The invitation extended by Brazilian President, Fernando Henrique Cardoso, to build a South American area introduces a new dimension into Latin America’s integration and development processes that calls for a tremendous political operation.

During his visit to Andean Community headquarters in Lima, in July 1999, President Cardoso gave a lecture in which he anticipated his initiative in the following words: "integration with South America is the basic thing. By this, I do not mean non-integration with the FTAA, non-integration with Europe, non-integration with whatever, but the fact is that for Brazil, the closest reality is the South American reality."

Months later, in February of this year, his summons came to the Summit of South American Heads of State, based on the fact that "their geographic contiguity makes of the rapprochement of the region’s countries a goal that is both natural and necessary." … "Intensification of the network of reciprocal interests will contribute heavily to peace, democracy, and stability in our region, as well as to the economic and social development of each of our countries."

The challenge before us is huge, but so also are the opportunities. South America spans an enormous area that is exceptionally well endowed with natural resources like water, minerals, hydrocarbons, and diversity, which offer immense prospects for the growth and development of the economies that occupy it and of their peoples.

South America covers roughly 17.8 million square kilometers, has a population of 341 million persons and a Gross Domestic Product of over 1 trillion 207 billion dollars and its exports were in the neighborhood of 134 billion dollars en 1999. All of this makes it a very important real market with a potential for achieving a more favorable and competitive position in the world economy and an undeniable political weight on the international scene.

The growing interlinkage between its two integration processes, the Andean Community and Mercosur, takes on increased importance from this new vantage point.

In April 1998, after a lengthy process of approaches, the Andean Community and Mercosur signed the Framework Agreement in Buenos Aires for the creation of a Free Trade Area that encompassed other fields for cooperation and coordination between the two blocs.

The tariff agreements signed by the Andean Community, first with Brazil and then with Argentina, are helping to clear the way so that direct negotiations may be conducted to put a free trade area into operation. As soon as the consent of Paraguay and Uruguay, the two other Mercosur members, is obtained, we can start up the process for concluding this trade agreement, which we hope to have operational toward the middle of next year.

In this context, it will be necessary to have an interconnection with Chile, currently an associate member of Mercosur, as well as to bring Guyana and Suriname into these processes.

These are what make the relationship between the Andean Community and Mercosur the keystone in the building of the South American area. To our way of thinking, this process should rest simultaneously on the deepening and consolidation of integration within each of these blocs, their growing interconnection, and a rapid convergence toward the attainment of the new objective in common.

We are convinced that this relationship can be progressively enriched if, as of this moment, we start to jointly undertake specific and useful tasks like harmonizing provisions for interconnecting telecommunications systems and on transportation between countries, as well as on technical and health issues and customs practices and formalities for boosting trade. Headway can also be made in developing the physical infrastructure and border crossings that are vital if what we want is to turn this geographic space into an actively operating market.

Consolidation within the Andean Community and within Mercosur itself, the convergence of the two blocs in building the South American area, and the reinforcement of regional integration are concurrent processes for which there is a pressing need, for time is running out.

Each group of countries should contribute the best that it has in order to take advantage of synergies. Group efforts should not be limited to the fields of trade and production; rather, new areas should be opened up for cooperation on monetary and financial issues and in the field of computers and new technologies where a large potential awaits development.

For the Andean Community, the establishment of a free trade area with Mercosur cannot be attained through "haggling," but must be born of cooperation. The aim is to seek out formulas in which both parties are winners, and this is not impossible. In fact, we consider that this relationship cannot be allowed to stop at trade aspects, but should extend to dialogue and concerted decisions in the political area.

Within these general principles, we believe that the development of an economic area and for cooperation between the South American countries should be congruent with the aim of moving toward the integration of Latin America and the Caribbean. As of this moment, we should promote the region’s coordination in seeking more balanced participation in the negotiating of the Free Trade Area of the Americas, scheduled to enter into operation in 2005.

The progressive consolidation of the South American area is the best contribution we can made toward giving our countries a more orchestrated, balanced, and equitable role to play within the world economy. Its achievement will depend basically on our own capacities and constitutes one of the strongest responses possible in the face of a globalization process that threatens to benefit mainly the developing countries.