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POLITICS

BUILDING A COMMON
AVIATION AREA IN
SOUTH AMERICA
This paper briefly discusses the conception of gradually establish-
ing a Common Aviation Area in South America (CASA) based on a
multilateral open skies approach, such as a much revised and mod-
ernized version of the Fortaleza Agreement. For this, not only ana- made this international effort null in
lyzing the current aspects of the international air transport policy in effect to the much needed liberalization
South America, this paper will present some implications regarding and envisioned integration.
the “cultural” aspects within the region, which in turn has continu-
ously lead to a state of division, rather than a state of unity. In view 2 Pursuing Changes in Interna-
of this, air transportation may play an important role in uniting po- tional Air Transport Regulation
litically and economically the South American continent. Since the mid-70s, unimaginable
events and achievements for the dele-
By Respicio A. Espirito Santo Jr., D.Sc. 1 a , gates attending the Chicago Conven-
Marcio Peixoto de Sequeira Santos, Ph.D. b tion have taken place: the infinite vari-
a
Associate Professor – Federal University of Rio de Janeiro ety of technological tools and some
(UFRJ/Brazil) remarkable management strategies that
b
Associate Professor – Federal University of Rio de Janeiro were and are continuously being put in
(UFRJ/Brazil) place, mainly by airlines, all over the
world has levered the air transportation
industry into a totally different busi-
ness. This, combined with the global-
ization of the production of goods and
1 Introduction should be fostering true integrating and services, the booming of the tourism
Throughout today’s dynamic, mul- collaborative sets of policies within the industry, the new scenarios being un-
tisegmented and plurinational economy air transport industry. covered by today’s modern, dynamic,
it is hard to imagine any kind of busi- technology-influenced economy, the
ness without a direct or indirect de- In the continent of the Americas, some free-trade conceptions, the formation
pendence in the air transportation in- tentative liberal agreements have al- of economic-integrated plurinational
dustry. Critical examples are sup- ready been signed. An example of this blocs, plus the consolidation of the
ply/logistics and the tourism industries. are the bilateral open skies agreements customer as the most important player
Indeed, the dimensions of job creation, in place between the United States and in almost all economic activities, can
generation of taxes and multiple prod- several Latin American countries like be listed as the major factors pushing
uct availability of both industries are Chile, Costa Rica and Peru. But basing for a great revision of international air
some of the main characteristics of a an international integration policy on transport regulations.
modern and steady economy. More- still-limited bilateral agreements may
over, the society itself, with all its not lead to the envisioned broad integra- 2.1 Bilateralism
infinite individual and collective needs tion involving multiple political, eco- The bilaterals have been used as ex-
and desires, would be directly bene- nomic and cultural issues. Instead, this cellent instruments for protectionism;
fited by the modernization and liberali- may be much more achieved by several in general, they impose limits and
zation of the current international regu- multilateral agreements. In this regard, conditions on how the designated ac-
latory environment. In view of this, the Mercosur countries have already tors of the air transport market will
several nations are considering an taken a tentative step: the Fortaleza perform their roles between the signing
integrated development of their air Agreement, signed in 1996 in the Bra- countries.
transportation markets while discussing zilian city that gave its name, is a true
minimizing their regulatory differ- multilateral involving Brazil, Argentina, Unfortunately, bilateralism in aviation
ences. The events occurred in Sept.11 Uruguay, and Paraguay, with Chile and is still heavily claimed as the most
should encourage unity, and not stimu- Bolivia as signing partners. Unfortu- reasonable option for some South
late differences. In this regard, we nately, the existence of a great dose of American (SA) countries because its
consider essential that governments protectionism from the signatories have protectionism is very often justified by

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the “national defence” or the “sov- creation, social welfare and economic extend the treaty to Colombia and
ereignty” arguments. Needless to say, generation, income distribution, tour- Venezuela.
the culture of protectionism is still very ism enhancement, trade multipliers,
deeply incrusted in several air transport new business opportunities, etc.) still Signed in December 1996, the For-
authorities in South America. Com- are not a primary factor when discuss- taleza Agreement has been marked by
plementing, arguing totally in favour of ing ASAs between the countries of the its complete failure and unsuccessful-
the protectionist strategies are the region, while individual airline-related ness. But how can a multilateral open-
home/flag carriers of the region’s businesses certainly are. skies treaty (yes, it is an open-skies
States. Indeed, both government air agreement!) be a total failure? Simple:
transport officials and airlines work in Yet many non-aviation issues directly put as many restrictions as possible and
tight partnership when claiming the influence a country’s international tour- do not cancel the bilaterals...
“dangers of predatory competition” or ism industry (such as local currency
“the danger we will lose our sover- valuation, visa requirements and con- At the time of signing, the treaty mem-
eignty” or the much more popular “in cession policies, hotel availability, urban bers, with the exception of Chile, were
the interest of national defence” (in violence, and domestic transportation all very protectionists regarding inter-
fact, this latter argument is very often infrastructure, to name just a few) the national aviation. In order to fulfil the
used even by the U.S.). ever-growing tourism industry may be protectionist demands of their ma-
one of the most important economic jor/flag carriers, the countries agreed to
2.2 Including Tourism, multipliers a country can count on to establish the Fortaleza multilateral and
Businesses and Trade Opportu- lessen many of its social problems. its liberal essence just on the routes that
nities in ASAs Tourism generates jobs and promotes were not subjected to the bilaterals.
When discussing air service agree- the distribution of income not only as a Needless to say, all routes that are
ments (ASAs), one could point out that multiple-service industry, but also both possible under the Fortaleza Agree-
there are vital almost-only-political directly and indirectly in the construc- ment are routes linking cities that sim-
issues at stake. This was very true tion, transportation, telecommunication, ply do not generate economically-
during the 40s and during the Cold supply/logistics, farming and agricul- viable traffic at all. While some avia-
War Era. But nowadays, are modern tural businesses. Besides this, counting tion officials claim that customs regu-
and vital “nation-wide issues” being totally in its favour, tourism is neither a lation and airport infrastructure were
discussed in detail and then weighted capital-intensive nor a high-education not modernized to cope with the “ad-
during bilateral or even multilateral demanding industry. Therefore, if only vances” of the multilateral open-skies
negotiations? Interviews and question- tourism would be counted as the sole treaty, it should be pointed out that
naire surveys, conducted by one of the “nation-wide interest” to be considered, even if these constrains were over-
authors in 1998 and 2000 with several it alone would certainly generate much come, there would be still no sufficient
SA officials dealing directly with the more jobs and overall economic benefits revenue traffic to guarantee an eco-
countries’ aviation policies and with than all sets of airline-related issues nomically-sound operation.
ASAs (Espirito Santo Jr., 2000), under the protection of the majority of
showed that true modern “nation-wide today’s restrictive ASAs. The Fortaleza effort was a remarkable
interests” were not really a primary example of how South American coun-
issue. On the contrary, primary issues Complementarily to tourism, the oppor- tries can reach a consensus on very
were the nation’s airline(s) problems, tunity to enhance business and trade advanced future-oriented terms: in the
and, of course, those carefully chosen should be seriously considered when case, multilateral open-skies. But was
arguments of “national defence” and discussing ASAs in South America. In also clear evidence that the majority of
“sovereignty”. The officials inter- the case of trade, dedicated profession- the countries involved are still very
viewed stated that the bilateral ASAs als and experts in commerce, monetary, much chained to the old protectionist
negotiations were heavily, if not to- financial and economic affairs from the culture of the past, as they have main-
tally, dominated by discussions involv- governments involved in the agreements tained all the restrictive bilaterals in
ing individual airline-affecting factors should be called to assist the air trans- place. In fact, even the most recent
such as origin/destination cities, ca- portation officials in determining what extension of the agreement involving
pacity, reciprocity and, of course, is- set of issues would have relevant posi- Peru and possibly Colombia and Vene-
sues dealing with the fares that would tive impacts for the “nation-wide inter- zuela is still structured to maintain the
be put in place. The great majority of ests” and what set of issues would not. bilaterals. Realizing that the Fortaleza
the respondents acknowledged that The Argentinean crisis could be taken as Agreement will never take off while
tourism industry representatives, des- a true example for this approach to be the bilaterals are kept in effect, Chile
ignated-cities or chamber of commerce put in effect. Unfortunately, again, has opted to sign open-skies bilaterally
officials or government officials spe- nothing as been done concretely. with the U.S. and a multilateral with
cialized in international again the U.S. plus New Zealand, Sin-
trade/commerce were often underrep- 2.3 Multilateralism gapore and Brunei. Central American
resented in the countries’ delegations In 1996, in the Brazilian northeastern and Caribbean nations, having a small
discussing ASAs. But, on the contrary, city of Fortaleza, a multilateral agree- or no domestic traffic at all, and taking
all of the interviewed positively con- ment was signed between Brazil, Ar- advantage of having been
firmed that in all delegations, airline gentina, Uruguay, Paraguay, Chile and (re)discovered as marvellous tourist
representatives were counted as “offi- Bolivia. Most recently, the Fortaleza destinations by Americans and Euro-
cial members”. This clearly shows that Agreement countries have added Peru peans, have had much modern views
modern “nation-wide interests” (job and conversations are on the way to towards modernizing their international

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aviation policies than the majority of On the other hand, cabotage rights that these differences will very much
South American countries. within a multilateral agreement are still likely be responsible for the growth
a very sensitive issue. Probably more and/or survival of carriers A, G and K,
3 A Gradual Implementation for than any other aspect to be discussed in and the bankruptcy and demise of
the “Casa” a broad multilateral, cabotage is the carriers B, C and Y, for instance.
By favouring a broad multilateral en- issue that will drive most of the atten-
compassing the entirety of the South tion back to the “national defence”, Moreover, when tourism, trade and
American continent (our so-called “sovereignty” and likely-based nation- businesses (and all of their infinite
Common Aviation Area of South alistic arguments. Again it is essential positive social-economic impacts) are
America, CASA), the authors also fa- to point out that granting cabotage to be put in the first place when dis-
vour a gradual international deregula- rights bilaterally or multilaterally are cussing the CASA effort, “reciprocity”
tion for the continent. Following the not prohibited by the Chicago Conven- is one of the arguments that must be
general concepts announced in Havel tion text. Indeed, article 7 of the 1994 put aside. This, plus the application of
(1997) and Fennes (2000), this gradual Convention clearly states that the sig- common competition and antitrust law
liberalization would comprise incre- natories will not enter any arrangement plus other regulatory aspects (such as
mental phases extending throughout a that would grant cabotage on an exclu- safety and security, CRSs, code-
decade. Within these gradually- sive basis. Therefore, bilateral and sharing, slots, air traffic control, state
implemented phases, governments, multilateral agreements may include aid, bankruptcy protection, leasing,
labour unions, customer-representative cabotage rights in reciprocity and still safety, security, consumer protection,
groups, tourism officials, plus banking be totally nested within the Chicago environmental protection, labour is-
and industrial leaders, just to mention a framework. sues, etc.) would have to be deeply
few of the relevant groups that should founded on the principles of promoting
be then involved in the multilateral 4 Conclusions the social-economical integration and
talks, would ultimately discuss the de- Lessons from the failure of the Fortaleza cooperation of the nations involved.
velopment of the CASA into a true Agreement point towards commencing
open-skies, ultimately with cabotage a true integration of the Americas Nations as a whole, and not just indi-
and foreign ownership and control bar- through combined sets of social- vidual airlines or labour unions or
riers totally lifted. economic true “national interests”. consumer groups, would be responsible
These must be directly linked to the new for developing, implementing and
Of the two barriers listed, the particular world economy multipliers like tourism, making the CASA a success in all
case of foreign ownership and control businesses and trade, simultaneously. levels. This is one of the very main
may be one of the less difficult to over- Simply put, not a single of the three reasons why a proposed CASA effort
come. Examples of other industries aforementioned “new economy national could not be launched as a sole unify-
cited as belonging to the so-called sensi- interests” can survive or prosper without ing action. The agenda to be put for-
tive “national security” group to be air transportation. ward by the South American countries
closely monitored by the government comprises economic issues, labour
just like air transportation are: telecom- For all of this, the process of imple- issues, trade issues, social issues, edu-
munications, land and maritime trans- menting the CASA must be firmly cational issues, and transportation
portation, steel plants, mining and oil grounded on a broad set of suprana- issues.
industries, and power generation and tional policies guided by the essences
distribution. As almost all of these had of harmonisation and convergence Note: Prof. Espirito Santo delivered a lecture
already their monopolies broken in the between all the nations involved. This on the CASA concept in the III Wings of
majority of South American govern- would be vital to minimize the risks of Change: High Level Air Transport Confer-
ments, airlines may well follow the possible conflict of interests between ence for the Americas, in Santiago de Chile,
on March 31, 2004. The full speech and the
trend the mid-term period. any individual countries. It is our opin- presentation slides can be sent by contacting
ion that all the governments and parties the author through the email
Within this future broad multilateral involved in developing the CASA must respicio@momentus.com.br .
environment, we can imagine a hypo- comprehend that there is no perfect and
thetical scenario where LAN Chile no absolutely equal playing field. This References
could be teaming up with TAM to is explained by the fact that, as there Espirito Santo Jr., R. A. (2000) Cenários
establish a new carrier in Argentina. It are hundreds of economic, legislatory Futuros para o Transporte Aéreo
is relevant to observe that Argentinean and cultural differences between the Internacional de Passageiros no Brasil
labour laws, as all other types of legis- countries in the region, there sure will [Future Scenarios for the International
lation, would be applied over the new be differences in markets, sup- Air Transport in Brazil]. Doctor Science
airline, whose majority of employees ply/demand, management cultures, thesis, Federal University of Rio de Janeiro,
Brazil.
would also very much possibly be management efficiency, taxes, operat-
Argentinean. We foresee that if the ing costs, and several other aspects that Fennes, R. J. (2000) Back to the Future or
foreign ownership barrier is lifted will ultimately contribute to differences a Bridge Across Tomorrow? Speech
throughout the region, a great new field in seat-mile costs, revenues, profits, during the 9th Annual International Aviation
of opportunities involving investments, etc. In view of this, even after the ma- Symposium, Phoenix, USA.
trade, and new management cultures jority of air transport related regula- Havel, B. (1997) In Search of Open Skies:
will be ready to be explored by the tions are streamlined and unified Law and Policy for a New Era in Inter-
multiple parties involved, including the within the region, major differences national Aviation. Kluwer Law Internatio-
ever-contrary labour unions. will still exist between the carriers, and nal, Netherlands.

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