MercoPress. South Atlantic News Agency

Lula appeals to Mercosur unity

Brazilian president Luiz Inacio Lula da Silva sent a letter to the three partners of Mercosur, Argentina, Paraguay and Uruguay, calling them to maintain unity, and convergence in trade negotiations. In exchange Brazil commits itself to eliminate trade barriers inside the block.

Brazilian Deputy Foreign Affairs Minister Samuel Pinheiro Guimaraes delivered the letter to Argentine President Eduardo Duhalde, while Ambassadors in Asunción and Montevideo were instructed to hand deliver them to presidents Luis González Macchi and Jorge Batlle.

In the letter Mr. Lula da Silva stresses the importance that Mercosur retains "its unity in foreign relations" and "convergence" in the proposals presented in trade negotiations particularly regarding the US sponsored Free Trade of the Americas Association. He also commits Brazil to eliminate trade barriers within Mercosur and invites his counterparts to "an open national debate" about the creation of FTAA, with the participation of Congress, the private sector, trade unions and non government organizations.

President Lula's letter follows recent criticism to Brazil for acquiring subsidized rice from outer region suppliers when there's ample production in Mercosur and a sugar tariff dispute with Argentina.

Argentine Congress recently imposed a 20% tariff on Brazilian sugar arguing that the Pro-Alcohol program "grants exceptional production conditions to Brazilian farmers, unequal to those of Argentine farmers".

Brazilian Congress is threatening with two retaliatory measures including ending a 10% additional tariff to non Mercosur wheat suppliers that favours Argentine exports.

However both Deputy Foreign Affaris Ministers, Martín Redrado from Argentina and Samuel Pinheiro Guimaraes argued that "we can't build a project (Mercosur) of this importance through reprisals", adding that Brazil was not thinking "for the moment" of presenting a claim before the World Trade Organization.

In the Brazilian Congress legislators are insisting in some kind of reprisal to this the first head on conflict with Argentina of the Lula da Silva administration.

"The Argentine Congress caved in to the Argentine sugar lobby, harming Mercosur and just when we need to unite and face Washington pressures regarding FTAA", said Brazilian Deputy Antonio Mendes Thame co-sponsor of the reprisal bills.

"We ceased incentives to cane sugar for alcohol production in 1998; we only have a minimum alcohol transport compensation equation for the distribution to the 26,000 gasoline stations of the country. I recommend Argentina installs alcohol distilleries from sugar cane to mix with fuel, instead of playing with artificial tariffs", underlined Mr. Mendes Thame.

But in spite of the squabbling and threats Argentina and Brazil decided the creation of the Mercosur Monetary Cooperation Institute to help converge and target a "homogeneous monetary policy" for the region.

"It's the moment to advance monetary and exchange coordination. Differences in exchange rates only generate economic and trade problems between Mercosur members", said Argentine delegate Martín Redrado.