SUNS 4318 Friday 6 November 1998
ARGENTINA-MEXICO PACT HEIGHTENS TENSION IN MERCOSUR
Rio de Janeiro, Nov 4 (IPS/Mario Osava) -- A new free trade agreement between Argentina and Mexico has heightened the tension within the Southern Cone Common Market (Mercosur), which had been overshadowed lately by the financial crisis shaking Brazil and jeopardising integration in the region.
Brazil argues that with its late 2001 deadline, the new bilateral agreement between Argentina and Mexico rides roughshod over the Mercosur customs union, whose common foreign tariff is to fully go into effect as of January 2001 in all sectors except telecommunications and informatics.
The Brazilian government and local industrialists fear that Argentina is becoming a route through which Mexican products - actually U.S. goods assembled in "maquila" plants in Mexico - are imported and then re-exported to the rest of the Mercosur.
Mercosur - which links Brazil, Argentina, Uruguay and Paraguay - is the world's fourth largest economic bloc, with a combined population of nearly 200 million.
There are no clear prospects for agreement in the bloc's long-drawn-out negotiations with Mexico and the Andean Community. An accord with Mexico is mainly being held up by discrepancies between that country and Brazil.
But signs of impatience have not only come from Argentina. Brazil's National Confederation of Industry (CNI) decided to discuss trade issues with Mexico's business community on its own. The initial meeting is scheduled to be held Nov. 16 in Rio de Janeiro.
A document that the CNI sent various government bodies late last month took issue with the manner in which negotiations with the Andean Community were being carried out. The industrialists maintained that not only had the talks failed to take the interests of Brazilian industry into account, but they were not even making any real progress.
The current financial crisis makes it an "absolute priority to broaden access by Brazilian products to other markets," stressed CNI chairman Senator Fernando Bezerra.
Brazil sees Argentina's bilateral agreement with Mexico as a blow to the bloc's unified stance in working toward sealing a Mercosur-Mexico accord, similar to those that granted Chile and Bolivia associate status in the bloc. Renato Marques, head of Latin American Integration matters in the Brazilian Foreign Ministry, called the pact between Argentina and Mexico "disturbing."
In order to pressure Mexico into throwing more effort into reaching an accord with Mercosur, the Brazilian government stopped extending its bilateral agreements with Mexico in the framework of the Latin American Integration Association (ALADI).
Industrialists in Brazil are confident that the government's suspension of preferential terms of trade for Mexico will breathe new life into the bloc's negotiations with that country.
Brazilian imports from Mexico totalled $686 million by August, 17.7% down from the same period last year, according to official Brazilian statistics.
Brazil's exports to Mexico, meanwhile, rose 37.9% to $699 million, enabling Brazil to convert a $327 million January to August 1997 trade deficit to a surplus of $13 million by August this year.
Argentina, meanwhile, has offered preferential treatment for Mexican steel, while threatening to file anti-dumping charges against Brazilian steelworks. It also promised not to include Brazilian sugar in candy and chocolate to be sold to Mexico under preferential terms of trade.
Sugar is the only product completely left out of Mercosur agreements, despite Brazil's protests. Argentina complains that the competitiveness of Brazilian sugar is the result of government subsidies to the sector.
Although the impact of the international financial crisis has mainly been felt in Brazil, it has also contributed to a deterioration in trade relations between Mercosur partners, each of which is facing its own troubles.
Due to the pressing need to improve its external accounts, Brazil slapped restrictions on imports of agricultural products and medicine, demanding that companies wishing to export certain products to Brazil first apply for a licence. Argentina has been especially hard-hit by the new measures.
And the reprisals continue. The recent International Footwear Fair in Buenos Aires refused to allow Brazilian companies to participate.
But for the time being, the crisis in Brazil has put internecine squabbles within the bloc largely on the backburner. A devaluation of Brazil's local currency would spell disaster for Argentina, which sells one-third of its total exports to its giant neighbour and trading partner. As analysts point out, solidarity backed by self-interest tends to silence complaints.