Continental trade group admits Caracas

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BUENOS AIRES -- Venezuela today becomes a full voting member of South America's dominant trading bloc, amid worries that President Hugo Chavez will seek to sway Mercosur from its democratic and free-market leanings.

The continent's regional oil power and third largest economy will be admitted to the organization in a ceremony in the Venezuelan capital after a decision in December by Mercosur's four full members: Argentina, Brazil, Paraguay and Uruguay.

Chile and Bolivia are associate members of the union, which embraces 200 million people.

Mr. Chavez has declared his ambition to make Mercosur a part of his "Bolivarian Revolution," which aims to free South America from what he sees as American neocolonialism. "We were a colony of the north, but now we are free to propel the union of the south," he said in a speech.

The Mercosur members wanted Caracas in the group because of its economic heft. With Venezuela as a member, the bloc will account for 75 percent of South America's gross domestic product and add 25 million people to its common market, said Venezuela Analysis, a Caracas-based analyst group.

Argentine lawyer and political analyst Rosendo Fraga said Argentina and Brazil -- the main powers in Mercosur -- also were eager for better access to Venezuelan natural gas. The three nations plan to cooperate on a $25 billion, 5,600-mile gas pipeline linking Caracas, Brasilia and Buenos Aires.

"Russia is using its energy capacity in Europe as an instrument to recoup its influence, and Venezuela is doing the same in Latin America," Mr. Fraga said.

Despite a broad political swing to the left in South America, the bloc has remained anchored in market principles thanks to the pragmatism of the Argentine and Brazilian governments -- despite their commitment to heavy social investment -- and the centrist vision of Chile.

But analysts worry that Mr. Chavez will try to sway the bloc toward a version of Venezuela's statist model, which he portrays as a "Bolivarian alternative" to policies endorsed by Washington.

They also question whether he can adjust his hard-charging leadership style to the diplomatic demands of Mercosur's dispute-resolution mechanisms, and whether he will clash with Brazil, the traditional continental heavyweight.

Even before Venezuela's admission, the bloc was struggling with several internal disagreements.

Argentina and Uruguay are engaged in an intense environmental dispute over paper mills on the Uruguayan side of a shared river. Paraguay and Uruguay, miffed by their unequal status within the group, are pursuing bilateral trade arrangements with the United States, a move opposed by Argentina and Brazil.

Mr. Chavez is a vocal opponent of U.S.-backed trade deals, having pulled Venezuela from another trade bloc -- the Andean Community of Nations -- after members Peru and Colombia signed free-trade deals with Washington.

Diego E. Arria, a former Venezuelan ambassador to the United Nations, said in an interview that Mr. Chavez stands to be a "poison pill" for Mercosur.

His sentiments were echoed by Robert Lavagna, the former Argentine economics minister credited with restoring his country's economy after a collapse in 2002. Mr. Lavagna told a British newspaper he fears Mr. Chavez could damage the union's democratic underpinnings and hurt the financial prospects of fellow members.

"For the business climate, Chavez matters," Mr. Lavagna, a centrist and potential presidential candidate, told the Financial Times.

"He wants a socialist economy, and that's fine if he wants to do that [in Venezuela], but I don't like it and I don't think it's good for Argentina. I don't want this relationship to influence politics in Argentina."

Venezuelan economist Jose Cordeiro said the admission of Venezuela is "a disgrace" for the group. "Mercosur is already slow and falling short of its goals, but with Chavez it will achieve even less," he said.