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  LUISS Conference | Rome, December 12-14, 2013
Assessing Democracies and Development in Latin America.


Preliminary version of the presentation at the panel "Democracy and Regional Integration"

LUISS Conference
Rome, December 12-14, 2013

Introductory remarks

Some lessons could be drawn from the integration experiences of regional spaces. This presentation will consider some of those which can be observed in the very different integration processes of the European Union (EU) and of Mercosur in Latin America.

A first lesson is that a profound integration process among democratic nations requires, to be sustainable in the long term, a strong identification of the people of each country with its construction. Citizens of a democratic nation will support the idea of working together with their neighbors of the other participating nations if they perceive clear benefits of the association in terms of peace, democracy, employment, economic and social development and, especially, identity and the idea of having a future in the global scenario.

A second lesson is that an integration process requires a continuing adaptation to changes in national, regional and global realities. Especially in our times of very dynamic and deep international transformations, both at the power and economic level, an integration process should be able to help answering the demands resulting from new realities in terms of challenges and opportunities for each nation and its people. Today everything risks becoming obsolete very quickly. And this could also be the case in an integration process among democratic nations, if the political leadership is not able demonstrate their capacity to develop a strategy for its adaptation, both in terms of its sense and of its methodologies, and to preserve the support of their citizens.

Participation of the people and adaptation to new realities will be two main aspects of the following reflections. Our objective is to contribute to a debate about the future of integration that appears to be necessary in the Latin American region, but it seems that also is convenient in other regions and very especially in Europe.

Both in Latin America and in Europe, the debate about the future of the integration processes -the idea of working together in a permanent way between nations and peoples that share a common geographic space- is closely related with the debate about the future of democracy, as the political system that allows people to obtain an environment of peace, liberty and political stability as a way to achieve economic and social development, and to navigate, at the same time, the turbulences of a transition to a new global order that eventually could take time to be stable and effective. It is related to the idea of global and regional governance through institutions that permit avoiding the risks for fragmentation among nations and, particularly, within nations. The logic of fragmentation, as the contrary of the idea of working together, could lead to the radicalization of positions of the main protagonists and eventually to the use of force in solving conflicts that could emerge. Within nations, regional fragmentation could weaken the cultural conditions that are necessary for the prevalence of democratic values, including those related with social justice and harmony.

Having in mind the previous considerations, we are including in the final part of this presentation some reflections about Mercosur and the future of regional integration in Latin America.

Civil society participation in an integration process
among democratic nations

In the last decades, since democratic institutions prevail in most of Latin America, the idea of "working together" among nations of the region and of each of the main sub regions, has had support from political leadership but also from citizens. Frequently this idea has been presented through the concept, the rhetoric and the mechanisms of different modalities of "integration", even pretending to develop formal processes toward higher degree of it, as has been the case of several projects oriented toward "common markets" or, at least, "free trade areas" or "customs unions". But in real life, what prevailed through the years has been the value attributed by governments and politicians to the more pragmatic idea of avoiding conditions for political fragmentation leading to conflicts and, eventually, to war.

Political will and strategic vision that reflect the concrete national interests; external conditions that generate the perception of economic and political challenges, even of threats; and a network of cross-interests in the economic and social levels are some of the basic conditions that explain the origin of the integration agreements between countries and, eventually, between regions. And also explains their sustainability in the long term.

These are agreements which, regardless of their modalities and of the market integration techniques employed - for which there are no single mandatory models - are subscribed voluntarily with the idea of building a permanent relation among sovereign nations. They are multidimensional in scope since at the same time they have political, economic and even social implications due to their effect on the level of welfare and on the expectations of the respective populations. At least this is indicated by five decades of experiences developed not only in Europe -so far the most successful integration process in terms of sustainability and depth, even with its well known actual strong difficulties- but also in other regions including South America and the Mercosur regional space.

The presence or absence of the above mentioned conditions, as well as their respective weight, may account for the successes or failures in the history of integration processes. However, it should also be noted that those conditions have a dynamic character and tend to change with time. This is the reason why the enthusiasm and energy present at the moment of the conclusion and signature of an integration agreement are weakened by changes in the original circumstances, as well as by the perception - in one or all of the partners, especially in the citizenship - of the actual or expected future results. Additionally, more personal factors become relevant in order to explain the origin of the respective agreements. Political leaders and negotiators with different interests, priorities and qualities, may help to explain the founding moment of an institutionalized strategic association between two or more nations, as well as the capacity to overcome through changes, those other moments when inertia prevails or when the necessary drive to continue building what was originally imagined begins to wane.

One of the key factors that explain the success of an integration process is the degree of participation of civil societies. In democratic countries as is the case of Mercosur as well as of the EU, the intensity of this participation is crucial for the perception of citizens that an integration process is "their process".

There are at least three different angles from which to approach the issue of civil society's participation in a concrete integration process such as, for example, Mercosur.

The first one is its participation in the design of integration strategies and public policies to be adopted by the partners, as well as in the creation and enforcement of the rules destined to regulate the construction of the integrated economic space, and the transnational competition among firms producing goods and providing services.

The second is the participation of civil society in the development of multinational social interaction networks, which may be a result of the governmental strategies and public policies and rules. They manifest especially in business and social behaviors, in associative efforts on all levels (even in the cultural and academic) and in the trade, investments and human flows through the frontiers.

And the third one is the emergence of Mercosur´s civil society. That is, a common citizenship -even a common identity in an embryonic stage- that expresses itself in demands and expectations of participation from non-governmental actors in the political instances (created or to be created) on a supranational level. It would be similar, on a regional level, to the growing demands and expectations with regards to the emergence of a civil society in the "global village", which is currently manifesting itself through social movements that emerge along the institutional dimension of globalization, especially with regards to its governance and, among others, to the development of the World Trade Organization (WTO).

This presentation will be limited to the first of the possible angles, regardless of recognizing the importance and natural complementariness of the other two angles. The broadness of the issues if the three angles were to be boarded simultaneously forces us to privilege the one we think most significantly impacts the possible progress of the others.

We understand that a real participation of civil society in the making of economic integration strategies and public policies, as well as in the creation and application of the rules, may produce significant effects in the development of regional social networks -or at the interregional level in the case of an eventual agreement of Mercosur with the EU -as well as with regards to the progress towards the creation of an authentic Mercosur civil society. It will even be difficult to imagine relatively balanced progresses in the development of such networks -particularly when they involve investment decisions- if they are not sustained on effective rules that reflect the interests of each civil society.

What must we understand by civil society participation in an integration process such as Mercosur? Basically we are relating to the fact that the men and women of each of its member countries, in their different roles -citizens, tax payers, consumers, workers, business people, among others-, either directly or through their political representatives -especially Congress- or through their NGO´s, may influence the definition of economic integration strategies, in the making of their governments common policies, and in the creation and application of rules that in some way affect their values and interests.

What are the levels in which civil society's participation can be observed in the making of strategies and rules of an economic integration process such as Mercosur?

It is important to distinguish between the national level of each of the member countries, and the multinational or common level. The first level differs, and sometimes significantly, in each country. It does not necessarily respond to common parameters. Nevertheless, in the Mercosur case, at least in its founding moments, the respective National Sections of the Common Market Group (CMG) were conceived as a main decision-making mechanism at the national level. That was reflected in the Asunción Treaty, in the Ouro Preto Protocol and even in the Brasilia Protocol. The second level is a result of what the members decide together with respect to how the civil society may express itself and be effectively heard in the common bodies that compose the institutional and rule-making mechanism of the integration process.

The participation of civil society in the process of designing and implementing Mercosur's integration strategies, as well as public policies and norms, is important for at least two reasons. They are the effectiveness of the rules and its consequent degree of efficacy and credibility, and the social legitimacy of the integration process.

In the case of Mercosur both reasons are related with the voluntary and permanent character of the integration process. We are talking about voluntary association among sovereign nations that do not necessarily pretend to disappear as such. They commit themselves to work together in a permanent way in order to integrate their economies -using their own techniques that essentially correspond to a well done interpretation of what article XXIV of GATT allows- establishing economic preferences -limited to goods or eventually extensible to services and other production factors-, collective disciplines and institutional mechanisms for the creation and enforcement of common rules. Generally these processes acquire a multidimensional character that exceeds the exclusive trade and economic level when they occur among neighbor countries. Besides Mercosur the EU, the NAFTA, the Andean Community, the Central American the Caribbean integration schemes, among others, belong to this category. We may also include within this category the eventual interregional association between the EU and Mercosur.

These kind of processes normally take place among nations with asymmetries in their relative power and with different economic dimensions. That is why it is relevant for them to be predominantly oriented by freely consented and enforceable common rules (rule-oriented process). This neutralizes the negative effects to the relative weaker and smaller partners if the reciprocal relations were predominantly determined by power factors (power-oriented process). This observation is valid both for the intra-Mercosur relations, as well as for the interregional Mercosur-UE relations.

This is why institutions and common rules are important in order to maintain the win-win scenario that sustains the voluntary associative link through time. The goal of such institutions and rules is to preserve in a dynamic way the reciprocity of interests among partners. No country participates in these kinds of processes if they consider that it is not convenient for them. No one stays if they understand that it is losing more belonging than not. In other words: no country is forced to negotiate or to participate in this kind of consensual associations among sovereign nations.

These processes as a result of their voluntary character and their vocation of permanence could be sustainable in the long term if the advantages of belonging are perceived by the respective citizens. It is the social legitimacy what at the end explains the origin of the association and that sustains it through the years. It is in this perspective that civil society participation in the definition of strategies, public policies and common rules acquires its full relevance. The citizens must feel identified with belonging to a regional space created by the association of nations. The appraisal of a certain regional identity gives vitality to the respective processes.

The effectiveness of a legal norm in international relations is generally considered by its capacity to penetrate into reality. This is reflected in the fact that it is considered and respected by the different protagonists in their behaviors and reciprocal relations. For that purpose it must be supposed that the norm has formal validity. In other words, that it meets the necessary requirements to be recognized as such. And the efficacy of a norm depends, in a great manner, on its effectiveness. That means that the pursuit results are indeed achieved. It is difficult for non-effective rules to have efficacy. The issue of the efficacy of a rule may condition the general process efficacy if there is a chain effect of ineffective rules. In this case, the balance of interest behind any rule -and even the whole set of norms adopted by the members- may be affected in its efficacy.

The problem of the effectiveness and efficacy of the agreed rules, acquires a particular relevance when an integration process such as Mercosur is oriented to stimulate investments and productive transformation in each of the members and in the block as whole. Such objectives require a reasonable degree of predictability with regards to the rules that will influence particularly the open market access for goods and, eventually, for services and investments as well. If the rules are not effective, which means they do not penetrate into reality, the process loses the investor's creditability on the possibility to access a larger market than the national one. If this is the case, the main damages would come to the relatively smaller countries, such as Paraguay and Uruguay in the case of Mercosur. It would affect their ability to attract productive investments on behalf of a broader market, even if the other investment conditions were to be favorable. This way, the expected results by their participation in the integration process would not be obtained with the consequent efficacy and, eventually, social legitimacy loss. In the case of Mercosur, this is yet more important because the expectation of unrestrictive access to a broader market and its effect on productive investments was the main argument why Argentina and Brazil refused to grant a special treatment to Paraguay and Uruguay at the founding moment, except the one given by article 6 of the treaty.

Furthermore, the effectiveness and efficacy of the rules impacts its credibility and social legitimacy. Credibility should be understood as the possibility that the social actors to whom the rules are destined may perceive them as a relevant factor in determining decisions that influence in their behaviors. This is the case of businesses and investors. Social legitimacy is understood as the recognition by society and, particularly its most affected social actors, that the rules are common to all the members and that they should be respected because of mutual convenience. In other words, that they are rules that guarantee that benefits will be obtained by all the members, regardless of the relative power or economic dimension, and that therefore allow to counterweight the eventual costs produced by the unrestrictive opening of their markets to relatively more developed countries.

The credibility and social legitimacy issue grows in political and economic relative importance, as the number of rules affected by the lack of effectiveness and efficacy gets bigger in relation to the overall set of rules that regulates a voluntary economic integration process. If the spectrum is broad, it is very likely that it is reflecting serious deficiency in the partner's political willingness to carry out what they agreed. Citizens, businesses and investors usually perceive this immediately, especially if there is a collective memory of past tendencies towards a "fiction-integration". It is even possible that it is also showing some profound disequilibrium in the reciprocity of national interests that support the consensual association. This could be the current case of Mercosur.

Another characteristic of this voluntary and permanent association phenomenon, besides having common rules, is that they have institutional mechanisms whose objectives are to formulate decisions that are materialized in common rules, and to administrate and settle conceptual or interest conflicts among the members. There is not a unique institutional model, nor are there international rules that determine parameters on their modalities and reaches. There is a very broad set of alternatives.

There are three basic functions that are expected to be fulfilled by the institutions of a voluntary and permanent association among sovereign nations. All three are related to the need to preserve, through time, the reciprocity of national interests in a win-win condition, as well as to translate it into rules that are effective, credible and legitimate.

The first function is to canalize the integration process political impulse, particularly when it foresees an incremental development in different stages implicitly or explicitly contemplated in the constitutive agreement, as have been the cases of the Rome and Asunción treaties. The second is to allow the creation and implementation of different types of decisions, expressed in complementary norms derived from the constitutive pact. The third function is to facilitate the administration of the conflicts that arise among the members and to solve them when they are set as actionable controversies.

Such functions are fulfilled by common organs of the association. They can be integrated by government representatives that act in such character. They could be distinguished according to the level of governmental representation, in political and technical organs. Usually they have attributions to adopt different kind of decisions that, generally originate legally binding rules of the game. There can also be organs integrated by technical independent officials that are designated collectively by the member States.

In the decision-making organs, the articulation of national interests and its expression in decisions with different types of legal effects recognizes at least three phases. The first one is what we could call the ascending phase. It is the phase in which each country determines its own proposal with regard to what they want or need to obtain as a collective decision. It is supposedly made based on a diagnostic on what the national interests are and what are the possibilities of obtaining consensus with the partners on it. It is a phase fulfilled in the domestic levels of the decision making process. Each country organizes itself in the most convenient way and according, among other factors, to their domestic legal framework. The second phase is the negotiation and eventually adoption of decisions at the common multinational level. If the members reach an agreement, the decision is finally adopted -according to the established vote system- and becomes the respective norm -including the legal effects that should be produced and the internalization modalities, if it corresponds. Finally the third phase can be named as descendent. It is the one in which the decision penetrates into reality either because of its direct effect or because it is incorporated by a national norm in the respective domestic legal systems in order to be enforced.

The Mercosur experience could be showing that important institutional deficiencies are located in the ascendant phase of the decision making process. It could be the fact that the proposals that arrive at the final decision multinational level either have not been sufficiently consulted with other governmental instances or with the interested social sectors. This is translated, sometimes, in unsatisfactory quality products.

It could then be the definition of each national interest that may be representing some weaknesses -including the essential exercise of conciliating each country's domestic requirements with the possibilities to obtain from the members what presumably is needed-. It could explain the accumulated number of rules that are not being enforced, or in other words, are not being effective. Sometimes they do not even have finished the respective legal process to obtain their formal validity. This deficiency in the preparation of the national positions can be due to various reasons. One of them could be the insufficient consultations to different sectors of the public administration or to a low participation of civil society through its representative institutions. A factor that may explain civil society's low participation could be the difficulties to access quality and in-time information that may help the following of what is actually been negotiated. This lack of transparency contributes to reinforce the tendency to a decision making mechanism that work in a kind of closed circuit in which only government experts and eventually some civil society's representative institutions participate.

The amount of accumulated rules that did not penetrate into reality or that have not even completed their cycle to become formally valid, could help to explain the perception that citizens, businesses, investors and third countries have about a deep distance between Mercosur´s nominal legal structure and reality. This can contribute in the diagnosis of a process with serious efficacy and credibility problems that may result in a growing legitimacy crisis if such situation produces serious damages to the interests of partners, especially those with less economic dimension and relative power.

Adaptation to changes, the inexistence of unique models and the importance of a dynamic national strategy for integration

At least three lessons could be drawn of the EU and Mercosur recent experiences.

The first one is that to sustain voluntary integration among sovereign nations requires permanent adaptations to changes in their domestic and international environments. Roadmaps and working methods should be permanently adapted to new circumstances. How to produce this adaptation preserving, at the same time, the accumulated assets of years of working together, is then a big challenge.

Adaptations become more necessary when citizens began to doubt about the convenience for their own country to continue working together with nations with whom they share a geographic space. It could lead to a point in which they perceive the integration process as part of their problems and not of any solution. Sometimes this is the result of not recognizing the problems of the people of another member country as being their own problem. If that is the situation, a frank explanation to the citizens of the different countries of which could be the costs for them of a failure of the integration process seems to be necessary. Particularly if the political leadership perceives that they don't have rational alternatives to the idea of working together with their partners.

Preserving the win-win perceptions among the people of the member countries is then one of the main challenges faced by the construction of any voluntary integration process. This is more difficult in a context of deep global economic and political transformations as we are facing this years. The impacts of those changes sometimes are very different from one member country to another one. It could weaken then the idea of being in the same boat. Or increase the perception of the advantages of navigating alone to better tackle the challenges posed by new realities. This could then jeopardize the core idea of working together among nations of the same geographic space, especially if institutions with the capability of expressing a common vision do not exist or eventually are not able to undertake the necessary leadership.

The second lesson is that there is no unique model or formula to produce that adaptation to an environment of deep changes. There are obviously limits to the imagination about how to tackle the main problems that are faced. They could be the result of political, economic and legal constraints. But at the same time, with a mix of political will and technical capabilities it is always possible to draw mechanisms that could contemplate the new realities and the different interests of member countries. Most probably this will imply heterodox and flexible formulas including those requiring multiple speeds, variable geometry and "à la charte" approaches.

And the third lesson is that to succeed in the difficult task of integrating sovereign nations through a voluntary and long term process implies, at the same time, effective common disciplines and a clearly defined national strategy by each of the participant countries. The dynamic interaction of both factors seems to be crucial precisely to preserve the "win-win" situation among the members of a common integration process. And here is where flexibility of concepts, mechanisms and instruments become so important. It facilitates the continuous adaptation of the process to new realities. And this becomes more important when those new realities have different impacts in each of the member countries due, eventually, to asymmetries of relative power, dimension and degree of economic development among them.

Mercosur and the EU are undergoing complex transition processes towards a new stage in their development. In both cases it would seem premature to venture any forecasts of the results. The outcomes are still uncertain, but everything indicates that in each case the new stage will be different from the previous one. If the accumulated assets are preserved and previous experiences are capitalized the outcome is likely to be positive. Otherwise, they could face scenarios in which it will not be possible to avoid the word "failure" and its consequences in terms of affecting the regional governance and stimulating fragmentation among and within member countries. Beyond the well-known differences that distinguish both processes, as well as their histories and regional realities, the good news is that in the two cases there are debates within the respective societies that reflect methodological dilemmas and, increasingly, existential ones. The more encompassing and inclusive these debates become the better for the social legitimacy of the results.

A common element of these debates on both sides of the Atlantic is the growing doubts that arise on the real possibility for the subsistence of a distinction between "us" and "them" that reflects a common identity rooted in the respective citizenships. But, at the same time, even those who would seem to be more frustrated with the membership of their country to the integration process have difficulties in bringing forward a credible option that is sustainable both at the economic and, above all, the political level. By this we mean an option that has its own social legitimacy within pluralist and democratic societies that does not exceed by far the costs of attempting to correct the deficiencies of the joint work within the current integration processes. If it were true that the member countries -large or small- had no reasonable alternatives to the voluntary integration with their current partners, the debate would then be circumscribed by the methodology of the joint work within a shared geographic space rather than by the existential reasons behind it.

Having in mind the recent experiences, in the case of Latin America three are some possible conclusions to draw about what normally receive the label of "regional integration": i) the idea of working together among nations that share a geographic space, requires to be effective some modality of collective leadership and a great accent in strengthening the main focuses for peace and political stability within the region, as is the case of the Argentina-Brazil strategic relation; ii) when short or medium term considerations prevails in the leaderships of the different nations, normally the result will be a low quality "rule-oriented process" with weak common institutions and precarious rules, and iii) the idea of working together respond to multiple factors that lead to a multi-dimensional collective action; is not only related to power or welfare or to the perception of an external challenge.

Mercosur and the future of regional integration in Latin America

Latin America integration, as well as the region and also its nations, are going through a process of deep changes. Is not clear how the integration process will develop in the near future or in the long term. Most probably what has been observed in the past will continue to prevail for some years. The main regional institutions (ALADI-UNASUR-CELAC) will continue to be there with different degrees of relevance according to the circumstances. At the sub-regional level Mercosur, ALBA, SICA, CARICOM and the Pacific Alliance, will also continue to be part of the landscape even if is not possible to predict how relevant and effective each of them will become in the future.

Also it seems possible to forecast the following trends with impact on the evolution of the future regional scenarios: i) plurality of active and relevant non-regional protagonists; ii) proliferation of options for the global economic international strategy of each nation within the region -and not only for the biggest one's- leading them to try to become active protagonists both at the global and inter-regional trade agreements, and iii) emphasis on the role of the new urban middle classes, on the quality of physical connectivity among the different nations and with respect to other regions in the world, and on the development of global and regional transnational production networks.

In the case of Mercosur, its transition to a new stage with still uncertain institutional profiles and work methods increases the need to reflect on how to enter, based on the acquired experience and capitalizing on the accumulated assets, to a new stage of the process of integration in which the benefits that are generated can be perceived as advantageous by the different countries and, in particular, by its citizens. This will not be easy. Since its creation in 1991, the experiences and assets that have been accumulated have value in terms, for example, of relatively guaranteed preferential access to the respective markets and a budding productive integration. At times Mercosur was even perceived as a success. However, many frustrations have also been accumulated. These stem from the inherent difficulties of a joint work undertaking that requires combining very different national interests within a context of numerous asymmetries, especially in the relative economic dimension of the involved countries.

The suggested reflection needs to be done having in mind the context of the profound changes that are taking place at a global scale. It also requires placing Mercosur within the institutional architecture of the South American region (UNASUR), the Latin American regional space (LAIA and SELA), and the broader Latin American and Caribbean (CELAC). Articulating any cooperation initiatives that may be developed through the mosaic of existing institutions is today one of the explicit priorities of the countries that form part of them. There are several possible options for the design of a new phase. One lesson to be learned from the accumulated experience in these and in other regions is precisely that the design must be tailor made to fit well diagnosed realities. As once held by Jean Monnet, it is essential to find formulas that are adapted to each historic circumstance. It is here where the right combination of political and technical imagination will be needed.

One option might be to conceive Mercosur as a network of bilateral and plurilateral agreements, including sector and cross-sector agreements of productive integration, connected together. It would require flexible variable geometry and multi-speed mechanisms. The EU itself has some experience in this regard. This would not entail setting aside the commitment of building a customs union as a step towards a common economic space. It could be done through additional protocols to the Treaty of Asuncion, or through parallel non contradictory legal instruments. The bilateral agreements between Argentina and Brazil are a precedent to consider. This option would enable to include the possibility of relaxing, under certain conditions, the conclusion of commitments made within the framework of preferential agreements signed by one or more member countries with third countries or groups of countries. Of course, this would mean agreeing on collective disciplines among Mercosur members whose fulfillment could be supervised and evaluated by a technical organ with effective competencies. It does not have to fit the stereotype installed with the equivocal concept of "supranational". The model of the role of the Director-General of the WTO may be useful in this regard.

It is important to note that there are many conditions that may be necessary for the construction of a regional space characterized by the ideas of integration and cooperation, that is, of joint work between the nations that form it. These conditions result, in particular, from some of the main features of these multinational undertakings, such as the voluntary nature of the participation of each nation. In the case of Mercosur as it stands now, at the end of one stage and transitioning to a new not yet precisely defined one, there seem to be three important conditions that will be required in order to take a leap towards a stronger and more effective construction that has the potential to capture the public interest due to its ability to generate mutual gains for each of the participating countries, while taking into account the diversities that characterize them. Such conditions include the strategy for development and international integration of each participating country, the quality of institutions and ground rules and the productive articulation of transnational scope. It would seem advisable that these three conditions are present in the necessary national debate that each country interested in remaining a member, or willing to become one, should encourage in order to clearly define the strategies and methods of Mercosur's new stage.

The joint work between nations that share a regional geographic space, especially when expressed through agreements and institutions with ambitious and long term goals such as the case of Mercosur, presupposes that each participating country knows what it needs and what it can obtain from the association with others. This means that it has a strategy for development and international integration designed according to its own internal characteristics and to the goals that are most valued by its society. It is a strategy that should not have only a regional scope. Today more than ever, the goals at the regional level should be thought out in relation to the goals of global scope. How such a strategy is developed and expressed depends on each country. The fact is that the consensual construction of a multinational region, whatever its objectives, modalities and scope, is based on the national interests of each participating country. In this regard, it has been rightly pointed out that countries associate at a regional level not based on any hypothetical supranational rationality but because of concrete national rationalities. It is the sharing of national interests around a common strategic vision what characterizes this type of voluntary joint work between sovereign nations that aspire to continue being so.

In the case of Mercosur in its current crossroads, it would be convenient for each member country to ponder about their real options. If a country were not satisfied with Mercosur and visualized other reasonable options that would allow a better outlook for its insertion in the region and in the world, it could then be reasonable to abandon the joint undertaking. If, on the contrary, such country is unable to visualize a reasonable alternative plan from a political or economic perspective, it would be convenient for it to ponder what should be the scope of a future Mercosur in the light of the constituent pacts and the methodological options that could be imagined. Such considerations would be sounder if they reflect the objectives defined in the corresponding strategy for national development. It would seem reasonable to imagine that this plan would include an assessment of what the country needs and of what it may obtain form its global and regional context.

A second condition is related to the quality of the institutions and the ground rules. This includes the process of decision-making, the rules that are approved and the mechanisms for their implementation and for the settlement of the disputes that may arise between the member countries in relation to the compliance of those rules. Again, it can be argued that institutional quality begins at the respective national level, is later expressed at the multinational level, and is finally re-expressed at the national level where what is agreed is implemented or not.

The intensity of the participation of the civil society at the domestic level of each member country is a key factor to ensure the institutional quality of an integration process. It requires a culture of transparency that is reflected, in the national and the multinational, through the quality of Web pages loaded with useful information for the management of the competitive intelligence by all the protagonists.

Reconciling flexibility with predictability seems to be crucial if the next stage of Mercosur aims to include other South American countries, which would increase the asymmetries and the diversity of interests. As already mentioned this will require the use of variable geometry and multi-speed methodologies. Without quality ground rules these methodologies could accentuate tendencies towards the scattering of efforts and lead Mercosur to new frustrations.

The third condition is related to regional productive integration. The issue of productive integration has an important place in Mercosur's agenda. Actually, it comes from its founding moment when the concept of sector agreements was incorporated to the Treaty of Asuncion and Decision CMC 03/91 was approved. It is based on the experience gained during the period of bilateral integration between Argentina and Brazil. Aside from generating mutual gains between the participating countries, productive integration through transnational value chains enables to develop what Jean Monnet called de facto solidarities in his foundational layout of European integration. They can be, in this sense, a strong factor to reduce the risks of reversibility of the commitments made by member countries. This is so because they contribute to link the different national productive systems and its players, generating strong incentives to preserve and expand a process of multinational integration. It requires, in each of the countries, domestic firms with aggressive objectives and capacity for international projection. .

The three above mentioned conditions are closely linked with each other. Added together they help us imagine a realistic strategy of trade negotiations with other countries and regions. Without a national strategy, it will be difficult for a country to benefit from the decisions that are made to guide an integration process and to generate its ground rules. Without ground rules that are effectively enforced, it will be difficult to gain flexibility and encourage companies to make productive investments based on the expanded market. Without productive investments, especially in the context of cross-border value chains, it will be difficult to generate the stable benefits that can be expected from an integration process, especially those of greater social impact due to their effects on job creation and on the identification of citizens with the idea of a shared region. It will be harder still to establish international trade negotiations that contribute favorably to the development and productive transformation of each country in the region.

In any case the redesign of Mercosur will have to take into account more recent developments at the global, interregional and also regional level. Recent developments in these three levels have had repercussions in Latin America and especially in the South American regional space. On the one hand, due to the difficulty in determining the real practical extent of the progress that would be taking place in the development of the Pacific Alliance. On the other hand, in the debate that is being installed in Mercosur countries on how to address the new realities of trade and international trade negotiations, as reflected in recent reports published by business institutions in Brazil -(two of the reports are from the Instituto de Estudos para o Desenvolvimento Industrial (IEDI) which gathers a significant group of leading Brazilian businesses. One of them deals with the impact that the new mega preferential agreements under negotiation would have on the business strategies of Brazil The other IEDI report refers to Brazilian participation in global value chains ( The third report is by the Federaçâo das Indústrias do Estado de S.Paulo (FIESP) and it introduces an external integration agenda ( From these three reports we can sense the risk of isolation of the Brazilian economy in the new global context. The fact that Mercosur as a joint strategic project of a group of South American countries is not being questioned becomes much more relevant when we note the frequency with which different analysts and protagonists suggest that countries like Brazil should rethink their relation in regards to other approaches considered more appropriate. In particular, the model that is in contrast with that of Mercosur is that of the Pacific Alliance. In doing so, it is assumed that the partnership has already produced the results announced by its four member countries.

We can also find the approach of the requirement of flexibility in the agreements to be negotiated. Specifically, it is proposed with regard to the ongoing negotiations between Mercosur and the EU. It is an approach that would be based on the assumption that not all Mercosur member countries would be willing to move forward at the same pace in terms of tariff reductions, at least in all sectors. Beyond how sustainable this assumption may be, it would be convenient to ponder on the different forms that the proposals for flexibility of the commitments could have. The idea would be to achieve flexibility in the context of an "umbrella" agreement that contemplates multiple speeds on the tariff reduction commitments of each Mercosur country, but also variable geometries in the commitments made in other non-tariff issues and in particular in the regulatory frameworks of trade and investments. It is an alternative that could erode the preferential treatments agreed within Mercosur and that, in practice and due to the economic dimension of the EU, could lead to the same results that the signing of free trade bilateral agreements between the EU and each one of the Mercosur countries. In other words, it could be tantamount to the end of Mercosur as a relevant economic integration process for its members. However, a section of the IEDI report on the impact of the negotiations of mega- preferential trade agreements (page 43) provides more interesting options that would be convenient to explore in the debate that has actually been installed by the Brazilian business institutions. Such options are three: the gradual implementation of the negotiated measures; the use of temporary general, special and sector safeguards; and the implementation of training and professional relocation mechanisms. Including such measures in the architecture of the respective bi-regional agreement would enable to contemplate any eventual situations of disparity resulting from the existing asymmetries in economic development, both within Mercosur and with regards to EU countries. Other proposals included in the IEDI report (pages 42 and 43) deserve special attention. They refer to preferential rules of origin, mechanisms of mutual recognition or harmonization of non-tariff measures, protection of investments originating in Brazil or in other Mercosur countries and a gradual liberalization of services to aid regional economic integration, structuring value chains and enabling market access for domestic companies.

Beyond the initial enthusiasm that now seems evident in the participating countries and in others that aspire to have some kind of connection, even just as observers, the question that arises then is how sustainable over time will be the process of deep integration' channeled by the so called 'Alliance of the Pacific'.

An issue to monitor closely is that of the relationships that are built between the Latin American preferential spaces: the Alliance of the Pacific and Mercosur. It is a matter of economic interest but also with strong geopolitical connotations. It should be noted that for several countries in the Alliance of the Pacific relations at all levels with Mercosur countries, but especially with Argentina and Brazil, are very close and transcend trade.

Hence, the importance of raising the question of whether these two regional preferential spaces will complement each other or if, by the contrary, contradictory views will prevail. And this is a question that will take time to get an answer based on solid arguments and not only ideological or emotional ones. Among other reasons, time will be necessary in order to have a clearer idea of what are the commitments that are eventually manifested in the space of the Pacific Alliance and to appreciate the true scope of the present 'metamorphosis' of Mercosur, resulting especially from changes in its membership, the convenience of capitalizing on the experience gained since its creation, and its recommendable adaptation to national, regional and global realities different from those of the time of its creation.

The Alliance of the Pacific is the equivalent of a house to be built. The willingness to do so exists and the plans are being discussed. Mercosur is also the equivalent of a house under construction but it already needs to be expanded and adjusted to the new realities of its owners and the environment in which they operate. Both constructions are developed in the broader institutional frameworks that exist in the region. All of them aim to ensure regional governance -in terms of peace and political stability- and not only in the economic aspect.

How to get both processes to complement each other, generating a convergence of development and commercial policies and achieving a growing articulation of transnational value chains? This is perhaps the central question on which to base the work between Mercosur and the Pacific Alliance from now on, while maximizing the installed capacity within the scope of the regional institutions mentioned above.

But while it seems certain that the previous design of South American integration is undergoing a process of change, it will be difficult to predict how long the one that is beginning to take shape will remain in effect. The experience of recent decades suggests great caution in any optimistic forecasts regarding its eventual longevity.

Conclusions: A necessary debate

Several factors are contributing to the redesign of South American integration. Some are external to the region, while others are endogenous.

As for the external factors, some deserve to be pointed out, although they are not the only ones: " The paralysis suffered for quite some time by the multilateral trade negotiations of the Doha Round within the scope of the World Trade Organization (WTO). Even when in Geneva the fire is being kept alive, there is marked skepticism about the possibility of restoring this multilateral negotiation process of global scope. There is no evidence of a sufficient political will to relaunch such negotiations in relevant countries due to their impact on world trade. Such is the case in particular of the United States.

" The increasing proliferation of negotiations aimed at creating "private clubs" in international trade that are the result of various forms of preferential agreements, all of them with a discriminatory scope for countries that are not members, even when they belong to the WTO. Recent examples include the Trans-Pacific Partnership (TPP). Another example is the Regional Comprehensive Economic Partnership (RCEP). To this we must add, among others, the free trade agreements being negotiated by the EU with Canada, India and now Japan, as well as the eventual delayed association agreement with Mercosur. And, finally we must add the negotiations between the EU and the United States for the conclusion of a Trans-Atlantic Trade and Investment Partnership.

" The fact that the growing trend towards the development of transnational value chains generates a greater demand for the facilitation of trade and investments -in all the possible derivations of this concept- and of ground rules that are favorable for the development of transnational business strategies involving productive investments in many countries. The perception that it might be difficult to imagine any rapid progress on the Doha Round negotiations would encourage the development of new forms of agreements between groups of countries, all of them aimed at reaching objectives in terms of trade and investments that go beyond what has been achieved -or could be achieved- in the framework of the WTO. The problem is that this could eventually intensify the fragmentation of the multilateral world trade system and that the subsequent erosion may also have systemic geopolitical connotations that would not help in securing global governance, understood as the prevalence of conditions conductive to peace and political stability in international relations.

As for the endogenous factors to the South American region, the following are the most relevant: " The accumulation of frustrated experiences, richer in their expectations and even in their rhetoric that in the actual fulfillment of the agreed commitments. Perhaps the fact that it is difficult for citizens of a South American country - the same applies for the wider Latin American space- to relate their level of well-being and, in particular, their jobs with the effects derived from an integration process, be it the CAN or Mercosur, may be the more noteworthy fact when seeking an explanation for the low credibility that the idea of economic integration between countries of the region awakens today. The fragility of the ground rules related with the opening of the respective markets to reciprocal trade -especially of the countries of largest economic dimension- may be a factor that helps explain the weak impact that the major agreements have had on the productive integration of the region. This results in the differences observed in the development of transnational value chains between the countries of Asia and those of South America.

" The greater freedom to develop joint actions between countries of the region with the aim of ensuring at the same time reasonable governance of the South American space -in terms of peace and political stability- and the strengthening of the linkages of the productive systems through cross-investments aimed at projecting to the world the existing capacity of each country to develop competitive goods and services. It is a freedom which is nurtured by the erosion of rigid models of economic integration and a more informed appreciation of the real scope of one of the only international legal constraints when selecting methods of integration, which is derived from Article XXIV, paragraph 8, of the GATT.

" The fact that all countries in the region, regardless of their economic size, level of development or relative power, have in today's world many choices as to their economic -and even political- insertion in the international system. This favors a strategy of multiple alliances with commitments and memberships that can even be superimposed, as is the case today with the mentioned agreements that are being negotiated between the Asian and the Pacific countries. At the same time, it becomes difficult to imagine a South American regional construction focused on the hypothetical hegemonic leadership of one single country. This tips the balance towards collective regional leadership patterns, which will probably be of variable geometry, as will be the regional agreements that are devised. Both the European and the present Asian experiences have much to illustrate on the dynamics of such types of collective regional leaderships.

The combination of exogenous and endogenous factors will influence the future design of South American integration. If past lessons are correctly capitalized and certain advantage is derived from the leeway provided by a decentralized international system with multiple options, we can anticipate that what will predominate in the region will be multidimensional integration agreements (with political and economic objectives at the same time) and with cross-memberships and commitments. In the perspective of the dominant regional integration orthodoxy of the past six decades, with all its variations and "closed" or "open" forms, it is possible to anticipate the predominance of heterodox models in the future.

What criteria would be possible to assess the sustainability of the new map of South American integration that is now emerging? How can citizens and those who must make decisions for productive investment in order to take advantage of the benefits offered by the integration agreements, trust in the effective fulfillment of the promises? How to prevent citizens and investors, when analyzing the announcements made on agreements often described as "historic", from concluding that these are actually "more of the same" (i.e., a "déjà vu")?

Those are some of the main questions to answer in what is now clearly a necessary debate both at the regional and at the national level, in each case with strong participation of citizens and their social and political representatives.

Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information. |

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