South American Community of Nations announced at Third South American Summit

December 2004

South American nations began the creation of an international economic and legislative bloc by a declaration made at the Third South American Summit on 8 December. Named the South American Community of Nations, the organization is a step toward greater coordination among South American states.

Two existing South American trade blocs, the Andean Community (Comunidad Andina) and the Southern Common Market (Mercado Común del Sur, or Mercosur), have been combined and three previously uninvolved states included to create the community.

The summit, held between 7-9 December at Cusco and Ayacucho in Peru, was attended by heads of state from Bolivia, Brazil, Chile, Colombia, Guyana, Peru, Suriname, and Venezuela. Foreign ministers attended for Argentina, Ecuador, Paraguay, and Uruguay. The summit was convened principally to sign the two-page Preamble to the Foundation Act of the South American Union on the second day of the summit. Although the Bolivian and Colombian presidents attended the summit, they did not attend the signing ceremony, this instead being done by representatives. Central American states Mexico and Panama attended the ceremony as observers.

The locations for the summit were chosen for their historical significance and their association with events that reflect well on South America. Cusco was the ancient capital of the advanced civilization of the Incas. Ayachucho was the site of an 1824 decisive victory against Spanish troops by the South American independence movement headed by Simón Bolívar. The First and Second South American Summits were held at Brasília, Brazil in September 2000 and Guayaquil, Ecuador in July 2002.

The community will include every state in South America with the exception of French Guiana, itself a territory of France. Bolivia, Colombia, Ecuador, Peru, and Venezuela join SACN from the Andean Community, a trade bloc established in 1969. From the more recent (1991) Mercosur comes Argentina, Brazil, Paraguay, and Uruguay. Guyana, Suriname, two small northeastern countries which had previously not participated in a South American trade bloc, will not immediately join the community. Chile will additionally join; it has, however, been cautious.

SACN is a more ambitious union than the previous Andean Community and Mercosur. It has been established to be more than a trade union. The "ultimate goal, which can hopefully be reached, in time, is the United States of South America," explains Secretary General of the Andean Community Wagner. A common currency, tariff-free common market, and regional parliament are all proposed in the Cusco declaration.

Many disputes exist between South American nations that may be issues in advancing SACN.

The principal force behind SACN has been Brazil. The First South American Summit was held in Brazil through the efforts of Brazilian President Fernando Henrique Cardoso.

Chile has been an associate member of Mercosur since 1996. It was a member of the Andean Community from its inception in 1969, but withdrew six years later when ruled by General Augusto Pinochet. With 70% of its GDP attributed to foreign trade, Chile has traditionally favored relations with the United States or the Asia-Pacific Economic Cooperation forum over South American agreements.

SACN's short-term political and economic effects may be limited. The elimination of all trade tariffs has long been a goal of both the Andean Community and Mercosur, but has had little success.

However, 32 construction projects were approved at the summit. Worth US$4.3bn over five years, the projects focus on improving regional infrastructure. The largest is a US$700m road highway that will link Brazil and Peru across the Andes mountains. "These are anchor projects that will be carried out over five years," said Wagner. "They were chosen because they do not serve merely as corridors between countries and zones, but also as a means of promoting development in border regions, which have traditionally been the poorest and most marginalised in our countries." Wagner identifies 350 potential infrastructure projects of a combined cost of US$200bn.

Details of the South American Community of Nations are expected to be planned further at the first First SACN Summit in March or April of 2005 in Brazil. Work on a constitution is expected to begin in 2005. A Second SACN Summit of unspecified date is to be held in Bolivia.