MercoPress. South Atlantic News Agency

Growing irritation between Chile and Argentina

Chilean Agriculture minister confirmed Thursday that in the next two weeks Chile will be requesting safeguards against dairy imports, mostly from Argentina, although he underlined it was not in retaliation for the natural gas dispute.

"What we've done is we've received the (Chilean dairy industry) claim, which we share, and are reorganizing the market on the basis of a safeguards window", said Minister Alvaro Rojas.

Chile's Diary Federation, Fedeleche, recently requested strong actions to address the fall in prices and over supply of dairy produce particularly given the surge in imports from Argentina.

According to the Chilean Agriculture Study and Policy Office, during the first five months of 2006, dairy imports from Argentina soared 230%, to 28.6 million US dollars from 8.6 million in the same period a year ago.

"Under no circumstances it must be interpreted as a reprisal because safeguards are clearly defined by items. This is nothing against Argentina", underlined Minister Rojas. "The mechanism, date and other details of the safeguards is something which we will be defining in the next 12/15 days", added Rojas following a meeting with the Finance, Economy and Energy ministers.

According to Chilean legislation safeguards are basically an extra tariff or the elimination of a preference tariff, particularly when imports of a particular item damage or threaten to damage a sector or industry. Chilean legislation is in accordance with GATT and WTO regulations.

However in Chile safeguards have a maximum period of one year, with the possibility of another 12 months extension. Under WTO regulations the time period is four plus four years.

"The over supply from Argentina in just a few months has soared 200% even when Chile is the second supplier of cheese to the United States market", pointed out sources from Fedeleche.

The coming milk dispute, on the backstage of the natural gas provision controversy, is expected to sour bilateral relations even more.

Chile and Argentina have been for several years now at loggerheads over the provision and price of natural gas, a situation that becomes particularly irritating when extreme weather conditions occur in winter and even summer.

Highly Argentine dependent Chile has had to endure increasing cuts in gas supply when domestic demand in Argentina soars, plus lately a controversial increase in price.

Argentina is short in natural gas and has been forced to pay Bolivia a higher price which it has passed on to Chile.

The alleged original hike reluctantly agreed by President Michelle Bachelet with her Argentine counterpart Nestor Kirchner during a Mercosur summit in Cordoba, according to Chilean claims was ignored, and the understood price tag in the range of 3.80 US dollars per million BTU, was finally taken to 4.80 US dollars per million BTU.

President Bachelet sent a letter to President Kirchner expressing her disappointment with Argentina's attitude and warning that the "strategic" relation between both countries had been damaged. Kirchner's reply was not disclosed.

However Ms Bachelet said she was grateful for the quick reply from Buenos Aires and underlined both countries would have "to keep working very hard to ensure integration and to safeguard both countries interests". "It's a private letter and I will not reveal its content", insisted the Chilean president.

Meantime over 460 manufacturing plants in metropolitan Santiago have been shut down for the fifth day running following the lack of Argentine natural gas provision.

Chilean officials are now in the uncomfortable position of having to argue before Chilean public opinion and the opposition that the cuts respond to extreme polar conditions in Argentina and are not in "retaliation" to Ms Bachelet letter.

The Chilean industry confederation has also warned that several manufacturing sectors are considering demanding safeguards from Argentine imported products because of the "notorious" distortion in energy costs between both countries.