South American integration movement fades

Bolivian soldiers patrol outside the Palmasola refinery near Santa Cruz de la Sierra, 900km east of La Paz, Bolivia, on Wednesday. PHOTO: AP

It wasn't so long ago that South America's leftist leaders were sharing bear-hugs and discussing the formation of something like the EU, with a continental pipeline network to solve energy problems, a unified parliament and a common currency, good from Colombia's Caribbean beaches to Argentina's frosty southern coast.

Bolivian President Evo Morales changed all that by abruptly taking over his country's 53 foreign-owned natural gas installations and installing white-helmeted military police with semiautomatic rifles to guard the continent's second-largest gas reserves.

The nationalization evokes comparisons to decades past when Latin American regimes ruled with brute military force and has created a serious rift between the region's center-left governments and the hard-left administrations of Morales and his mentor, the socialist Venezuelan President Hugo Chavez.

"South America is back to its unstable ways, big time," said Gary Hufbauer, a senior fellow at the Institute for International Economics in Washington.

The takeover threatens to cause energy shortages and price hikes that could seriously damage the economies of Bolivia's biggest customers, Argentina and Brazil.

As Latin American leaders prepare to fly to Vienna for an annual summit today with their European counterparts, the energy crisis looms largest amid regional divisions unseen in South America since the 1980s era of lingering dictatorships and budding democracies.

The Andean Community and Mercosur economic blocs appear to be falling apart as Colombia and Peru clinch free trade deals with the US and Paraguay and Uruguay consider similar alliances. Bolivia and Venezuela lashed back by joining with communist Cuba in a trade pact promising a socialist version of regional cooperation.

Bolivia also alleged that its gas was being diverted from Argentina to Chile, playing on old border grudges and possibly reversing a warming trend in Bolivian-Chilean relations. Argentina and Uruguay are escalating their battle over potential pollution from pulp mills on their shared river.

"Call it regional disintegration," said David Fleischer, a political scientist at the University of Brasilia. "It all converged in the months of April and May, and we don't know how it's going to play out."

Less than two years ago, Brazilian President Luiz Inacio Lula da Silva formed a "South American Community of Nations" aimed at putting the region on a path toward political and economic integration.

The idea was to create a South American union, complete with a regional parliament and a currency like the euro.

Silva already had a fellow left-of-center ally in Argentine President Nestor Kirchner, and like-minded leaders were soon elected in Bolivia, Chile and Uruguay.

These presidents have downplayed trade disputes as the growing pains of a region still focused on unification. But when Morales surrounded Bolivia's gas fields and refineries with soldiers last week, a political fracture emerged that may be hard to repair.

Brazil is bitterly resisting calls by Morales for a 60 percent price hike, which could fuel inflation and take Brazil off its solid course of slow, sustainable growth. Higher gas prices also could adversely affect Argentina's strong economic recovery from a 2002 economic meltdown.

Many Brazilians believe this new hard-left Latin alliance is getting the better of Silva, at least for now.

"That hurts!" screams the headline of the influential Veja news magazine, showing a photograph of Silva with a oily boot print drawn on his rear end, presumably delivered by former army paratrooper Chavez.