Mercosur welcomes Venezuela, suspends Paraguay

MENDOZA, Argentina Fri Jun 29, 2012 6:27pm EDT

MENDOZA, Argentina (Reuters) - The Mercosur trade bloc - which includes regional heavyweights Brazil and Argentina - will make Venezuela a full member next month, uniting South America's biggest grains and energy exporters.

At a presidential summit on Friday, Mercosur leaders also decided to extend Paraguay's suspension over the ouster of President Fernando Lugo until democracy is restored via new elections, scheduled for April 2013.

No economic sanctions were adopted against Paraguay but its officials will be banned from participating in Mercosur meetings. The suspension opened the way for Venezuela to be incorporated into the bloc since opposition in Paraguay's Congress was the only remaining obstacle after a six-year wait.

"We're calling on the entire region to recognize the need to expand our union so we can confront this crisis ... caused by rich countries, but which will affect our economies regardless," Argentine President Cristina Fernandez said at the summit in Mendoza, a small city in western Argentina.

"(We need to) develop the incredible potential that South America has in terms of food and agriculture, minerals, energy, and science and technology," she added.

Venezuela has the world's biggest crude oil reserves and belongs to OPEC. Socialist firebrand Hugo Chavez has governed there since 1999 and he is running for re-election again this year, despite his battle with cancer.

The Andean nation will be fully incorporated into Mercosur on July 31 at a meeting in Rio de Janeiro.

"This is a historic day for ... integration," Chavez told Telesur television station by telephone. "This is win-win for everybody."

The Mercosur bloc - which groups Brazil, Argentina, Uruguay and Paraguay - is a major global food supplier.

But it is rife with internal divisions. Brazil and Argentina, which are often at odds over trade, have limited each other's imports despite Mercosur accords that promote free trade among member countries.

Argentine officials said earlier this month that they had reached a deal with Brazil to ease the entry of Argentine goods including lemons, king prawns and medicines.

However, Brazilian Industry Minister Fernando Pimentel told Reuters: "There's still no agreement that would motivate a change on the (non-automatic import) licenses."

The Mercosur leaders were expected to discuss China's proposal that the two sides evaluate a possible free-trade agreement. But no mention of this was made in the bloc's final declaration.

Trade analysts say Brazil and Argentina would probably be wary of a deal with China as both nations take protectionist measures aimed at shielding local industry from imported goods.

PARAGUAY PUNISHED

Paraguay's suspension from Mercosur meetings came after its Senate removed Lugo from office a week ago in an impeachment trial that lasted a matter of hours.

Neighboring governments wanted to send a stern warning about the consequences of removing a democratically elected leader, but they ruled out penalties that could hurt ordinary people in Paraguay - one of South America's poorest countries.

"We are not in any way applying economic sanctions because our aim is to improve our people's quality of life," Fernandez said. "(But we cannot) tolerate these 'gentle coups' or movements that - under a veneer of institutional correctness - shatter the constitutional order."

Paraguay is a landlocked, soy-exporting nation of 6 million people, sandwiched between Brazil, Argentina and Bolivia. It has a long history of political instability and military rule.

The country's new president, Federico Franco, was Lugo's vice president and one of his fiercest critics. Franco has defended the constitutionality of the impeachment trial, which Paraguay's top court upheld.

Lugo, a leftist former Roman Catholic bishop, admitted it would take a miracle to get him reinstated.

Just after the Mercosur gathering, the UNASUR group of South American nations met in Mendoza to discuss Lugo's swift removal, which was sparked by clashes over a land eviction that killed 17 police and peasant farmers.

UNASUR could also suspend Paraguay from its organization, saying Congress denied Lugo the right to a proper defense.

(Writing by Hilary Burke and Helen Popper; editing by Mohammad Zargham)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.