Constructing regionalism in South America: the cases of sectoral cooperation on transport infrastructure and energy

Abstract

This article contributes to the study of South American regionalism focusing on the emergence of sectoral cooperation starting in 2000. To do so, the article analyses two policy areas — transport infrastructure and energy integration — addressing two questions: Why has regional cooperation emerged despite the absence of economic interdependence and market-driven demand for economic integration? And why are policy outcomes evident in some areas (i.e. transport infrastructure) while limited in others (i.e. energy)? It is argued that the emergence of regional cooperation as well as the variation in policy outcomes between areas can be explained largely by the articulation of a regional leadership and its effect on the convergence of state preferences. The article shows how the Brazilian leadership, incentivised by the effects of the US-led Free Trade Area of the Americas negotiations and the financial crises that hit the region in the late 1990s, made state preferences converge towards a regionalist project encompassing all South American countries by making visible the mutual benefits of cooperation on transport infrastructure and energy. In the case of energy, however, the emergence of a second regional leadership project — pursued by Chávez’s Venezuela — and deep preference divergence led sectoral cooperation into a gridlock.

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Notes

  1. 1.

    UNASUR is an intergovernmental regional organisation that groups together all 12 South American countries.

  2. 2.

    The most emblematic regional organisations of the first wave of regionalism were the Latin American Free Trade Association (ALALC), created under the influence of the UN Economic Commission for Latin American (CEPAL) in 1960, and the Andean Pact, launched in 1969 with the signing of the Cartagena Agreement. These organisations were aimed chiefly at promoting the industrial development of member states’ economies. The regional organisations created in the 1980s and 1990s, such as the Latin American Integration Association (1980), the MERCOSUR (1991), and the Andean Community (1996), promoted regional economic integration as a stepping-stone for a more competitive insertion in the world economy, following the open regionalism policy paradigm: a trade-oriented strategy of regional economic integration – which was imported from APEC countries and became dominant in Latin America in the early 1990s – pivoted on the reduction of tariff barriers and the opening up of national markets to foreign trade and investments; the economic schemes conceived under the umbrella of ‘open regionalism’ were designed to have an ‘open membership’ not limited to the countries of a specific region (ECLAC 1994).

  3. 3.

    The 1997–1999 East Asian financial crises reverberated through the region and contributed to the devaluation of the Brazilian real and the Argentinean peso, which led to Argentina’s default in 2001.

  4. 4.

    Together with infrastructure and energy, Brazil’s regional agenda included collective security and trade convergence between CAN and MERCOSUR.

  5. 5.

    http://www.iirsa.org/admin_iirsa_web/Uploads/Documents/comunicado_brasilia_esp.pdf.

  6. 6.

    IIRSA’s ten integration and development hubs are the Andean Axis, the Peru-Brazil-Bolivia Axis, the Paraguay-Parana Waterway Axis, the Capricorn Axis, the Southern Andean Axis, the Southern Axis, the Mercosur-Chile Axis, the Central Inter-Oceanic Axis, the Amazon Axis, and the Guyana Shield Axis (IDB 2011: 66).

  7. 7.

    Between 2002 and 2006, left-wing governments won elections in Argentina, Bolivia, Brazil, Chile, Ecuador, Uruguay, and Venezuela (although Chávez got to power in 1997, it was only in reaction to the 2002 coup attempt that his government turned decisively to the left).

  8. 8.

    It is noteworthy that, although BNDES has become an important financier of South American infrastructure projects, it did not finance any IIRSA/COSIPLAN projects. As a matter of fact, BNDES prioritised South American governments’ demands for loans concerning domestic infrastructure projects, which were not part of the integration project portfolio but had more political visibility and thus provided higher electoral payoffs. By conditioning lending activities to South American governments on the requirement to contract Brazilian companies and workforce, BNDES fostered the regionalisation of the Brazilian construction sector, rather than the integration of South America’s regional infrastructure (Hochstetler and Montero 2013).

  9. 9.

    PETROSUR is an energy cooperation initiative that Venezuela has addressed to all South American countries following the model of PETROCARIBE (Venezuela’s flagship cooperation programme with the Caribbean countries). The initiative is based on strategic cooperation among state oil companies aimed at increasing production efficiency, and it includes assistance for oil developments, investments in refining capacity, and preferential oil pricing among member countries.

  10. 10.

    Brazil is privileging national and bilateral energy projects over regional energy cooperation, while Venezuela’s hegemonic project has lost momentum due to the severe domestic economic and political problems of the post-Chávez phase.

  11. 11.

    It is relevant to specify that 82.3 per cent (477 projects) of COSIPLAN’s total projects are national, 16.4 per cent (95 projects) are binational, and only 0.8 per cent (5 projects) and 0.3 per cent (2 projects) are, respectively, tri-national and multinational. In terms of territorial scope by country, Argentina absorbs 180 projects (145 national and 35 binational), Brazil 106 (79 national, 25 binational, and 2 tri-national), and Peru 73 (49 national, 21 binational, 1 tri-national, and 2 multinational) (COSIPLAN Portfolio Projects Database 2014).

  12. 12.

    Within the COSIPLAN portfolio, there are 101 projects that belong to API because of their high impact on South America’s physical integration, totalling an estimated investment of US$ 16.7 billion (10.6 per cent of COSIPLAN’s total investment).

  13. 13.

    It is an effort to rationalise and optimise the integration of the IIRSA portfolio projects for the next decade in order to increase their developmental impact. See http://www.iirsa.org/admin_iirsa_web/Uploads/Documents/rc_brasilia11_1_pae.pdf.

  14. 14.

    This evaluation methodology has been designed to identify complementary actions that aim at minimising the negative effects – from a social, environmental, and cultural point of view – of IIRSA’s infrastructure projects. The methodology includes the participation of experts in the area of environmental and social evaluation, as well as of civil society groups.

  15. 15.

    The construction or refitting of hydroelectric plants and microcentrals represents 60 per cent of energy generation projects and 85.4 per cent of estimated investments in the subsector, whereas energy interconnection projects are exclusively focused on building new power interconnections (COSIPLAN 2013: 62).

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Interviews

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  2. I2: Chile’s representative at COSIPLAN (15 December, 2012).

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  4. I4: Former Ministry of Strategic Affairs — Itamaraty (19 October, 2012).

  5. I5: Director of South American Economic Relations — Itamaraty (22 October, 2012).

  6. I6: Executive Secretary of the Latin American Energy Organisation (OLADE) (11 December, 2013).

  7. I7: Analyst from the Brazilian Ministry of Planning (21 October, 2012).

  8. I8: Expert on infrastructure integration from the Federal University of Rio de Janeiro (UFRJ) (8 October, 2012).

  9. I9: Coordinator of International Negotiations, Industrial Federation of São Paulo (FIESP) (14 October, 2012).

  10. I10: Director of the Energy Institute at the University of São Paulo (USP) (16 October, 2012).

  11. I11: Director of the Infrastructure Department, Federation of Industries of São Paulo (FIESP) (14 October, 2012).

  12. I12: Former President of the Republic of Chile (17 December, 2013).

  13. I13: Ecuador’s representative at the Energy Council of UNASUR (4 December, 2013).

  14. I14: Argentina’s representative at COSIPLAN-IIRSA (19 February, 2015).

  15. I15: Senior representative from IDB-INTAL (15 February, 2015).

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Acknowledgements

A preliminary version of this article was presented in the Seminar on Comparative Regional Integration organised by the Global Governance Programme at the European University Institute, in Florence, on 22 May, 2014. The authors wish to thank especially Carlos Closa, László Bruszt, Olivier Dabène, Philipp Schmitter, Detlef Nolte, Carlos Milani, and three anonymous reviewers for their critical comments. All errors or omissions are the authors’ sole responsibility.

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Correspondence to Stefano Palestini.

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Palestini, S., Agostinis, G. Constructing regionalism in South America: the cases of sectoral cooperation on transport infrastructure and energy. J Int Relat Dev 21, 46–74 (2018). https://doi.org/10.1057/jird.2015.15

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Keywords

  • energy integration
  • regionalism
  • regional leadership
  • South America
  • transport infrastructure
  • UNASUR