MercoPress. South Atlantic News Agency

Brazil and Argentina clash over trade

Brazil is considering restricting Argentine imports if Argentina insists in limiting the access of Brazilian exports, according to reports published Tuesday in Rio do Janeiro's press.

The situation occurs just two days before the Ouro Preto, Brazil, summit which was to be the launching pad for a "refurbished" Mercosur, as had been agreed by the group's main partners, Argentina and Brazil.

Mario Mugnaini, the Brazilian Chamber of Foreign Commerce CEO said Brazil would "act" if Argentina insists with safeguards against Brazilian industrial products, mainly white line home equipment and television sets. "If we don't reach an agreement we'll have to introduce certain elements because we are having problems, particularly in Rio Grande do Sul", said Mr. Mugnaini in direct reference to complaints from farmers protesting Argentine rice, wine, wheat, onions and garlic imports.

The threat follows the failure last week of bilateral negotiations held in Buenos Aires. Both sides agreed to meet again in a month's time and to not include the issue in the coming Mercosur presidential summit Friday.

Besides these specific restrictions, Argentina wants to agree with Brazil and junior members Paraguay and Uruguay, an automatic system of safeguards in the framework of Mercosur to aid those sectors suddenly exposed to changes in the trade relation.

The project would mean the automatic establishment of quotas when there's a significant difference in growth rates or strong turbulences in money exchange rates. Brazil rejects the initiative arguing that it's contrary to Mercosur integration spirit.

Argentina and Brazil have had recurrent differences regarding home equipment, footwear and cars.

Since last June Argentina has imposed a 21% tariff on television sets imported from Manaus, northern Brazil, where a free trade zone operates. With the purpose of avoiding further irritation in bilateral trade, businessmen from both countries have agreed on specific numbers for kitchens, fridges and washing machines.

"We can't see Brazil developing or Latinamerica integrating if Argentina doesn't develop. We both have our interests, but as Germany and France, Argentina and Brazil must learn to understand each other", said Jose Dirceu, head of Civil Affairs in the Brazilian Executive. "Obviously the ideal would be for Argentina and Brazil to have common macroeconomic and industrial policies. Political advances have now be contrasted and amalgamated with practical issues", added Mr. Dirceu.

Other controversial issues to be discussed in Ouro Preto include the Mercosur Parliament which Uruguay does not accept given the proportionality and degree of representation Brazil wishes to impose.

Uruguay is also insistent that all decisions must continue to be by consensus and that those asymmetries inside the group contemplating development differences must be addressed as well as lowering the common external tariff.

Uruguay will also protest about the recent recognition by Argentina and Brazil of China as a "market economy", which "ties our hands in dumping issues".

"We arrive at the summit with quite a few loose ends, which must be addressed mainly by Brazil. The launching of Ouro Preto II could end in a committee", said Ambassador Gerardo Vaneiro from the Uruguayan Ministry of Foreign Affairs.