By Alonso Soto
BRASILIA (Reuters) - On his first foreign trip since undergoing cancer treatment in Cuba earlier this year, Venezuelan President Hugo Chavez on hailed his country's welcome by fellow South American leaders into a troubled regional trade bloc on Tuesday.
Ignoring criticism that Venezuela's entry could eventually cause greater dysfunction among the Mercosur trade bloc's members, Chavez cast the event as a continuation of his self-styled revolution and a sign of greater ascendance for South America as a whole.
"Our north is the south," the Venezuelan president said, evoking Simon Bolivar and other revolutionaries who wrested the continent from colonial powers. "Mercosur is, without a doubt, the most powerful engine that exists to preserve our independence."
Chavez, who recently declared himself cancer-free, stood at a podium throughout his 20-minute speech in Brazil's capital and spoke in a clear, strong voice.
The meeting was overshadowed by controversial events that enabled Venezuela's entry into Mercosur, which also includes Brazil, Argentina, Paraguay and Uruguay. The grouping now accounts for about $3.3 trillion in combined gross domestic product, and the leaders said it would be the world's fifth-largest economy if it were a single nation.
The expansion of Mercosur was criticized by many who see a paradox in the protectionist policies and leftist slant that increasingly have come to dominate a bloc originally created to liberalize trade.
After years of stalled negotiations with Caracas, the group hastily accepted Venezuela despite the objections of Paraguay, a marked absence at Tuesday's meeting. The other three countries made their invitation to Chavez after suspending Paraguay in June because of the controversial impeachment there by conservative legislators of leftist president Fernando Lugo.
That move troubled critics, who said it was emblematic of the decline of a bloc that was founded in 1995, at a time when a group of free-market reformers was dominant in the region.
"What was once an economic bloc has now been reduced to a political sideshow," said Mario Marconini, a former Brazilian trade secretary who is now a business consultant in Sao Paulo. The inclusion of Venezuela despite the veto of a full-fledged member, "is a fatal blow to its economic credibility."
Brazilian President Dilma Rousseff said on Tuesday that Paraguay's suspension is justified until the country "normalizes" its internal politics. Brazil and other neighbouring countries have argued that Paraguay must proceed with its regularly scheduled presidential elections next year before they consider its government to be stable.
FOCUS ON CHAVEZ
Most of the other leaders present glazed over the Paraguay controversy, and focused instead on criticizing the orthodox economic policies of the developed world. They cited Mercosur as a vehicle that could further regional goals of fair trade, equitable growth, and social inclusion.
Chavez said construction companies from Mercosur countries should take part in ongoing projects to build millions of subsidized homes in Venezuela. Argentine President Cristina Fernandez said the region would continue to produce all-important raw materials for the global economy, but demanded "financial stability" in return from richer countries.
Mercosur, she said, could "make this new pole of power indivisible, indestructible."
Chavez, who has spent more than 13 years in office, has pursued a personality driven government that has scared away foreign investors and crippled productivity. His acceptance by Mercosur, opponents say, will give him one more thing to boast about as he campaigns for another six-year term ahead of Venezuela's presidential election in October.
Officially, the leaders hailed Venezuela's strengths as a major oil producer and an important market for everything from Brazilian machinery to Argentine wheat. In practice, though, Venezuela can't fully participate in the bloc until it agrees to accept common tariffs adopted by Mercosur, common agreements with third-party countries, and other prerequisites that Chavez has failed to embrace since talks for inclusion began in 2006.
In private, Brazilian exporters say they are worried about doing more business with Venezuela. Though Brazil exports appliances, vehicles, and other products to the Andean country, companies have problems with Venezuela's strict currency controls and onerous rules for the repatriation of profits.
BLOC IS ALREADY TROUBLED
"The bloc is a mess," said Rubens Barbosa, a former Brazilian representative to Mercosur who is now a consultant.
"Just imagine if you start adding Venezuela and others," he added, noting recent discussions to include Bolivia and Ecuador, two countries with close ties to Chavez.
Tuesday's ceremony was accompanied by a trickle of business as Chavez and Rousseff formalized a previously disclosed plan by Conviasa, the Venezuelan airline, to purchase 100-seat jets made by Embraer, the Brazilian aircraft manufacturer. Under the terms of the agreement, Conviasa will pay about $270 million for six Embraer 190 jets, with an option for 14 more.
Meanwhile, Venezuela and Argentina signed an agreement for greater investment in each other's oil sector. PDVSA, Venezuela's state-run oil producer, will invest in Argentine petrochemicals, and YPF, its Argentine counterpart, will invest in Venezuelan oil fields, according to the agreement.
(Writing and additional reporting by Paulo Prada in Rio de Janeiro; Editing by Todd Benson and Stacey Joyce)
