Venezuela's complicated relations with South American partners

After Paraguay’s membership suspension from the South American MERCOSUR regional trade organization in late June, its trade relations with Venezuela have somewhat reached a stalling point. Venezuelan President Hugo Chavez’s policies of 21st century socialism are affecting the globalist trends of South American countries which additionally have been negatively affected by the anti –globalist leaders of Ecuador and Bolivia.

According to an exports report of REDIEX (a government agency of export – import and foreign trade data in Paraguay), exports of Paraguayan products to Venezuela had remained relatively stable consisting of USD  110 to USD 132 million per year, with the exception of an extraordinary flow of goods in 2008.

In 2011, major exports had consisted of frozen beef products covering 40 percent of overall available product.  Some other agricultural products exported are 31.9 percent of Paraguay’s soybean oil production and 8.7 percent of soybeans production and corn. In addition Paraguay exported also mechanized milking systems to be used for dairy production.

The highest level of Paraguayan exports to Venezuela was in May, 2012 at US$10.3 million. The lowest point of exports shipment was in July with only USD 141,000.00 being shipped to Venezuelan markets; on average Paraguay exports to Venezuela approximately US$120 million worth of products and commodities.

Exports fell sharply in the first eight months of this year, especially in July, consisting of US$36.1 compared to US$61.8 million earned between January and August 2012.  Unfortunately there will not be beef shipments since the use contract of refrigerator system has not been renewed.   

There was a relative recovery in August with exports of machinery for the dairy industry, and to a lesser extent to shipment of cotton and wood.  Whereas import levels are determined almost exclusively by the fuel ratio that has been intact despite a provisional order by the Venezuelan government deciding to suspend oil shipments of PDVSA to Paraguay.  Only in August 2012, Paraguay received directly from Venezuela US$15.7 million in fuel, in addition to oil with Venezuelan origin imported from third countries.

For Paraguayan based economist,  Julio Giménez: “ [Paraguay has] to make assessments regarding the potential markets that are developing in the world," in addition to Venezuela, Paraguayan President is considering to establish strong commercial ties with the countries of  Pacific Alliance trade block,  which has over 215 million consumers and a combined GDP of more than US$2 Trillion. Pacific Alliance took shape in June 6th, when the presidents of Chile, Colombia, Mexico and Peru signed the formal agreement.  This group is expected to finalize creation of first combined Latin American Stock exchange which is in motion but does not include Mexico.  As Paraguay continues to remain out of MERCOSUR, the country is open to join the pacific alliance as an observer with the intention to become a full member later in the process.  The Paraguayan president “will not discriminate any country in the world if that country will pay a good price for Paraguayan products.” Federico Franco is only interested to establish strong commercial ties with other countries interested to Paraguayan products. 

Spero columnist Peter M. Tase is political and trade analyst specializing in Latin America.

The views and opinions expressed herein are those of the author only, not of Spero News.

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