur trade summit involving Argentina, Brazil, Paraguay, Uruguay, Ecuador and Venezuela.

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Venezuelan President Hugo Chavez needs to wait a bit longer for his country's entry into Mercosur, the Common Market of the South founded in 1991 by Argentina, Brazil, Paraguay, and Uruguay. Though the group feels they found a procedural move to get around the opposition of Paraguay's legislature, the move will take additional time.

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Much of the debate on Venezuela's potential entry to Mercosur has focused on shallow political questions about whether or not President Chavez should be admitted. Paraguay's opposition has used its legislative control to block approval of Venezuela's entry on the grounds that Chavez's Venezuela does not meet Mercosur's standards on democracy. Meanwhile, Chavez and his supporters have treated Venezuela's entry into Mercosur as an obvious step for South American integration.

For those who've forgotten, Mercosur actually has rules with an economic impact. It's not one of those nominal integration organizations in which a group of presidents hang out and talk once or twice per year and then is forgotten. Mercosur rules, though sometimes poorly enforced, have an impact on its members' trade agreements, customs, tariffs, monetary policies, and contractual law.

Let's go over some of the potential impacts that will occur if/when Venezuela joins Mercosur, some of which are just as important even if Chavez is no longer president a year from now.

Free trade within Mercosur. Venezuela must allow the free transit of goods and services with Mercosur countries. It's the basic foundation of the organization.

Free trade with Colombia. Mercosur signed and implemented a free trade agreement with Colombia a few years ago. The sudden implementation of a new free trade framework between Venezuela and Colombia via Mercosur could have a major impact on both economies. Specific to the current Chavez government, how would Mercosur's regulations affect Venezuela the next time Chavez decides to shut down trade at the border over some random dispute, as he did when President Alvaro Uribe was in office?

Free trade agreement with Israel. Mercosur has a signed and fully implemented free trade agreement with Israel. Separately, they signed a deal with Palestine during this week's meeting. Venezuela's ascendance means they must abide by the Israel free trade rules. How will Chavez's friends in Iran and Syria who cheered his breaking of diplomatic ties with Israel a few years ago take his sudden agreement to a free trade deal with the country?

Restrictions on unilateral trade agreements. With some leniency, all Mercosur members must negotiate trade agreements jointly. A few years ago, Mercosur prevented Uruguay from negotiating a free trade agreement with the United States. Could Chavez negotiate new trade deals with his ALBA partners without consulting Mercosur? Also, Venezuela would gain significant veto power over any potential new trade deals that Mercosur attempts to negotiate, which could significantly tie Brazil's hands.

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