MercoPress. South Atlantic News Agency

Hot News: Mercosur and European Union closer

Mercosur and European Union closer / Massive subsidies to US farmers / “Black Thursday” in Brazil

Mercosur and European Union closer
Mercosur and the European Union are preparing to announce measures that will enhance bilateral trade and economic cooperation in twenty specific areas after two long exhausting years of discussions. The agreement is based on private sector recommendations and is a significant advance towards a free trade Association between the two blocks.
According to Spanish sources the announcement will be made official during the coming European Union-Latinamerica summit to be held next May 17th. in Madrid, and will represent a strong political boost for the project.
The measures to facilitate trade include technical regulations which will speed Customs operations and eliminate much burocratic red tape. Besides the decision implies a flexibilization of the "single undertaking" that so far has ruled Mercosur-EU discussions.
Regarding co-operation the agreements reached, these include critical areas such as agriculture and fisheries, where the Community protectionism is most strong. In the political field, Mercosur and EU will cooperate with dialogue mechanisms that converge positions in world forums such as United Nations plus regular ministerial encounters to boost the tempo of trade talks.

Massive subsidies to US farmers
US Senate finally approved this week a bill ensuring massive subsidies to farmers that have been seriously questioned by members of the World Trade Organization who consider them in violation of international trade legislation.
The Agriculture Bill was approved 54 to 35 in the Senate dominated by Democrats. However the previous week a Republican House of Representatives also passed the bill 280 to 141.
The bill contemplates strong guidelines for US agriculture in the coming ten years. However the bill also opens access to 73 billion US dollars in direct aid to farmers until 2007, equivalent to a 70% increase in government agriculture spending in the next six years. Strong formal protests from Mercosur and the Cairns group are expected.

"Black Thursday" in Brazil
The Sao Paulo stock exchange plunged and Brazil's country risk soared to its highest level in the last twelve months this Thursday after polls confirmed that President Fernando Cardoso's hand picked candidate for next October presidential election was lagging far behind, and further corruption allegations regarding the Cardoso administration surfaced.
The US dollar also climbed in the exchange market when nervous investors were informed that Mr. José Serra, the man who is expected to follow President Cardoso's reformist government, had dropped to fourth place in the polls, almost trebled by Luiz Inacio Lula the opposition Socialist candidate.
The so called "Lula effect" which has been looming over the Brazilian political scenario for some time keeps generating uncertainty about Brazil's future in spite of reiterated attempts to cool markets by the government and even Mr. Luiz Inacio da Silva, the former union leader who nevertheless has changed the boiler suit for Armani wear and French perfumes.
Another disturbing factor was the publication of claims that a 15 million US dollars bribe was paid for the privatization of the country's main steel works, and the money had gone to close Cardoso cronies involved in political campaigns.
Brazilian Finance Minister Pedro Malán said it was only natural that with presidential elections only five months away, "turbulences" would have an impact in financial markets.
However President Cardoso criticized Wall Street investment banks and risk agencies calling them "inept", adding that many times they over shoot by acting on short term trends and ignoring the sound democratic standing of Brazil.
"We will keep ruling with out taking into account what the different risk agencies predict", stressed President Cardoso.
Lately foreign banks and financial advisors have recommended clients to stop purchasing Brazilian bonds fearful of the presidential election results of next October 6th, and an ever closer possible victory of Mr. Lula.
However powerful political groups who broke away from the ruling coalition after Mr. Cardoso hand picked his old mate José Serra have suggested they are prepared to help, if another more palatable candidate can be agreed on. Right wing liberal populist Carlos Antonio Magallaes, who dominates the northeastern block of states and has been a decisive factor in all governments for the last thirty years is quoted as saying, "as things are now, we wouldn't have objections in voting for Lula". Brazil's country risk this week jumped over the 900 points and Sao Paulo stock exchange accumulated losses of almost 10%.