INTEGRATION: Mercosur Meeting – Two Steps Forward One Step Back

By Fabiana Frayssinet and Mario Osava Reprint | | Print |

Fabiana Frayssinet y Mario Osava

FORTALEZA, Brazil, Dec 18 1996 (IPS) - The XI meeting of the Mercosur (Southern Cone Common Market) Council closed here Wednesday, with higher self-esteem, due to international recognition of the successes, marred by a few persistent frustrations.

The host of the meeting, President Fernando Cardoso, said the “Mercosur’s superior level of integration” could teach the North American Free Trade Agreement (NAFTA) a thing or two.

However, his humourous concluding speech, sprinkled with jokes, could not hide the persistent dicrepancies – mainly between Brazil and Argentina – and the fact the draft agreement for negotiations with the Andean Community was not closed.

Argentina’s embassador in Brazil, Diego Guelar, confident in the advances made with Colombia, Ecuador, Peru and Venezuela, said a South American free trade area could be expected by the end of 1997.

But Uruguayan president, Julio Sanguinetti, recognised the difficulties and predicted new associations with the Mercosur “will be much slower” than those of Chile and Bolivia.

Cardoso said the same, adding that obstacles would be formed by the “internal inequalities” between the Andean nations, recommending negotiations one country at a time and not with the group as a whole.

The same agreement with Bolivia, signed in Fortaleza was only reached after clashes and delays. The final statement of the summit said it would come into effect “during 1997,” without stating if this would be in April and dismissing any last ideas of Jan. 1 as a starting date.

A total of 51 agreements and resolutions were eventually signed in Fortaleza, but some of the most important only formalised delays.

One Brazilian diplomat interpreted this positively, saying the commitments had been made but only with later deadlines.

This was the case with the complementary agreements over trade safeguards and the defence of competition. A “transition period” delayed the implementation of common rules on “dumping,” monopolies and anti-free market practices until 2001.

The sugar, leather and market related public policies issues – those which most divide Brazil and Argentina – will be dealt with in “ad hoc” study groups to draw up proposals within five months for the first two issues, and with no time limit for the third.

Brazil wants to include sugar in the Mercosur agreements in a gradual form until 2001 – for it is the worlds main exporter and is unquestionably competitive.

Argentina and Paraguay want to stretch the deadline until 2006, worried that hundreds of thousands of sugar workers will lose their jobs.

But Cardoso argued this type of social problems and the reconversion of non-competitive activities are the internal responsibility of each country.

Brazil has already opened its market to Argentine wheat, which is of a better quality and gives a better yield than its own, enduring the effects on its agriculture and workers, said Renato Marques, from the Brazilian Foreign Ministry.

The Argentine government is also claiming public policies which distort competition must be abolished – the Brazilian sugar industry receives indirect subsidies from the sugar-based alcohol fuel programme.

Roque Fernandez, Argentina’s Economy Minister in an interview with Brazilian daily “al Jornal do Brasil” Wednesday added that while taxes and preferential credits are harmonised and subsidies “which do not exist in Argentina” eliminated, all the tariffs between the Mercosur nations should also be reduced.

Argentina’s President Carlos Menem made it clear his government could retaliate against the announced Brazilian plan to provide fiscal incentives for assembly plants setting up in the Northeast of the country.

Menem threatened to adopt similar methods, offering advantages to the automobile industry in Argentina, extending the war for transnational investment in the sector from a fight between Brazilian states and municipal authorities, to a bloc-wide squabble.

The Summit in Fortaleza offered some advances, widening the frontiers to include Bolivia in the free trade zone and extending the Mercosur agreements beyond questions of tariffs and trade.

The agreement on subregional air transport will allow for direct flights between middle-sized cities in the interior of the nations, moving into a service sector Brazil had always resisted including in its international agreements.

Pacts on cultural and educational integration, with treaties on postgraduate courses and the training of human resources, and especially the joint acceptance of trans-frontier consumer’s rights, introduced the social dimension to the bloc, opening the way for a community of populations and not only businesses.

However, the Brazilian government had generated far more ambitious expectations for the summit, in its desire to achieve more than was possible during its presidency of the bloc. The post will be passed on to Paraguay for the next six months.