TRADE-LATAM: A Turning-Point in Mercosur Relations

By Marcela Valente Reprint | | Print |

Marcela Valente

BUENOS AIRES, Apr 29 2000 (IPS) - Government ministers from Argentina and Brazil announced Friday in Buenos Aires the start of “a new era” in bilateral and regional relations, characterised by faster progress towards macroeconomic convergence and the settling of trade disputes by the private sector.

The ministers of economy, defence and foreign relations of both countries concluded two days of meetings Friday signing the Buenos Aires Declaration, in which they agreed to take concrete steps towards convergence, setting targets to be reached by September and others with a March 2001 deadline.

“This declaration is a watershed in our bilateral and regional relations,” said Argentine foreign minister Adalberto Rodriguez Giavarini. “We are at a turning-point, moving from a stage characterised by obvious differences to one of a ‘relaunching’ of bilateral relations and relations in Mercosur.”

Since President Fernando de la Rúa took office in Argentina in December, efforts have been made towards achieving a new understanding between the two countries that account for more than 90 percent of the Gross Domestic Product (GDP) and population of Mercosur (Southern Common Market – also comprised of Uruguay and Paraguay), after a period marked by particularly intense trade conflicts.

The four full members of Mercosur represent almost 80 percent of South America’s total combined GDP, and are home to more than 200 million inhabitants. Chile and Bolivia are associate members of the bloc.

The biggest discrepancies between Mercosur’s two largest partners arose in the wake of the disorderly devaluation of the Brazilian currency, the real, in January 1999. Business sectors in Argentina complained that the crash of the real hurt the competitiveness of their products, which could no longer compete with cheap Brazilian goods.

But determined to leave behind the recent phase of tension and conflicts, the two countries set out to tackle a “broad, open agenda, with no off-limits issues” this week, Rodríguez told a news conference. The atmosphere was described by participants as “friendly, brotherly and cordial.”

Argentine economy minister José Luis Machinea announced that the two governments would seek to foment cooperation between the private sectors, which should lead to agreements, while the governments would limit their role to “monitoring” those accords through a mechanism to be announced by June at the latest.

“The idea is to keep trade disputes from distracting us from our strategic goals,” said Machinea, who explained that if “a few problems could be isolated” and treated separately, progress could be made on “far-reaching” issues like those related to macroeconomic coordination.

Brazilian foreign minister Luiz Lampreia agreed that relations between the two countries were currently “excellent,” and that there was “very broad agreement” on a number of issues. All outstanding differences are “perfectly manageable,” he insisted.

“We are at the start of a new phase, and we will do whatever is necessary to ‘relaunch’ Mercosur,” said Lampreia, who reiterated Brazil’s aim to “gradually move towards a Mercosur free market, with free circulation of goods, capital and people.”

The Brazilian minister added that a common currency, shared foreign policy and unified defence policy might “eventually” be possible.

Although they did not take part in the news briefing, and met separately from the other ministers, the Argentine and Brazilian ministers of defence Ricardo López Murphy and Gerardo Maguela Quintao also discussed means of moving towards common policies.

The economy and foreign ministers dealt with matters linked to trade and infrastructure, while studying the possibility of treating sales between members of the bloc as internal sales in the mid-term. They also set a timetable for macroeconomic convergence, starting with harmonising the systems used to measure indicators.

Machinea and his Brazilian counterpart, Pedro Malán, agreed that by September comparative statistics for the two countries would be published, including price indexes, fiscal measurements and various figures referring to the foreign debt.

Machinea said that before late June, when Argentina leaves the rotating presidency of the bloc, a meeting of economy ministers and central bank presidents of the four partners, as well as those of Bolivia and Chile, would be held in Buenos Aires in order for the rest of the Mercosur countries to join the initiative.

The debate on dispute settlement by the private sector and the degree of government intervention was a heated one, it was reported. In addition, Argentina’s proposal to set up a permanent dispute settlement mechanism failed to win Brazil’s support.

Ad hoc panels are currently set up to resolve commercial conflicts between the two countries.

But the ministers attempted to downplay such differences at their meeting with the press. Rodriguez said Argentina would propose semi-permanent “arbitrators” to set legal precedents, and he also commented on the possibility of the creation of independent mediation bodies.

The ministers also stressed that Mercosur, despite its rough spots and internal bickering, has proven to be a success, because trade among the four full partners has climbed fourfold since creation of the bloc in 1991.

“There have been, are and will be problems, but we are advancing by means of a serious dialogue towards mutually satisfactory solutions that allow us to move forward,” said Malán.