Power and Regionalism in Latin America: The Politics of MERCOSUR

Chapter Two: Patterns of Conflict and Cooperation in the Southern Cone

13 Chapter two Patterns of Conflict and Cooperation in the Southern Cone A puzzling combination of conflict and cooperation has characterized Argentine-­ Brazilian commercial and diplomatic relations since the 1990s. What explains these erratic and unsteady dynamics of regional cooperation? In answering this question, we will consider four competing theoretical approaches to regional cooperation, which focus, respectively , on the role of international institutions, the role of interstate power asymmetries, the role of globalization, and the role of domestic politics. I argue that none of these explanations is, by itself, sufficient to account for the unstable patterns of conflict and cooperation in MERCOSUR, nor for the bloc’s current inertia. Understanding regional cooperation dynamics in the Southern Cone, I argue, requires a two-­ level approach that integrates insights from both systemic and domestic explanations. This analytical framework is developed in chapter 3. 14 Power and Regionalism in Latin America Origins and Evolution of Regionalism in South America The origins of regional trade cooperation in the Southern Cone can be traced back to the Argentine-­Brazilian rapprochement initiated in the late 1970s. The signing of a number of nuclear nonproliferation agreements and the successful resolution of the dispute over the Itapú and Corpus dams in 1979 marked a significant shift away from historical mistrust and rivalry.1 However, the two nations did not effectively begin to institutionalize security and economic links between them until democracy was reestablished in both countries in the mid-­ 1980s. In 1986 Argentine president Raúl Alfonsín and his Brazilian counterpart, José Sarney, signed the Argentine-­ Brazilian Integration Act, which established the Economic Integration and Cooperation Program (PICE). The agreement consisted of a number of bilateral protocols aimed at promoting balanced trade integration between the two countries in a number of key sectors. The PICE was followed by the Treaty of Integration and Cooperation in 1988 and by the Treaty of Integration, Cooperation, and Development in 1989, which envisaged the creation of a free-­ trade area between the two countries. A series of confidence-­ building measures aimed at further reducing nuclear and military tensions were also introduced during this period. However, further progress in the integration process was hindered by the domestic economic crises confronted by the two partners. The reinvigoration of bilateral cooperation, after its stagnation in the late 1980s, was led by the administrations of Carlos Menem (1989–99) in Argentina and Fernando Collor de Mello (1990–92) in Brazil. The two new presidents introduced substantive methodological changes in the integration, broadening its scope and accelerating its pace (Rozemberg and Svarzman 2002). In July 1990 they signed the Buenos Aires Act, which called for the establishment of a common market by the end of 1994. Collor and Menem also took significant steps toward strengthening security cooperation, explicitly agreeing to give up nuclear weapons in the Declaration on Common Nuclear Policy and establishing mutual verification and inspection procedures (Solingen 1998; Lafer 2000). In 1991, the two partners invited smaller neighbors Uruguay and Paraguay to join them in the creation of MERCOSUR. The Treaty of Asunción, which formally gave birth to the South American trade bloc, constituted a major shift away from the sector-­ by-­ sector approach of the PICE in favor Patterns of Conflict and Cooperation in the Southern Cone 15 of a program of automatic tariff reduction (Manzetti 1994). Under this trade liberalization program, tariffs were progressively reduced, according to a predetermined schedule. The unprecedented commitment of members to the implementation of this tariff reduction program resulted in a dramatic increase in levels of trade interdependence within the bloc. By January 1995, MERCOSUR partners had also managed to agree on a common external tariff, turning the bloc into a customs union.2 However, this momentum proved hard to sustain. The second half of the decade saw a progressive deterioration in the quality of economic and political cooperation within the bloc. The increasing difficulties confronted by MERCOSUR are clear in light of the evolution of three indicators: (1) levels of economic interdependence within the bloc, and in particular, patterns of intraregional trade; (2) the extent of partners’ compliance with the agreements they signed; and (3) levels of commercial and diplomatic tension among members. First, both intra-­and extra-­ MERCOSUR trade grew rapidly between 1991 and 1997, as partners embarked in a simultaneous unilateral and regional trade liberalization. Moreover, during the first half of the decade, partners began trading more among themselves than with the rest of the world. This resulted in an impressive increase in...