By Mario Osava
RIO DE JANEIRO, Jun 28 2000 (IPS)

Brazil takes over the rotating presidency of Mercosur (Southern Common Market) this week, a six-month term that coincides with the country’s first steps towards expanding its leadership in South America, riding a modest wave of economic recovery.

The South American Summit, a Brazilian initiative slated for August 31 and September 1 in the nation’s capital, Brasilia, comes “at an appropriate moment,” according to Michel Abdo Alaby, of the Association of Brazilian Enterprises for Integration in Mercosur.

The summit is to occur just as the Brazilian economy consolidates its recovery, timid though it may be. Government authorities acknowledge that this year’s growth will likely be limited to 3.5 percent, not the 4.0 percent originally predicted.

It will be enough, however, to mark a more optimistic period, following efforts to neutralise the effects of three years of international financial turbulence and the sharp devaluation of the Brazilian real in January 1999.

This economic improvement, already evident in the industrial sector, “relieves many of the problems” Mercosur has faced in recent years, says Alaby, especially the conflicts between Argentina and Brazil about trade imbalance.

The increase in Brazilian exports will contribute to overcoming current tensions with Argentina, which have created the need to implement new fiscal adjustments, the business leader stated.

Trade with Brazil, which allowed Argentina to achieve a surplus of more than one billion dollars in past years, fell drastically after the devaluation of Brazil’s real. But this trend has already begun to turn around.

This year’s first quarter saw Brazilian imports of Argentine goods grow 14.8 percent, while exports expanded 12.6 percent, leaving Argentina a favourable balance of 284 million dollars in bilateral trade, according to Brazilian data.

Brazil’s exchange rate, meanwhile, with its real relatively stable at 1.80 per dollar since the beginning of the year, re-established balance between the two neighbours, says a study by the Buenos Aires-based Fundación Capital.

This stability has stimulated bilateral trade this year, though it is not likely to reach the 14.8 billion dollars in trade seen in 1998.

In addition to expanding imports, Brazil exerts less export pressure over its neighbours by attending to growing internal consumption. This also means reduced competition in third markets in products, such as beef, which are exported by several of its associates.

This context improves chances for agreements to be reached at the Mercosur Summit this Thursday and Friday in Buenos Aires, a meeting of presidents from the bloc’s member countries (Argentina, Brazil, Paraguay and Uruguay) and associate members Chile and Bolivia.

In addition to an accord on the automotive industry, there is likely to be progress – though not necessarily final agreements – on issues that still divide the bloc’s member countries, specifically Brazilian footwear, paper products, textiles and rice and Argentine and Uruguayan dairy products, predicts Alaby.

This “relaunching” of Mercosur is encouraging for the meeting of South American presidents at the end of August because it prevents a scenario of bilateral approaches and crisis within trade blocs.

Brazil’s economic growth also opens new channels for the countries of the Andean and Amazon regions. The largest Latin American market, though it is undergoing only modest expansion, is a major consumer of energy, whether it is petroleum, natural gas or electricity – all products exported by its neighbours.

Trade could also expand in the area of raw materials, such as petro-chemicals and agricultural products offered by the Andean nations, in exchange for Brazil’s manufactured goods, Alaby pointed out. One example is maize, which Brazil would like to obtain from the Andean region so it does not have to depend on Argentina.

South American trade integration is Brazil’s objective as an initial step toward the creation of the Free Trade Area of the Americas (FTAA) and creating a check on United States hegemony in the hemisphere. In pursuing this goal, Brazil signed an agreement with the Andean Community of Nations (CAN) that did not include its Mercosur partners.

The diplomacy of Brazilian President Fernando Henrique Cardoso has played a major role as he has cultivated ties with his Latin American counterparts. He is a close friend, for example, of Chile’s new president, Ricardo Lagos, who Cardoso met in the 1960s when he was exiled in Chile.

Economic recovery contributes to closer trade ties, but a leadership role also requires political attitudes that are increasingly complex in the current international context.

The South American Summit will try Cardoso’s hand at tackling the role of democracy on the continent, which he considers essential for regional integration. The Brazilian government has taken a strong stand on this issue, condemning and taking action against the several military coup attempts in Paraguay.

Following the recent elections in Peru, which gave Alberto Fujimori a third term as president, Cardoso officially recognised the election results, despite charges of fraud, neutralising United States attempts to apply sanctions against the Andean country through the Organisation of American States (OAS).

But this stance casts a shadow over Brazil’s leadership role, say some political observers.

If Brazil seeks to be a regional leader, “its first responsibility is to demand that its allies maintain a democratic system that alternates” parties in power, according to international relations expert Ricardo Seitenfus, of Brazil’s Federal University of Santa Maria.

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