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Brazil and Argentina Condemn Honduras Elections But Can’t Make Mercosur Work

Cristina Kirchner with Lula Brazilian analysts say that the political coincidences of the two-day Mercosur presidential summit held in Montevideo last week overshadowed the lack of relevant decisions for the consolidation of the block as a customs union.

Although there was unanimous support in condemning spurious Honduras elections and in praising exempalry democratic ballots in Uruguay and Bolivia as well as commitment to advance trade negotiations with the European Union, most issues of the domestic agenda remained stalled.

The Common External Tariff, TEC which applies to out of the region imports, according to an agreement reached at the end of 2008 should eliminate what is known as the double charge.

This basically means that once a product is inside the block it should not pay further tariffs even if it crosses more than one border. The issue had been strongly debated and a compromise reached was vetoed by Paraguay which, as a landlocked country fears the loss of customs revenue.

The Mercosur Customs Code was finally drafted at the end of 2008 and the following pace was the automatic interconnection of the four countries customs systems through a computer program. Together with the elimination of the double charge of TEC it should facilitate negotiations with the EU and other partners. However differences persist and the code is yet to be enforced.

Moreover the four Mercosur full members decided to extend until December 31st, 2011 the list of TEC exceptions. The original mechanism was for gradual reductions beginning in 2010 and phasing out at the end of the year. However Argentina's Development minister Deborah Girogi requested an extension of the exceptions because of difficulties in their "integral enforcement".

Similarly it was agreed to increase TEC for eleven dairy products from 11% to 28% on suggestion from Brazil which argued for better competitive protection from highly subsidized US and European production. Brazil also requested that TEC on certain textiles also be increased from 14% to 18% to combat Chinese competition. And on request from Argentina TEC was increased from 16% and 18% to 35% for backpacks, suicases and bags.

Ms Girogi also reported that Mercosul would extend until 2016 special import regimes scheduled to be eliminated at the end of 2010. This includes the import of agriculture provisions on which Uruguay was counting.

The Focem or Structural Convergence Fund created to finance infrastructure investments for the Mercosur smaller economies (Paraguaya and Uruguay) is expected to accumulate over US$ 500 million by 2010. However in this last summit no projects of the several on the pipeline were approved.

One of them involving US$ 80 million is for a high voltage power interconnection between the Uruguayan city of San Carlos and Candiotta in Brazil, but Argentina vetoed the operation because of the ongoing conflict over pulp mills constructed by Uruguay on its side of a shared and jointly managed river. Uruguay apparently will now attempt a direct loan from Brazil's Economic and Social Development bank to finance the investment.

Finally the Mercosur Parliament or Parlasur has also become a headache. At the end of 2008 a new structure (more in line with population representation) was agreed by which Brazil will have 75 seats, Argentina 43 and Uruguay and Paraguay 18 each. But the mechanism to approve legislation has still to be worked out. This among other things delays the direct election to Parlasur scheduled for next year in Brazil in coincidence with presidential elections.

Trade with Europe

Mercosur is also committed to advance trade negotiations with the European Union and expects to have drafted a viable position when leaders from Latin America and the Caribbean meet with their European Union counterparts next May for the Madrid summit.

Argentine president Cristina Fernandez de Kirchner said that was one of the main understandings reached at the Mercosur presidential summit held in Montevideo and which ended Tuesday with the block's chair passing from Uruguay to Argentina for the next six months.

At the press conference at the end of the summit deliberations next to Uruguayan president Tabare Vazquez, Mrs. Kirchner also said the block had strongly rejected Honduran elections and expects Venezuela will soon become a full member of Mercosur.

"We would like before starting to congratulate the Uruguayan people and the Bolivian people for their magnificent democratic electoral processes which have seen our good friend Jose Pepe Mujica elected president and Evo Morales re-elected in Bolivia, two democratic examples of the region and the very opposite of what recently happened in Honduras under a de facto government."

Besides host Vazquez and Mrs. Kirchner the summit convened President Luiz Inácio Lula from Brazil; Venezuela's Hugo Chavez; Paraguay's Fernando Lugo; Colombian Vice-president Francisco Santos and representatives from associate member countries whose leaders were unable to attend.

"We have integration and cooperation agreements with the European Union but some sectors such as services, government purchases and other commercial aspects still present difficulties", said Mrs. Kirchner.

She pointed out that the focus will be "to advance and consolidate those areas where we can agree and address the others gradually, instead of starting to talk on what we disagree".

"I think in Madrid we won't have a full agreement but should help us reach important conclusions for the region. They need us, we need them", said the Argentine president that will be chairing Mercosur for the following six months.

Mrs. Kirchner preferred not to talk about the pulp mills conflict between Uruguay and Argentina when she was asked if with incoming president elect Mujica a quick solution could be articulated.

"I think it is inappropriate to talk about an issue in a multilateral meeting. Thank your for the question," was the sharp reply.

Uruguayan president Vazquez adopted a similar attitude saying it was better to transit along the "wide positive avenue of links and understandings between our countries rather than concentrate on a minor discord." He also recalled that 300.000 Uruguayans have made Argentina their home.

The conflict over the construction of pulp mills on the Uruguayan side of a shared river with Argentina has been ongoing now for three years and has reached the International Court of The Hague.

Honduras Rejection

Mercosur presidents expressed their most "energetic condemnation" of the Honduran coup and "total and full rejection" of the November 29th elections which represent a strong blow to "the democratic values of Latin America and the Caribbean".

The statement at the end of the Mercosur summit held Tuesday in Montevideo was signed by Argentina's Cristina Fernandez de Kircher; Brazil's Lula; Paraguay's Fernando Lugo; Uruguay's Tabare Vazquez and Venezuela's Hugo Chavez.

The five leaders also consider "unacceptable the grave violations of human rights and fundamental freedoms suffered by the Honduran people".

Further on the statement says that "in light of failure to restore President Manuel Zelaya to the position for which he was democratically elected by the Honduran people, we want to express our total lack of recognition for the November 29th elections held by de facto government, which were undertaken in an unconstitutional, illegitimate and illegal atmosphere".

The statement was read by Uruguayan president Vasquez at the end of the deliberations before the Mercosur chair was handed to Argentine President Cristina Fernandez de Kirchner for the next six months,

The November 29th Honduran elections have divided Latin America. While condemnation of the June coup that ousted President Manuel Zelaya is unanimous, United States together with Panama, Costa Rica, Colombia, Peru and possibly Mexico consider that the elections could open a way out for the political crisis and should be recognized as a step toward restoring democracy.

However the rest of the continent led by Brazil, Argentina and Venezuela do not accept the election results and insist in a return to the June 28th situation.

Honduras, one of Latin America's poorest countries has been virtually paralyzed since the start of the crisis and has lost more than 200 million US dollars in frozen international aid and loans



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