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Lula da Silva and Vazquez agree to another patch for Mercosur

MercoPress | Tuesday, February 27, 2007

Lula da Silva and Vazquez agree to another patch for Mercosur

Presidents from Uruguay and Brazil, meeting in Colonia Monday, seem to have smoothed strained economic and political ties with promises of stronger bilateral relations and a new boost to the battered Mercosur block, although Argentina, just fifty kilometers away was not present at the summit.

Brazilian president Luiz Inacio Lula da Silva admitted that it was the responsibility of the larger members to address the “asymmetries”, one of the main objections over the years of Uruguay and Paraguay, and President Tabare Vazquez expressed “immense gratitude” for the understanding of “the eldest brother towards the members of lesser economies”.

Lula da Silva’s long overdue visit included promises of Brazilian investments, financial aid through the Development Bank, soft loans for energy and infrastructure projects (from a special Mercosur fund to promote junior members’ economies) and more fluid access to larger members’ markets.

However the Brazilian media views the visit as a way to head off any attempt by the United States to establish a trade agreement with Uruguay. US President George W. Bush will meet with Vazquez in Uruguay next month as part of a Latin American tour that also includes a stop in Brazil.

Uruguay and the United States last month signed a pact laying down guidelines for boosting trade between the two countries, a move which Uruguayan officials argue is key to the nation’s future economic growth. The Trade Investment Framework Agreement, TIFA, calls for a bilateral group on investments and commerce to meet at least once a year to identify areas of future trade liberalization.

Lula da Silva who promised to dedicate more time to revitalize the trade block during his second mandate that begun last January, said that any Mercosur member was free to discuss bilateral trade agreements with other countries but his Foreign Affairs minister Celos Amorim later indicated that Brazil prefers any negotiations with the US, Europe, China or whoever in the framework of Mercosur.

However Uruguay interpreted Lula’s statements as a “green Light” to formalize trade agreements outside the Mercosur framework, although both sides were very careful in not mentioning the expression “free trade agreements”.

Last May when President Vazquez’s visit to the White House, President Bush proposed formal negotiations for a free trade agreement but under pressure from the radical groups in the ruling coalition and Brazil’s stern warnings about “incompatibility” (Mercosur decisions are by consensus) the Uruguayan president opted at the end of 2006 for TIFA.

Analysts believe Uruguay is playing a risky game by keeping close to the moderate Socialist regimes of Chile and Brazil, while at the same time accepting close financial links with Venezuela’s Hugo Chavez and sending signals to Washington that the ultimate goal is a free trade agreement.

But overall the official Uruguayan release was titled: “Vazquez: Uruguay finds decisive support from President Lula da Silva”, and further on, “Lula: Brazil accepts and understands Uruguay’s claims”.

For Uruguay the meeting was described as a “success”, since the Brazilian president admitted and accepted many of Mercosur junior members claims, promising to redress them, plus it opens a window to the ongoing conflict of Uruguay with Argentina over the construction of pulp mills. Originally Uruguay believed that Brazil could have mediated in the dispute but President Lula da Silva accepted the Argentine argument that it was a “bilateral” issue and later that the “facilitating” efforts of the Spanish Crown are “on track” to a good (face saving) end for both countries.

Lula da Silva actually cancelled two previous visits and was absent from November’s IberoAmerican presidential Summit in Montevideo which proved to be a fiasco since Uruguay’s main neighbors were absent or only stayed for the formality of greeting King Juan Carlos and the former UN Secretary General Kofi Annan. Last January in a similar attitude President Vazquez only spent a few hours in the Rio do Janeiro Mercosur presidential summit.

Even so the meeting was just a six hours work round in the official Uruguayan presidential ranch and where only President Lula appeared wearing a tie and suit.

“The recognition of the issues raised by Uruguay in the Mercosur meetings have found a most ample echo in the president of Brazil”, said Vazquez at the closing of the meeting. Lula da Silva similarly assumed the role of “eldest brother” recognized by Vazquez and said his government “accepts the challenge and responsibilities of putting in practice” the political will to overcome Mercosur asymmetries. “We must facilitate conditions for junior members so they have the same opportunities so that benefits reach all of us in the block”.

But in spite of the “goodies” promised and the “niceties” exchanged, the wide open interpretation of the true impact of the meeting is yet to be seen: Uruguayan and Brazilian officials remain locked on the issue of bilateral (free) trade agreements outside of Mercosur and inside the Uruguayan ruling coalition, also deeply divided on the issue of close links with United States and Mercosur, both sides called it a victory for their aspirations.

But if geography speaks, the fact is that Colonia is closer to Buenos Aries than Montevideo and much of what was agreed or promised needs the consensus of the other major member Argentina.

For security reasons US President Bush will be meeting President Vazquez in the same ranch at Colonia where the summit with Lula da Silva took place.

Welcome President Bush to a feebly mended Mercosur.

 source: MercoPress