How about a little less talk and a lot more action?             

More Trade, Less Talk for Latin America

Mac Margolis writes about Latin America for Bloomberg View. He was a reporter for Newsweek and is the author of “The Last New World: The Conquest of the Amazon Frontier.”
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Whenever Latin America's leaders sit together, warm feelings flow. So it was in Caracas this week at the 46th summit of Mercosur, where the five heads of state of the struggling South American trade bloc outdid one another in displays of bonhomie and companerismo.

Predictably, there were bravos for outgoing temporary president, Venezuela's Nicolas Maduro, and oles for Argentina, which is battling cranky international creditors and flirting with its second debt default in 13 years. Brazilian President Dilma Rousseff gushed about the "democratic and pluralist" trade pact, while her Uruguayan counterpart, Jose Mujica, touted Mercosur as Latin America's "daily bread."

Scratch the paint, however, and the picture gets messier. Dominating the agenda was Argentine President Cristina Fernandez de Kirchner's war with vulture funds, the aggressive klatch of bondholders who refused the severe haircut that Argentina offered lenders and have gone all the way to U.S. Supreme Court for their cut.

Another national leader staring at default might have agreed to engage the holdouts. Kirchner played to the gallery, likening her country to Erendira, the hapless girl in the Gabriel Garcia Marquez tale who was pimped out by her grandmother to pay off debts that only grew.

Those familiar with the Casa Rosada's penchant for doctoring inflation, grabbing foreign assets, bullying critics and blaming foreigners might be forgiven for recalling another gem of Latin American fiction, the Argentine film "Nine Queens," about a pair of artful dodgers running an elaborate con game.

The Caracas summit also welcomed Paraguay back to the group, with the leaders of Argentina, Brazil, Venezuela and Uruguay hailing President Horacio Cartes like a prodigal son. No one mentioned that just two years ago, Paraguay, a founding member of Mercosur, had been expelled from the bloc for hastily removing then-President Fernando Lugo from office.

A fumbling leader with a soft spot for Venezuelan strongman Hugo Chavez, Lugo had run afoul of the conservative Colorado Party, which ginned up an impeachment trial in 24 hours. Argentina, Brazil and Uruguay blasted the maneuver as a kangaroo court, then staged one of their own, physically barring Asuncion's envoy to a summit days later and ousting Paraguay, so trampling Mercosur's own unanimity clause.

With Paraguay in the penalty box, the same trio of countries rushed Venezuela into Mercosur. This was a double sleight of hand, as the Paraguayan congress, wary of encroaching Chavismo, was the only barrier between El Comandante and the trade pact. By the time Paraguay was rehabilitated, with Cartes's election last year, Mercosur was already waxing Bolivarian.

The muscle diplomacy set off a row that not even the camaraderie in Caracas could erase. Though he seemed genuinely pleased to be back in good graces, Cartes arrived with a litany of grievances, namely some of the 183 resolutions passed in Paraguay's absence. Since any Mercosur decision must be ratified by all members, Asuncion could hold the bloc to ransom.

That may be the least of Mercosur's troubles. The group's squabbles are symptomatic of a deeper dysfunction. In 23 years, the trade bloc has succumbed to severe mission drift and hypernationalism.

Born as an expression of Latin unity and a counteroffensive to perceived U.S. overreach, Mercosur has fallen prey to half-measures and the whims of its crisis-prone members. The few trade agreements it has managed to ink, with Egypt, Israel and Morocco, add little to the commonwealth. Talks of an alliance with the euro zone have languished for more than a decade.

The biggest speed bump is between Brazil and Argentina, which continue to bicker over tariffs and quotas. Meantime, a fledgling Latin competitor, the Pacific Alliance, has done more in two years to unfetter commerce than Mercosur has in two decades.

While the world trades, Mercosur talks. It's a story as old as Latin America.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mac Margolis at mmargolis14@bloomberg.net

To contact the editor on this story:
James Gibney at jgibney5@bloomberg.net