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Brazil and Mercosur Create Their Own Mini World Bank

Energy, infrastructure, human rights and support for Bolivian democracy were among the main issues addressed Sunday in the Mercosur presidential summit hosted by Paraguay and which ends today with the transfer of the group’s pro tempore chair for the next six months to Uruguay.

The presidents of the four full members of Mercosur, Nestor Kirchner, Argentina; Luiz Inácio Lula da Silva, Brazil; Tabare Vázquez from Uruguay and host Nicanor Duarte Frutos meeting Sunday in Asunción agreed to create a Structural Fund, which in the coming next years should accumulate US$ 1 billion. 

Brazil is expected to contribute 70%, Argentina 27%, Uruguay 2% and Paraguay 1%, with the Fund becoming operational next January.

The purpose of the Fund is to extend credits to country members for improving integration conditions by addressing infrastructure needs and existing asymmetries emerging from the different size and development degree of the regional economies.

Mercosur sources in Asunción revealed that talks for a natural gas agreement with Peru "are advancing," which should help create a regional "energy grid" in anticipation of increased future demand.

The accord would also help overcome shortage peaks as those currently experienced by most members because of insufficient rainfall, Argentina’s natural gas supply cuts to neighbors and political turmoil in Bolivia.

Peru is currently developing vast natural gas deposits in the jungle, Camisea I and II, with a significant percentage of output already contracted to Mexico and probably United States.

However reserves are considered sufficient enough for the building of a gas pipeline from Peru, extending to Chile, Brazil, Argentina and Uruguay and costing US$ 2.5 billion, which apparently will be financed by the Inter American Development Bank and announced in Washington during the coming week.

This huge operation should ensure a more reliable supply of natural gas, which has now been seriously interrupted because of the unstable situation in Bolivia, where politically active groups are demanding the nationalization of the industry and foreign corporations warning they will leave the country and begin international legal action if contracts are not respected.

Regarding Bolivia, which has seen two elected presidents ousted in the last two and a half years, Mercosur member countries, Argentina, Brazil, Uruguay and Paraguay, plus associates Chile and Peru, expressed their "support and full solidarity" to caretaker President Eduardo Rodriguez and the calling of new elections in the next six months.

The four Presidents also agreed on a human rights protocol, based on the Mercosur Democratic Clause, which contemplates the suspension of any member that does not abide by the democratic system.

The new human rights protocol also opens the way for suspension of a country member when there is evidence of "systematic and massive" acts of violence.

Monday morning is the official presidential summit ceremony when the agreements reached will be signed by all heads of state followed by the transfer of the Mercosur chair currently held by host Paraguay to Uruguay until the end of 2005.

Mercopress – www.mercopress.com

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