MercoPress. South Atlantic News Agency

Uruguay's Vazquez has courting appointment with Lula da Silva

Uruguay and Brazil's presidents will be meeting Friday most probably in Porto Alegre, Brazil to discuss Uruguay's intention of signing a free trade agreement with United States, according to Uruguayan diplomatic sources.

The meeting was decided following a phone conversation between Uruguay's Tabare Vazquez and Brazil's Lula da Silva since Brazil currently holds the Mercosur chair and any trade agreement of country members with third parties must have the consensus of the group. Mercosur full members are Argentina, Brazil, Paraguay, Uruguay and Venezuela.

President Lula da Silva is scheduled to visit the neighbouring state of Rio Grande do Sul this Friday as part of his October re-election bid

Uruguay a junior member of Mercosur, together with Paraguay, have become increasingly disappointed with the functioning of Mercosur which to all effects has turned into a Brazil-Argentina decision making block. Faced with this scenario, Uruguay began during the previous administration of President Jorge Batlle talks for a trade agreement with United States, which have been confirmed and advanced by the current administration of Socialist president Tabare Vazquez.

Actually since the collapse of the Argentine economy in 2000/01, United States and the North American Free Trade Association, Nafta have replaced Mercosur as Uruguay's main trading partner.

But Mr. Vazquez' government, a catch all coalition of radical to conservative political groups is also deeply divided on the issue, with minority Communist, Socialist and former guerrilla groups contrary to any strong links with United States. Their position has been strengthened by the recent incorporation to Mercosur, as a full member of Hugo Chavez' Venezuela.

Apparently after much wrangling and debate a political agreement was reached inside the ruling coalition the free trade agreement with the United States: it will be supported in Parliament if it comes in a package that also includes similar accords with China and India.

President Vazquez, Economy minister Danilo Astori and members of the more moderate groups from the ruling coalition have been strongly lobbying China and India for trade agreements. China is one of Uruguay's main trade associates, particularly wool, textiles and fish, and a top political delegation headed by the Chinese Popular Assembly president Wu Banguuo has been visiting Montevideo for "top level trade, cooperation and political conversations".

Uruguayan trade with India is minimal but several Indian software companies have established their headquarters in Montevideo taking advantage of highly trained local labour resources, communications and pro-business climate.

Last Friday in a Mercosur Economy ministers meeting in Rio do Janeiro Argentina's Felisa Miceli and Brazil's Guido Mantega showed flexibility on the issue of a bilateral free trade agreement of one of the country members with a third party.

Miceli said Argentina and Brazil understand the needs of junior members, Uruguay and Paraguay, although pointing out that "flexibility goes as far as no risk is posed to the building of a strong Mercosur". Mantega added Brazil was open to "alternatives" to solve junior member countries adaptation problems, particularly Mercosur "asymmetries" which act as fences to fluid trade.

"I believe there are no threats in this (free trade agreement with the US), since (Uruguay's minister) Astori is a strong supporter of Mercosur and works hard to make Mercosur a success", said Mantega.

However Brazilian diplomacy, a big voice in world trade forums takes for granted that it represents all Mercosur members, and believes Brazil is the natural counterbalance of United States predominance particularly in South America.

If Uruguay and eventually Paraguay, build strong trade and investment links with the US their interests could not necessarily coincide with those of Brazil and some of the alleged strongly later-denied confessions of a "happy hour" President Lula da Silva in Tokyo, with very mundane straight forward revelations about his feelings towards the leaders of Chile, Uruguay, Argentina and Venezuela.

Enjoy your trip to Porto Alegre, Mr. Vazquez.