DRAFT VERSION. Poznan University of Economics, European Studies Department (Poland)

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1 Transfer of the European Regional Policy to Latin America Ida Musiałkowska, Ph.D. Poznan University of Economics, European Studies Department (Poland) In contemporary world there are still disparities very much visible among regions (understood as sub-national units). In the European Union (EU) one of the instrument aimed at cohesion and the regional potential spurring is its regional/ cohesion policy 1. Lately, the interest in the European integration model and governance has started to be noticed in the international organizations and the third countries. Also the cohesion/ regional policy of the EU has been inspiring the policy-makers world-wide. The European Commission started dialogues with the third parties through which policy transfer can be observable. The main aim of the article is to analyze the process of possible EU regional policy transfer and regional/ cohesion policyforming in Latin America (with special focus on MERCOSUR). The transfer depends on many factors among which the level of integration and institutionalization of international organization are very important. The article is divided into the following sections: the EU support to the integration process in Latin America (LA) with the emphasis on MERCOSUR, brief presentation of basic foundations of the EU regional policy, the possibilities of the policy transfer to MERCOSUR followed by the example of cross-border co-operation (CBC). 1. European Union as a supporter of regional integration in MERCOSUR To-day we do observe increasing interdependence of many states in the globalised world. Also in the Latin America one may enumerate many bi- or multilateral agreements, superimposed each other, as well as existence of new geographic and functional areas of integration. They co-exist despite of the debates on the protectionism, populism and reference more towards bilateral contacts of many states. There is also a strong debate on the reason of maintaining neoliberal approach to policy-making or seeking new solutions in the area of economy. Since the nineties of the 20 th century one may observe both integration process and proliferation of the Latin America countries external relations (see graph 1). 1 In the article the author would rather use the notion regional policy that focuses on the relations between institutions; modes of governance and management of the policy. In the EU the name Cohesion Policy is more frequently used, which stresses one of the integration aims that is economic, social and territorial cohesion of the whole territory. 1

2 Graph 1. Example of the Latin America countries external relations proliferation since the 1990 s Source: Sanoussi Bilal; The Coherence of Multi-Level Negotiations:Challenges for developing countries; UNU-CRIS e-working Papers; W-2004/11 in: Musiałkowska I. Do Business Cycles in Latin America Synchronise, CESLA, Warsaw, 2007 Integration trials in the LA can be observed since Central American Common Market appeared in 1960, then Andean Community in 1969, Caribbean Community (CARICOM) - in 1973 or the Southern Common Market (MERCOSUR) in Lately, appearance and significance of UNASUR and ZICOSUR has been also discussed. The levels of institutionalization of each international organization are different due to different approaches of the Member states towards integration. What can be characteristic for 2

3 the process is building of a sort of institutional structure in cases of CARICOM or CACM and lack of real strong structures in case of the MERCOSUR or the Andean Community. In the opinions of some authors (i.e. C. Ramon-Berjano) this shows worrying fact of non-learning form the past Latin American experiences. There are many factors that are influencing insufficient integration progress. The decision on founding MERCOSUR was political and economic because of the Argentinean and Brazilian governments will to foster regional trade since 1991 [Rosenberg, Bozzalla, 2008]. Since that date it comprises: Argentina, Brazil, Uruguay, Paraguay. Currently Venezuela has to be ratified by Paraguay, despite its application for full membership in The functioning of the MERCOSUR one can divide into three phases: phase characterized by increase of the trade volume and the FDI (foreign direct investment) among its Member States, which is contributed mainly to: introduction of liberal reforms and lowering custom duties in mutual trade. In 1996 also Chile and Bolivia declared their will to join the MERCOSUR phase characterized by stagnation in deepening the reform process. It was due to the crises that affected the economies of the Member States, namely: Asiatic, Brazilian, Russian and Argentinean phase characterized by revitalization of integration processes in the MERCOSUR. New instruments to rebuild the custom union and trials to create the common market were introduced in the organization. Moreover, Venezuela applied for membership of the MERCOSUR and at the same time Ecuador, Columbia and Peru got the status of the associate countries, while Mexico got the observer status. However, the share of trade volume against the total import and export volumes can be noticed last years (except for Argentina in case of import). Main groups of traded goods are agriculture and raw materials that can be easier traded outside the MERCOSUR. That factor is non-favorable for the co-operation development among the countries belonging to the community[chwiej, 2010, pp ]. When dealing with the economic integration phases one may observe that MERCOSUR is now trying to finish free trade area and complete the common market. 3

4 The European Union is trying to support integration process in the Latin America. One may distinguish the objectives and elements of potential EU help to strengthen a process of LA integration (see table 1.) Table 1. Objectives and elements of the EU support to regional integration in Latin America Regional Regional cooperation Political Trade Development integration dialogue cooperation Rio Group-LAC X X MERCOSUR X X X Andean X X Community Central America X X Adaptation based on Lombaerde The EU and World Regionalism Ashgate, 2009 p. 15. In case of MERCOSUR there are three areas of potential support: regional integration, political dialogue and trade. The relations between Latin America and the EU are characterized by institutionalized and multi-layered approach. The EU institutions: Commission and Parliament set the strategic framework for co-operation. For years the Commission cooperation policy is based on four elements that are related to the areas shown in table 1: intensification of political dialogue; creation of environment for trade and investment (by i.e. creation of Association Agreement based on region-to region approach); support for Latin America in gaining stability and prosperity; better cooperation to improve mutual understanding [Lombaerde, Schulz, 2009 p.18]. The support for regional integration is targeted not only on institutional regional bodies but also organizations that represent economic and business sectors: trade unions, trade organizations, chambers of commerce and associations. This shows contemporary vision of the economic/ trade diplomacy acting from both: European and American sides. In case of MERCOSUR the Regional Strategy Paper for allocates ca. 50 million EUR to support projects in: - MERCOSUR institutional strengthening - supporting MERCOSUR in preparing implementation of the Association Agreement 4

5 - fostering the participation of civil society to MERCOSUR integration process Lombaerde, Schulz, 2009 pp.21-22]. There are also numerous indicators of measuring the progress in regional integration used by the European Union. The indicators in the table 2 reflect the methodology proposed by de Lombaerde and van Langenhove and are modification of the DG DEV (European Commission) and other international organizations like World Bank etc. proposals of such indicators. They can, according to the authors, facilitate observation of the processes and effects in many areas, including the EU support areas described before, that are shaped in the strategies. The main categories are indicators referring to actors, structural factors, implementation, effects and interdependence [Lombaerde, Schulz, 2009 p. 37]. In case of MERCOSUR the majority of indicators are enumerated in implementation section and refer to functioning of custom union and trade agreements (see table 2). 5

6 Table 2. Indicators used by the European Union while monitoring regional integration. Case of Latin America Category MERCOSUR CENTRAL AMERICA CAN ACTORS - Effective participation of all countries in all institutions - Effective participation of all countries in all institutions - Repartition of legislation competence between different actors - Repartition of legislation competence between different actors STRUCTURAL FACTORS - Elaboration of public procurement - Sustainable financing mechanisms to - Sustainable financing mechanisms to Institutionalization and Policies regime support institutional set-up support institutional set-up - Common policies - Common External Trade Policy (CET) - Common External Trade Policy - Common Policy in Agriculture - Common Policy in Agriculture IMPLEMENTATION Application of CET Harmonization of regulatory frameworks: Implementation of common trade regulatory frameworks: Implementation of common trade regulatory frameworks: - Application of the MERCOSUR - Legislation on competition - Legislation on competition framework Agreement in Services - Trade defence instruments - Trade defence instruments - Consistency with the WTO agreements - Sanitary and Phytosanitary Norms - Sanitary and Phytosanitary Norms on Technical Barriers to Trade (TBT) (SPS) (SPS) - Definition of norms (also consistent - Investment - Investment with TBT) - Government procurement - Government procurement - Validation of market procedures, - TBTs - TBTs including consultations with Party - IPRs - IPRs States before consideration by the - Geographical indications - Geographical indications Common Market Group - Implementation of legislation on - Implementation of legislation on Safeguard Measures: minimum prices, subsidies etc. minimum prices, subsidies etc. - Scope and application - Implementation of CET - Implementation of CET - Examination of import prices - Implementation of Customs procedures - Implementation of Customs procedures - Economic factors (valuation of goods, requirements for (valuation of goods, requirements for - Qualified applicants release in free circulation) release in free circulation) - Initiation; measure; investigation - Implementation of dispute settlement - Implementation of dispute settlement - Verification mechanism mechanism - Provisional measures - Implementation of regional - Implementation of regional - Definitive measures liberalization of trade in services liberalization of trade in services 6

7 - Appeals/ dispute settlement - Public interest - Authorities (trade defence & safeguard committee; MERCOSUR trade commission) - WTO notification\adjustment plan Implementation of anti-dumping legislation: - Normal value - Volume of imports/ market share - Minimum dumping - Support for complaint - Deadlines for proceedings - Period of investigation - Verification of the information submitted - Confidential information submitted by parties - Provisional measures - Definitive measures - Regional application - Lesser duty rule - Appeals/ dispute settlement - Legitimacy of third parties (consumers and users, other regional or foreign parties) - Public interest/ community interest - Measures on behalf of a third country - Circumvention - Definition of domestic production - Normal value and export price comparison Competition rules: - Completion of FTA Completion of FTA 7

8 - Restrictive acts - Concentrations - State aid Rules of origin: - Basic origin rules - Direct transport - Principle of territoriality - Cumulation of origin - Insufficient working or processing - Tolerance provision - Neutral elements\documentary of proof - Harmonization of SPS EFFECTS - Equal treatment for any EU products entering CA from any port - Equal treatment for any EU products entering CA from any port - Progress of intra-regional trade - Progress of intra-regional trade INTERDEPENDENCE Level of intra-regional trade Level of intra-regional trade Level of intra-regional trade Source: P. Lombaerde, op. cit. pp

9 Analyzing the table 2. one can evaluate that the EU support has concentrated mainly on facilitating and measuring trade relations within the organization. Despite the fact that majority of activities refers to the trade relations enforcement, in MERCOSUR, as in one of not so many international organizations, the structural interventions have been undertaken in order to strengthen completion of the common market [Dabene, 2009]. Those actions form a part of regional policy formulation and cohesion obtaining. 2. Regional policy-making Deepening of the internal market/ common market (as one of the economic integration phases classified by B. Balassa) is based not only on free circulation of factors of production and goods, services or entrepreneurship but also on improvement of functioning of many more areas. One of them is reducing regional and structural disparities among regions (understood as sub-national units) and existing social imbalances. Such equalization helps to pursue common policies from the organization level i.e. monetary policy, trade policy or stronger coordination of fiscal policies. Besides, the development of territories and so called integrated approach have been now the key-points for regional policy-makers Regional/ Cohesion policy of the European Union In international organization such as the European Union one of the policy that contributes to deepening the integration process is its regional/ Cohesion Policy, introduced in contemporary form in the nineties of the 20 th century. It is based on the shared competences of the European Commission - the main implementing body from the EU level and national and regional authorities from the EU Member States (MSs). One may analyze the regional policy taking into consideration strictly economics side and effects and paradigms of development, or broaden it also by policy management or governance. Contemporary focus of the European policy-makers is based on the approach proposed by the Organization for Economic and Co-operation Development - OECD [OECD, 2009], where regional growth has to be supported by investing in three areas at regional scale: - creation of innovation and support of business environment; - formation of human capital; - infrastructure provision. 9

10 Graph 2. OECD regional development approach Source: OECD, 2009 The support coming from the EU budget cannot be transferred only to one area because of potential lose of efficiency. Regional economic growth has to be based on balanced development of conditions necessary for economic growth that interact with each other. It was stated that majority of the countries (developed and some of the developing ones) are reforming to that direction, however the implementation of such a model can be difficult. As the opposite, the World Bank (WB) proposed its vision of economic (and regional economic) development with the possibility of separating support and concentration on one of the before-mentioned areas. The use of certain instruments depends on the number of problems (dimensions). As an example one may take the case of Brazil analyzed by the WB together with a set of solutions proposed to respond to problems identified in the report [graph 3, World Bank, 2009]. 10

11 Graph 3. Brazilian problems identified by the World Bank Source: World Bank, 2009 Brazil was characterized as a country with two main problems (dimensions 2D): - high poverty rate and numerous number of poor inhabitants; - lagging areas with problems coming from long distances and misplaced densities. The instruments (2 I) proposed by the WB were the following: - to create institutions that can help with solving social problems and help to combat poverty, - to provide infrastructure to connect leading and lagging places in the space. [World Bank, 2009] When comparing two approaches one can easily judge that instrument facilitating operation of business sector was neglected in the WB proposal. 2 Another aspect of analyzing possibility of EU regional policy transfer is the way of pursuing and shaping such a public policy in other organizations and countries. This approach bases on the public administration management/ governance theories. 2 Brazilian government in the National Regional Development Policy prepared in 2010 takes the EU and OECD approach rather than the World Bank one. DOI

12 The main features of the regional policy of the EU are embedded in its principles and interrelations between actors involved in policy implementation. The principles of regional/ Cohesion policy reflect both axiology, governance and management. Those are namely: - solidarity, subsidiarity, programming, concentration related to multiannual financial planning of the EU budget, and partnership. Those principles have influenced enhanced modes of co-operation and governance present in contemporary public sphere such as multilevel governance, network co-operation based on the horizontal and vertical co-operation/ partnership/ of the European, national, regional and local authorities in the process of the programming and implementing the regional policy. Another characteristic feature is presence of the different authorities and agencies in each phase of the policy cycle and delegating tasks to national and regional levels. Policy cycle is based on the Project Cycle Management (PCM) methodology used by the European Commission for many years (see figure 1). Figure 1. Political cycle according to PCM methodology 3. Formulation of aims and instruments 4. Implementation and results/ effects achievieng 2. System of intervention oriented towards problem solving 5. Control of cohesion and efficiency 1. Identification of problems and causes 6. drawing lessons Source: Molle,

13 Such policy approach stresses the way of proper planning of interventions with clear response to problems identified, monitoring of the policy implementation together with evaluation of cost/effect relations in terms of public spending. According to solidarity principle all Member States contribute to the EU budget and depending on the level of economic development of its regions are eligible for obtaining certain levels of support reflected in the policy objectives. Two of the regional policy objectives, Convergence and Regional competitiveness and employment classify all EU regions for co-financing depending on the fact whether their GDP per capita exceeds the 75% of the EU average GDP per capita. In case of the poorer regions the availability of financial instruments the Structural Funds is bigger. Moreover, the poor countries (with the GNI per capita lower than 90% of average indicator for all Member States) are eligible for additional funding from the Cohesion Fund. Another crucial aspect is developing transnational: crossborder and international co-operation between MSs regions. Reaching the EU objectives and the use of financial instruments is guaranteed in the EU primary law (Treaty on the functioning of the EU, title XVIII, art ) and main regulations on funds (Council Regulation (EC) No 1083/2006, (EC) No 1081/ 2006, (EC) No 1082/2006, (EC) No 1084/2006). There are possibilities of obtain repayable (loans and credits from the European Investment Bank, European Investment Fund or Structural Funds) and non-repayable (grants) forms of co-financing. It is also important to mention that public funding from the EU budget co-finances operations in the Member States and their regions that forces also the MSs to learn the EU way of policy-making in that particular area. The European Commission highlights also most important facts that can be taken into consideration by the third countries and international organizations while analyzing the EU regional policy. Those are: - the importance of economic framework conditions taken as crucial; - a need for tailored strategies with an appropriate policy mix; - the importance of stable budgets and coherent programming; - the need for cross-border cooperation; - agglomeration economies and urbanism; - the role of small and medium sized towns and local centers; 13

14 - local employment and capacity building initiatives; - strong institutional support (including strong institutional leadership, sound political judgment, robust economic analysis and policy-planning, technical expertise to guide project managers in the field plus strong inter-institutional co-ordination); - multilevel governance [European Commission, DG REGIO, Inforegio, 2009]. Moreover, the European Commission basing on the EU experiences proposes some lessons that can be useful for the countries outside the EU: - long term strategic vision of what needs to be achieved; - an objective/ non-political method or raising and allocating resources there is a strong necessity for clearness in allocating money for certain progammes and methods of measuring the effects (in other words methods of efficiency measuring); - system combining co-financing and partnership enhances ownership and in this meaning projects should belong to the community that benefits from them, which is problematic when i.e. local and regional authorities both are participating in project costs; - dissociation of the legal framework setting out the broad rules governing the implementation of the policy from individual project decisions (in the EU there are shared competences between the EU level, when the Commission and the European Parliament set out the legal basis and regulation referring to regional policy objectives and general rules; while the Member States decide on their way of the implementation of the whole systems in the countries). - decisions are needed whether to support integrated approach or support individual projects (the EU does both via different funds). - decision whether to rely on grants or repayable forms of support or combination of both (the EU does the combination so far) that depends on the economic incentives to be desirable from the economic point of view and the strength of the financial and banking sector. - adequate formal and informal institutional capacities are of crucial role for the progammes and projects management (those capacities are in the fields as: financial management and control, economic development planning, identification and motivation of suitable partners); this issue is especially important in case of cross-border co-operation that brings together actors from different administrative systems; 14

15 - monitoring and evaluation is crucial for ensuring the efficiency and effectiveness of the programmes; that requires technical capacity within co-funded programmes and presence of i.e. research institutions or universities to model macroeconomic development across regions; - conditionality that requires respect for open markets in case of the EU including competition rules on the state-aid, open public procurement rules), respect for so called horizontal policies : environment policies and rules; respect for principle of equal opportunity; an approach based on partnership and democracy. Non-respect in the EU may cause with the imposition of financial penalties; - transparency in policy and programmes implementation treated as an essential component of good governance ; effective communication and information systems should be included in the administration of the programmes (i.e. indicating the projects that have been assisted, the results of the monitoring and evaluation exercises, explanation how to obtain public aid to prospective beneficiaries) [European Commission, DG REGIO, Inforegio, 2009]. 3. Regional policy transfer to MERCOSUR? In case of regional policy one may observe a lot of inspiration taken from the European Union example in MERCOSUR and other places in the world. The European Commission, as described in the section 1., established political dialogue with many countries and international organizations through which more elements of policymaking can be discussed and introduction of which can be supported. When taking into consideration theoretical background policy transfer concepts will be used in this section of the article. The basic model can answer the following questions: who is involved in the process of transfer (actors), where from, where to and why (reasons) transfer can be observable, and what (subject) and in what form can be transferred (see figure 2.) 15

16 Figure 2. Simplification of policy transfer model Who? What? Form? Where from? Where to? Why? Own elaboration based on Evans, 2004 According to i.e. Evans, Rose, Marsh et al. reasons of transfer can be political, pragmatism, efficiency in other countries, in organization - voluntary, legitimization of own/ already achieved/ aims. Actors of transfer are i.e.: civil servants, policy-makers, consultants/ experts, society. Forms of transfer answer the question to what extent it was done: inspiration, adaptation, emulation, drawing of conclusions and own policy-making based on the basis of experiences of other countries. Subject of transfer in case of regional/ Cohesion policy can be i.e.: the whole policy cycle or cycle phase, strategic management introduction, planning/ MLG, financial instruments- cohesion/ structural funds In the analyzed area of the EU regional policy transfer some basic assumptions can be made. The EU is treated as a place where the transfer starts due to its accumulated knowledge and experiences in the area of the regional/ cohesion policy-making. Regional policy or its elements are subjects of transfer. Recipient is the international organization (MERCOSUR) that is a beneficiary of regional policy solutions adopted and it implements policy elements. Moment of transfer beginning are the date of the official documents signing by the EU i.e. Regional strategy Paper for and previous Communication from the Commission to the Council and the European Parliament COM(2005) 636 final. 16

17 It is also worth mentioning that European Commission (DG REGIO) concluded Memoranda of Understanding on regional policy cooperation with the third countries: China, Russia, Brazil 3, Ukraine or recently with the South Africa and all of which are confronted with: - wide regional disparities; - major challenges in terms of co-ordinating the different levels of government, and ensuring that decentralization can be achieved without compromising efficiency (DG REGIO DOI ]. The regular input of the European Commission to promote regional policies in Latin America has played a crucial role in interest in the European regional policy model. [AEBR, 2010] First action undertaken by the European Commission was problem mapping where main area of possible policy transfer were indentified. In case of the MERCOSUR and Brazil the common/ similar/ problems where the EU experiences can be useful are presented in the table 3. Table 3. Common problems and areas of possible transfer identified for the EU- MERCOSUR and EU-Brazil by the European Commission Problems and areas of possible cooperation/ transfer EU-MERCOSUR EU-BRAZIL to co-operate and exchange information on similar challenges in the global context: geographically targeted and other relevant social polarization, policies contributing to growth, the developments in the energy market and competitiveness, employment and to achieve climate change; a better, and sustainable, territorial balance in the urban-rural divide. the framework of a market economy; to exchange information on experiences in setting up and implementing regional policy with special emphasis on ways to promote the development of disadvantaged regions and areas including urban, rural and border areas; to exchange views and best practices on the organization of multi-level forms of 3 The agreement between the EU and Brazil signed in Brasilia in November 2007 can be treated probably as the cornerstone of a growing cooperation between the EU and Latin America in the field of territorial cohesion and it begun a very dynamic EU-Brazil Dialogue on Regional Policy. 17

18 governance and on participative governance through the involvement of partners in the conception and implementation of regional programmes; to exchange experience on developing regional strategies and methodologies of multi-annual programming and implementation Own elaboration based on the DG REGIO materials DOI In MERCOSUR one of the element supporting creation of common market is introduction of the regional policy elements preceded by introduction decentralization of power to the administrative units in i.e. Argentina and Brazil. The levels of task delegation and impact on sub-national policies may vary among the MERCOSUR states depending on the decentralization model adopted. [Faletti, 2010]. In 2005 financial instrument that should have helped in structural interventions - Structural Convergence Fund (FOCEM) was created to spur cooperation and integration among the four full MERCOSUR members (Argentina, Brazil, Paraguay and Uruguay) and to increase support for the lesser developed economies. It was based on the MERCOSUR decisions: Decisión CMC Nº 45/04, Decisión CMC Nº 18/05 and final Decisión CMC Nº 01/10. [MERCOSUR DOI ]. MERCOSUR Member States contribute to the fund depending on their wealth measured by GDP level) with the richest countries being the biggest contributors and poorest the recipients. FOCEM resources are concentrated in four programmes: structural convergence, development of competitiveness, social cohesion and strengthening of institutional structures and integration processes. They are intended for projects like i.e.: infrastructure works, increase in competition in smaller economies, promotion of social inclusion and strengthening the institutional structures. It appears that while the approval process is multi-stage, projects such energy inter-connection are getting underway. [MERCOSUR]. In that sense shaping of the financial instruments and use of similar principles as in case of the EU is strongly visible: solidarity, programming, concentration and even conditionality, 18

19 when certain agencies are supposed to evaluate projects along certain lines (environmental, social rates of return). There were also additional instruments introduced through decisions No 34/06 and 33/07 that reflected strategic plan to overcome asymmetries and aimed at opening smaller MERCOSUR economies as Paraguay and reduction of development gaps. [Dabene, 2009]. In the next sub-section of the article one of the form of pursuing regional policy crossborder co-operation in Latin America, with emphasis on MERCOSUR will be analyzed Cross-border co-operation (CBC) in MERCOSUR 4 Another interesting aspect of developing co-operation among Latin American regions is cross-border co-operation developed with the use of the European experiences. Despite differences in the geographic location, distances, and economic development 5, the Latin American regions started co-operation based on the European Union INTERREG projects and current third objective of the regional policy European Territorial Cooperation. Many European regions established contacts with their Latin American partners and started with exchange of experiences, study visits and sharing knowledge on regional development in the EU. Those are mainly Spanish, Portuguese, Italian and German regions that employed also consultants, local and regional authorities and research institutes in order to help with international projects 6. The European Commission created also a possibility to present results of such co-operation and enforce the dialogue during i.e. the Open Days conference for regional and local 4 Subsection is based on the AEBR Final Report CROSS-BORDER COOPERATION IN LATIN AMERICA. Contribution to the regional integration process, Reference nº 2009.CE.16.0.AT.118, October The total border lines of South America are less than in the EU, while the surface of the European Union covers only half of Brazil. With the exception of Buenos Aires the economic centers in Latin America are settled more in the interior of the states. Also important ports and metropolis at the seaside are far away from the borders. In Europe some important economic centers are located close to the border (Vienna, Bratislava, Berlin, and Copenhagen), being some of them already established cross-border metropolitan areas. Compared with Europe, distances are much longer, while transport infrastructure is less developed. AEBR, Spain and Italy are mostly related to protect indigenous communities and the environment. The Spanish Agency for International Cooperation has promoted some interventions in this sense. Another relevant project is the project Fronteras Abiertas (Open Borders), supported by the Italian Government and implemented by the Centro Studi di Politica Internazionale (CeSPI) and the Istituto Italo-Latino Americano (IILA), with the aim to build an interregional network for Latin American cross-border cooperation and integration. AEBR pp

20 authorities, practitioners and academia, co-organized with the Committee of Regions in Brussels. Documents that mainly refer to development of the CBC in Latin America are: - Communication from the Commission to the Council and the European Parliament (COM(2005) 636 final): A stronger partnership between the European Union and Latin America, in which the European Commission underlines the importance of cross-border cooperation concerning sustainable development: water resources, energy and planning of transport axes. - Sugerencias de politicas públicas de integración fronteriza en el MERCOSUR: el proyecto Integración Fronteriza en el MERCOSUR (Suggested public policies for border integration in MERCOSUR: the project Border Integration in MERCOSUR ). Main objective is to define action lines to design and manage border integration policies. - and besides: Decisions of the Andean Council of Foreign Ministers on Zonas de Integración Fronteriza (ZIF) en la Comunidad Andina.[AEBR, 2010 p. 23.] In case of MERCOSUR, apart from access to the FOCEM, the biggest financial contributions and at the same time most useful activities come from the national budgets (with top-down approach). Recent opening up the possibility to use the FOCEM resources for establishing the CBC and implementation of projects has given, in experts opinions, big impetus for development. Also financial institutions like the Andean Development Corporation (Corporación Andina de Fomento, CAF) and the Inter-American Development Bank (IDB) are including CBC in their agendas to promote development and integration in the continent. [AEBR, 2010] What was observed that until now there has not been a Latin American place-based approach for CBC with functioning structures like those developed in the EU during the last twenty years. At present this cooperation has taken mainly place on an informal level. [AEBR, 2010, p. 20] Taking into consideration the imbalances and fact of lagging behind border regions it is stated that the CBC formal interventions in these borders could be divided into three main axis: environment, human development and trade, and MERCOSUR 7 and related to it the network of MERCOCIUDADES include those lines in their programmes. The development of CBC is 7 Also the Andean Community of nations, SICA, Organization of American States OAS/OEA include CBC in their declarations. 20

21 linked fundamentally to supranational and national/sub-national political processes. Multilevel governance and subsidiarity are key issues. The strong need for bigger involvement of local administrative level is also stressed in the Latin American CBC [AEBR, 2010, p.28]. One of examples of the adoption of the EU way of thinking on the territorial co-operation is the set of interventions towards CBC listed in the Brazilian National Policy of Regional Development. The Development Programme for the Frontier Strip - PDFF (150 kilometres wide) was established along the borderline between Brazil and its 11 neighbours, defining objectives and lines of action. The frontier strip is now considered a priority area instead of an area of national defence, with plenty of barriers and restrictions, particularly after the redefinition of the Development Programme for the Border Strip. The focus is on sustainable regional development and integrated growth. It should be implemented in conjunction and compliance with the neighboring states of Brazil in order to achieve its objectives. The programme concentrates on the development of twin cities, intra- and intergovernmental structures, and integrated actions with the priorities of several meso-regions. The size of these regions is going beyond European ideas of border areas, but they have to be taken into account if CBC is concerned. Within the programme also a transnational strand exists. [NPRD, 2010; AEBR, 2010] The Brazilian Government is developing and supporting many activities i.e.: - constitution of an inter-federal working group on border integration in 2008 with the participation of federal departments, involving also municipalities and regions, in order to make proposals to develop and implement border integration activities with neighbouring countries, particularly with MERCOSUR. - a pilot project between the EU - French Guyana and Brazilian Federal Government, the States of Amapá, Amazonas and Pará, and Surinam. This project, in the framework of the Operational Programme Amazonia (European Territorial Objective, ERDF), aimed at the territorial development of border areas, the protection of the Amazonian natural and cultural heritage, and the development of cross-border economical activities and social cohesion, where the DG Regio of the European Commission is involved. - support to Interregional Cross-Border Cooperation and Latin American Integration Network (Open Borders). An Italian programme aiming to build an interregional network for cross-border cooperation and Latin American integration through the implication of sub-national authorities. It focuses in the triple border Brazil-Argentine-Paraguay; - Border Municipalities, developing special measures (education, labour, social services) for citizens living in border areas. 21

22 and some more. [AEBR, 2010] Brazil is also perceived as a country with the biggest impact on the cohesion in MERCOSUR as well as a leader in the CBC spurring. While using the European experiences the Brazilian authorities have already begun a process of regionalization and exchange of information with the EU, developing the concept of border areas with shared competences between national and sub-national governments. Further decentralized CBC at regional/local level in partnership with national governments and supra-national organizations seems to be the most suitable instrument to create the way for a new quality of borders as meeting places offering a wide range of opportunities. It is also underlined that thanks to MERCOSUR functioning also mobility for cross-border working was reinforced due to an agreement between Brazil and Uruguay. Some time to implement it is required however. As regards to veterinary and food control, a programme to strengthen the activities and a special capacity building programme for people involved in this field are available. Uruguay and Paraguay have also developed own regulations and binational treaties for border control. The biggest problem seem to be but finding and harmonizing common funding. In each country national funds are devoted for national projects (Brazil, Uruguay, Argentine, and Paraguay), but real common funding did not exist. That is why FOCEM opening seems to be promising. Some scientists highlight quoted in the AEBR report the relationship between formal and operational integration, while other scientists stress the relationship between the populations across the borders. One of examples is the Uruguayan-Brazilian cooperation aims to develop border areas as free-trade zones and they have proposed to create a border citizenship (a border statute), which means: free movement of people, manpower, goods, services and capitals; common services for urban infrastructure, more flexible controls, single customs in check points, tax exemptions for personal goods, simplification of trade, elimination of double taxation for citizens, cultural integration, etc. There are many juridical, institutional, financial and structural gaps. This process can be seen in twin cities (laboratories for integration), where very important lessons can be learned and new actions can be planned. In the AEBR report also SWOT analysis showing strong and weak parts as well as threats and opportunities for the LA CBC were included (table 4). 22

23 Table 4. SWOT analysis for CBC in Latin America Strenghts - growing awareness of the importance of cross-border areas for the future of South America - a set of political declarations, laws and instruments for cooperation (bilateral/trilateral treaties, agreements, associations) - numerous studies, publications, and other papers on cross-border cooperation (CBC) - mostly rural areas with a dominating - agricultural sector (big farms, large enterprises) - development of SMEs and small businesses services and activities - importance of twin cities - capitalization of differences along the border - several cross-border areas cooperate - numerous one-off activities to establish - contacts for cooperation - numerous single cross-border projects - economic and social partners active in CBC - (informal cooperation) - consultants dominate the process Opportunities - increasing favourable framework conditions - for CBC - favourable MERCOSUR rules for free trade - strong export of agricultural products - twin cities as a laboratory for CBC - some positive developments on the labour - market due to big firms - a common bank for Latin America - some integration funds - raising awareness of the need for regional development - strong feeling, that CBC requires a bottomup - approach - support of national governments to encourage - CBC at regional and local levels - starting dialogue between national and subnational - level - economic and social partners ready to - cooperate - political will at all levels to support CBC - strong interest in a more strategic and - sustainable approach - growing awareness of the need of crossborder structures - languages favourable - starting contacts with the EU and European Weaknesses - borders keep somehow their role of separation and military areas - national peripheral location of border areas - too many different instruments - implementation rather weak - mainly national approaches - bi- or multi-national studies rather - exceptional - weak economic structures - often strong dependence on border related - danger of mono-structure - positive single effects are too small - places of illegal activities borders only poorly controlled - no definition of a cross-border area - no coordinated activities - too much depending on concrete individuals - no coordinated activities - potentials for CBC hardly exploited in economic and social terms - regional/local authorities depending on consultants Threats - long distances - weak infrastructure - transport still difficult - long waiting time at the border pending on large enterprises and big farm - taking profit from low wage level - up to now twin cities often places of illegal - activities - national governments in favour of implementation of sensitive projects in border areas - not many specific funds for CBC or transnational activities - depending very much on political developments, - weak subsidiarity - lacking knowledge capacity at regional and local levels - conditions very different in political, historical, - economic and geographical terms - national governments playing a dominating - role - border regions not at the top of the political - agenda - decentralization of financial resources rather weak 23

24 organizations experienced in CBC - missing distribution of tasks and responsibilities - no coordinated activities - up to now sustainable implementation rather - weak - politicians hardly involved on a regular basis - no experience in developing decentralized cross-border strategies and programmes - networks and permanent cooperation structures missing - prejudices prevailing (media) - no systematic training of regional and local actors to do it by themselves (like in the EU) Source: AEBR Report, 2010 pp The contacts with the EU representatives and points of reference made toward the European experiences are pointed as potential opportunities for the CBC development in LA. Similarly to the EU, it can also be observed that national governments tend to support the implementation of sensitive infrastructural and economic projects in border areas. Currently the tendency (with the support of MERCOSUR) is more to change national development policies in border areas in favour of supporting CBC. The AEBR experts stress that the Latin American CBC faces multiple challenges out of those enumerated in the table 4.: -the traditional concept of sovereignty; -own national priorities; -lack of subsidiarity; -the consideration of border areas as marginal (only few national investments); -long-lasting border disputes; - the need to increase autonomy of territorial authorities; -the need to ameliorate citizens life conditions; -low local capacities; -permanent and temporary migrations control; -the need to protect natural and cultural heritage. [AEBR p ] At the same time there is a chance to transform the national peripheral situation of border areas in Latin America into a more favourable internal position within the continent. CBC is not about abolishing borders, but reducing them to administrative limits like those between provinces and departments. Based on this background, in the recommendations short-term objectives (concrete projects, need of decentralized cooperation, establishment of partnerships, informal structures for CBC in general); mid-term objectives (to increase local/regional/national capacities for sustainable 24

25 CBC, to elaborate joint strategies/programmes and projects, as well as strengthening crossborder institutions); and long-term objectives (with a view to a regional integration process throughout Latin America) are developed (compare pp of the article). While referring to actors of the CBC and previous potential transfer of the EU model many current and potential key actors in the process have been identified: - national, regional and local authorities, from both side of the (selected) borders; - supranational structures; - universities and research institutes, - enterprises from selected economic sectors, - social and cultural organizations, - trade unions and employers organizations(as feasible), - third sector organizations in concrete cases; - organizations responsible for infrastructures [AEBR, 2010, p. 60]. There are also key elements for successful CBC in Europe that can be adapted to the needs on the ground and can also be used in LA: - step-by step development (first the tasks, then the structure); - strengthening of regional and local tasks and responsibilities; - strategic/ programmatic approach; - real joint projects; - a permanent working structure per cross-border area (informal, later formal) as the main player (with joint decision making bodies, joint secretariat and staff); - own joint financial resources. This requires the following framework conditions and steps: -the political will of all states concerned; -bottom-up approach, where regional/local actors are playing the main role in partnership with the national government (external partnership, avoiding conflicts of competences); - involvement of politicians at all levels from both sides of the border to build up lobby in favour of CBC; - hands-on participation of all actors in both sides of the border (public/private and publicequivalent bodies, NGOs, etc.) in order to create a solid basis for CBC by using already existing knowledge on both sides of the border (internal partnership, avoiding conflicts of competences). 25

26 - the awareness that socio-cultural cooperation is as important as economic cooperation (and often a precondition for successful CBC as a whole); - in the starting phase, informal cooperation based on private law; - at the end, creation of permanent cross-border structures based on public law. [AEBR, 2010, p.64] The AEBR recommends also using the following instruments: - permanent advisory support and training; - exchange of experiences on best practices and information; - workshops/seminars, including targeted training; - international conferences. Besides, capacity building at regional/local level and a more sustainable and strategic CBC the following practical results can be achieved step by step: - stronger bottom-up approach; - better distribution of tasks and responsibilities,; - genuine cross-border programmes and projects; - solutions for daily border problems; - solutions for social problems; - improving CBC of SMEs; - development of new CBC between manufacturers and suppliers; - intensified cooperation in sectors like health, environment, innovation and research and tourism; - improved cooperation in education, especially bilingual schools (borders with Brazil); - stronger role of universities through cooperation in targeted analyses and studies (crossborder infrastructure, environment, diversification of economy, service sector, development of city centers, spatial planning); - creation of a network for a cross-border labour market through cooperation between workers, trade unions and public authorities; - promotion of cross-border vocational training and the mutual acknowledgement of national qualifications; - creation of cross-border commercial sites; - long-term cross-border development plans taken into account in national programmes; - CBC between police, customs and border police departments. 26