By Marcela Valente
BUENOS AIRES, Apr 21 1997 (IPS)

Argentine business community criticism of government weakness against Brazil, forced the Carlos Menem administration to toughen up its stance asking for import restrictions to be removed from within the Mercosur.

Only days before the Southern Cone Common Market (Mercosur) group meeting of Foreign and Economy Ministers on Thursday and Friday of this week in Asuncion, Paraguay, the negotiators have gone back to their sources: studying the Treaty of Asuncion to spot the infringements committed by Brazil.

The meeting of ministers is part of the lead up to a summit of the Presidents of Argentina and Brazil to be held on April 26 in Rio de Janeiro. This will be their chance to smooth over the rough spots between the two most warlike members of the trade block.

The Argentine foreign ministry said that in theory, the treaty does not allow the type of financial restrictions Brazil imposed unilaterally in late March, limiting imports from all countries, including its Mercosur partners.

The decision was made by Brazil’s Central Bank and basically eliminated funding for imports – a strategy which previously encouraged foreign purchases. Argentina was selling the nation 6 billion dollar-worth of goods each year, making Brazil its leading client in recent years.

Even though the damaged caused only actually affected around 100 million dollars-worth of trade, most analysts said the serious issue of the spat was the unilateral manner in which the measure had been adopted, behaviour which robs the block of credibility in the eyes of foreign investors.

The complaints from its Mercosur co-members forced Brazil to reconsider the measure within 120 days of its implementation. Only deals worth less than 40,000 dollars were excepted and given a maximum credit placement of 89 days.

But the Argentine Ministry of Economy said Brazil must entirely eliminate the measure straight away for the benefit of the Mercosur nations.

The Argentine goverment was always ready to negotiate with Brazil. Even in moments of conflict, the government traditionally acted to contain the ill-feeling of the business community againsts unnegotiated or damaging measures from the bloc big brother.

This is precisely what happened when Brazil adopted a special motor vehicle regime without consulting with its partners, or when it put restrictions on the buying of food products, or when it accepted the incentives the states offered encouraging foreign auto plants to set up within their boundaries.

However, this time the official position appears to be tougher and more supportive of the private sector point of view. The business community protested strongly and there was even pressure for Industry Secretary Alieto Guadagni to resign.

Guadagni, who was Argentine ambassador in Brazil, is one of the Mercosur negotiators.

The entrepreneurs said Guadagni had not taken a hard line against Brazil after the government of this country adopted its latest measures.

In contrast, they praised criticisms of the Brazilian Central Bank lodged by the Argentine ambassador in Brasilia, even though these earned him a ticking off from the Foreign Ministry.

Ambassador Diego Guelar made fun of the president of the Brazilian bank for being short, saying his lack of height made him arrogant enough to eliminate credit for imports without consulting with the Argentine government first.

The Foreign Ministry recalled Guelar to Buenos Aires in reprimand, while that same day, the Argentine Industrial Union garlanded him for firmly defending the interests of national business against the powerful and dominant Brazilian industrial leaders.

Guadagni is now saying the Treaty of Asuncion must be respected, and there must be “absolute free trade” as the document specifies.

Argentine Foreign Minister Guido Di Tella, prepared for the meeting in Asuncion, already said Argentina will adopt a “categoric” posture to preserve the norms of the Mercosur, but that this will be done “in an atmosphere of cordiality we normally take for granted.”

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