By Mario Osava
FLORIANOPOLIS, Brazil, Dec 16 2000 (IPS)

Shared goals in the areas of inflation reduction and taxation assured a productive end to the biannual summit of the Southern Common Market (Mercosur), Friday, pointing the way towards the ultimate objective: a true common market in the region.

The heads of state at the summit, held in the southern Brazilian city of Florianopolis, were able to prevent Chile’s postponed admission into the bloc from projecting an image of regional stagnation and division on the road to integration.

Decisions about macroeconomic coordination, lauded as “significant progress” by the presidents taking part in the meeting, were hailed as the beginning of the “little Maastricht” by the host, Brazilian President Fernando Henrique Cardoso, alluding to the European Union’s treaty for establishing a common currency.

Mercosur’s four members, Argentina, Brazil, Paraguay and Uruguay, with a total population of over 200 million, represent an estimated 80 percent of South America’s combined gross domestic product (GDP).

The announcement of the coordinated goals originally had been slated for March, but the members’ economy ministers and presidents of central banks agreed Wednesday that the nations of Mercosur, as well as associate members Bolivia and Chile, cannot surpass an annual inflation rate of five percent in the 2002-2005 period.

In 2006, inflation must not exceed four percent, and the limit will be three percent in the following years, according to the pact agreed by the six presidents.

Meanwhile, Mercosur member nations’ fiscal deficit may not be more than three percent of GDP beginning in 2002, and they will make an effort to reduce the net public debt to less than 40 percent by 2010.

The presidents of the bloc’s four full member countries also signed an accord for trade in the automobile sector, though adjustments for Paraguay’s benefit must still be made.

The resolutions alleviated the tension caused in the last two weeks by the announcement that Chile and the United States would negotiate a free trade treaty. That decision meant the suspension of talks for Chile’s full membership in Mercosur.

With the various initiatives, such as eliminating the need for visas and the translation of documents for the movement of citizens of different countries within the bloc, Mercosur has advanced toward the final phase, which is establishing a common market, commented Chile’s President Ricardo Lagos.

Chile’s negotiations of a bilateral trade deal with the United States will not stand in the way of a Southern Cone common market, Lagos said, adding that Chile would not join the North American Free Trade Agreement (NAFTA) because it would rather be a member of Mercosur.

The leaders at the summit also made progress by approving a Declaration of Basic Consumer Rights and by setting up a series of specialised meetings, pointed out Brazil’s Mercosur ambassador, Jose Botafogo Gonçalves.

At the meetings this week in Florianopolis, negotiators hammered out regulations for joint trade promotion, social development, energy, local administration and integration infrastructure.

The accord on trade in the automobile sector, which required tense negotiations between Argentina and Brazil throughout this year, was not celebrated as would be expected, given the importance of the sector for Mercosur’s two largest partners.

The lack of jubilation could largely be blamed on the delay in reaching an agreement and the objections raised by industry leaders in both countries.

The agreement involves a transitional regimen, which requires the balanced exchange between Argentina and Brazil, setting limits on inequities and imposing taxes on excesses, as much on vehicles as on auto parts. Free trade in the sector is not planned until 2006.

Sugar was also left out of free trade deals. One optimistic sign that Argentina and Brazil will be able to overcome this obstacle is the proposal made by private sugar producers to expand the matter to include energy discussions, Botafogo reported.

The dispute is rooted in the subsidies Brazil grants for fuel alcohol produced from sugar cane, which Argentine negotiators say distorts sugar trade. Broadening the debate to include the production of this fuel opens up alternatives for overcoming bilateral differences.

One possibility is that Brazil would export the sugar cane fuel to countries like the United States as an option for reducing air pollution, at the same time alleviating pressure of cheap sugar surplus on the Argentine market, said the president of Mercosur’s Joint Parliamentary Commission, Brazilian lawmaker Julio Redecker.

For this and other matters, urgency is the name of the game, according to negotiators who were part of the preparatory meetings leading up to the summit.

Mercosur must achieve “speed and transparency,” stated Redecker, speaking before the presidents as he communicated the Joint Parliamentary Commission’s recommendations.

Among them, he highlighted the need for “integrated management of human resources” and for opening participation to representatives from provincial and municipal legislatures, organised in a “Mercosur Parliamentary Union.”

“No free trade accord is justified if it does not produce employment and income for the population,” affirmed Redecker. To obtain such results in the trade integration of the Americas requires that Mercosur “do in four years” what the European Union did in 40, said the Brazilian deputy.

The bloc has to cultivate conditions for competition with industrialised nations, because every billion dollars in exports create 50,000 to 100,000 jobs, he explained.

This means overcoming the “knowledge deficit,” prioritising human resources and training more professionals.

Strengthening integration as rapidly as possible was also the message of Uruguayan president Jorge Batlle, who called for urgent tariff reductions, the creation of supra-national institutions and an effort to produce exports of greater added value.

The rapprochement of Chile and the United States, as well as Chile’s associate membership in Mercosur, provides the pressure needed for accelerating the work toward the bloc’s economic goals.

Chile’s fiscal objective is a surplus of just one percent, compared to the three percent accepted by Mercosur. As far as inflation and public debt, Chile’s goals are also more ambitious than those agreed by the four full members of the bloc.

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