SOUTH AMERICA: Brazil Steps on Integration Accelerator

By Mario Osava Reprint | | Print |

Mario Osava

RIO DE JANEIRO, Sep 23 2002 (IPS) - The Brazilian government has begun a race against time in trying to finalise a thorny free trade accord between Mercosur (Southern Common Market) and the Andean Community of Nations (CAN) by the end of this year.

This special effort could give President Fernando Henrique Cardoso one final success in his foreign policy before he ends his two-consecutive terms, eight years, as head of state, a tenure that has established him as leader of South American integration.

Everything is rushed these days in Brasilia, as time runs short for achieving the regional accord before Cardoso is to hand over the presidency, Dec 31, to the winner of the October elections.

Another potential obstacle to integration is the fact that opinion polls indicate it is unlikely that Cardoso’s fellow social democrat José Serra, the ruling coalition’s candidate and former Health minister, will be his successor.

Urgency also arises from the advances made towards the Free Trade Area of the Americas (FTAA), which next year enters the phase of concrete negotiations on the hemisphere-wide trade liberalisation system, which is slated to enter into force by 2006.

Brasilia’s diplomats are working quickly to try to thwart the joint Canadian-U.S. initiative to convene a new Americas Summit sometime in the first half of 2003 in order to speed up the FTAA timeline.

Brazil wants more time to build ties within South America in order to negotiate from a position of strength.

Foreign minister Celso Lafer has already expressed to the two North American government Brazil’s opposition to a special summit, a position shared by the 19 countries of what is known as the Rio Group, Latin America’s main political forum.

In this context, the timeline for negotiations between CAN and Mercosur (Argentina, Brazil, Paraguay and Uruguay) is very tight.

CAN, made up of Bolivia, Colombia, Ecuador, Peru and Venezuela, is to present its proposed deadlines for lifting tariffs and its list of “sensitive” products on Thursday.

Sergio Amaral, Brazil’s minister of Development, Industry and Trade, reported that the next step is the ministerial-level meeting between the two blocs, slated for Oct 7 in Lima.

Amaral hopes the accord is ready by the end of November for signing at the semi-yearly Mercosur summit or a special meeting of the presidents of the nine countries involved, which could be held in early December in Brazil.

By the time either of the two meetings would take place, Brazil will have already chosen its future president, as the first round of elections is slated for Oct 6, and the run-off vote, if necessary, is scheduled for Oct 27.

The Cardoso government seeks also to promote negotiations between Mercosur, of which Chile and Bolivia are associate members, with the Central American Common Market (composed of Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua) and with the 15 nations of the Caribbean Community (Caricom).

Those two blocs remain of limited importance to Brazilian trade — less than one percent — but strong growth has been recorded in the last few years.

And CAN does not represent much of Mercosur’s foreign trade either, limited to just 4.5 percent of exports and three percent of imports of the Southern Cone bloc.

Meanwhile, the United States absorbs 24.7 percent of Mercosur’s sales abroad and is the source of 23.5 percent of its imports.

Based on Mercosur’s foreign trade situation, Sebastian Edwards, former chief economist for Latin America at the World Bank, launched harsh criticism of Brazil’s decision to ally itself with the neighbouring nations of CAN while foregoing closer ties with larger markets and not working harder towards FTAA.

Mercosur has no future, and Brazil, an enormous economy, wins nothing from standing by Argentina during its crisis, said Edwards, now a professor at the University of California, in addressing a recent seminar in Rio de Janeiro.

However, reinforcing the faltering Mercosur and promoting South American integration are key components of Brazil’s strategy to shore up forces before negotiating the FTAA with the hemisphere’s powerhouse, the United States.

Cardoso has repeatedly confirmed this approach, which is defended by experts and politicians across the ideological spectrum.

The region’s financial crisis has also prompted the Brazilian government to be more aggressive in its search for new markets for exports, through bilateral accords and an array of trade negotiations.

That is Cardoso’s response to the criticisms from economists who stress the need to expand Brazil’s foreign trade, which is less than 20 percent of gross domestic product (GDP), to thus reduce the country’s vulnerability to international financial turbulence.

In recent months, Brazil has achieved surprising trade balances. So far this year, it has racked up a trade surplus of more than 6.3 billion dollars. But that is still not enough, say economists who urge even greater economic liberalisation. The country must increase the flow of trade in both directions, the say.

To reduce Brazil’s vulnerability, the country needs to export at least 20 percent of its GDP, said Alberto Fishlow, a U.S. expert with close ties to the Brazilian government. Currently, Brazil exports just nine percent of GDP.