MercoPress. South Atlantic News Agency

Chile's Mercosur deficit increased 469% in ten years

Chile's trade deficit with Mercosur full members, Argentina, Brazil, Paraguay and Uruguay has jumped 469% between 1995 and 2004, from 902 million US dollars to 5.1 billion US dollars by far the country's largest with any trade block.

According to the Chilean Industries Confederation, Sofofa, the Economic Complementation Accord reached with Mercosur in 1996, far from helping to cut the bilateral deficit has seen it expand almost fivefold.

Sofofa argues this can be explained by the "Argentina factor", which since the melting of the Argentine economy in the period 2001/2004 drastically contracted Chilean shipments while imports of Argentine natural gas rocketed.

In spite of this experience the Chilean private sector still eyes Mercosur and its population of 240 million as an attractive market, even admitting its volatility and recurrent economic and political crisis.

However Sofofa believes that the same conditions which made Chile become in 1996 an associate Mercosur member, instead of full member, because of disagreement on the common external tariff, (much higher and static than Chile's reduction policy), remain.

"Chile therefore should propose a free trade area covering services, disputes' arbitration, effective safeguards and government procurement, which are very attractive", said Hugo Baierlein, Sofofa's foreign trade advisor.

Obviously this must be addressed "without impinging on our tariffs policy or our liberty to sign further trade agreements", adds Mr. Baierlein.

However Sofofa's advisor admits that the Mercosur business community "is not necessarily prepared for this step forward, because of strong protectionist forces".