Brazil’s Lula Tries to Steal Bush’s Thunder in Uruguay

Uruguayan President Tabare Vasquez Brazilian president Luiz Inácio Lula da Silva will be arriving Monday for a one day fence mending visit to Uruguay where together with President Tabare Vazquez they will be addressing an agenda with several controversial issues.

Although both sides have tried to downplay differences and highlight understandings the fact is that Uruguay claims Mercosur, the South American trade block, has become a two members club, possibly three (Brazil, Argentina and Venezuela) leaving aside from benefits and decision making junior partners Uruguay and Paraguay plus limiting access to their larger markets.

Furthermore the Uruguayan government feels Lula has let them down because so far he has refused to intervene or mediate in the bitter Argentine-Uruguay dispute over the construction of pulp mills along the shared river Uruguay.

Brazil's predominance in the area and influence with Argentine president Nestor Kirchner is undisputed, but Lula has accepted Buenos Aires stance arguing the pulp mills dispute is a "bilateral issue" and even avoided coming to an Ibero American presidential and king's summit held in Montevideo, in November.

The excuse at the moment was that Lula was exhausted because of his victorious presidential run off, but the Brazilian press published pictures of the former union leader wearing a mini slip and holding hands with his wife as they strolled along a tropical beach.

Brazil is also furious because of Uruguay's attempts to circumvent Mercosur shortcomings by reaching a free trade agreement with United States, which needs the block's consensus to be approved, and on several occasions has warned that if Montevideo insists, "they know the way out and nobody is going to stop them".

"We Brazilians are very respectful of sovereign decisions," said Brazilian Foreign Secretary Celso Amorim in a long interview with the Financial Times.

However the Brazilian Ambassador in Montevideo José Fernando Felí­cio said that bilateral investments and trade relations in Mercosur figure at the head of the Lula-Vazquez agenda.

"The presidents will focus on initiatives to strengthen Mercosur, particularly the recently approved eleven infrastructure pilot projects which are to be financed with the Structural Convergence Fund, FOCEM," said Ambassador Felí­cio.

FOCEM is the carrot invented by Brazil to lure junior members Paraguay and Uruguay from flirting with the United States, together with more lax regulations to access larger members' markets.

But Argentina is not totally convinced with FOCEM, has vetoed some projects, and strong lobbies both in Argentina and Brazil have been very effective in limiting competitive access from junior Mercosur members.

Brazil-Uruguay expanding bilateral trade reached US$ 1.6 billion last year, with Brazil exporting over a billion US dollars and Uruguay US$ 620 million. The Brazilian market absorbs 15% of Uruguayan exports.

The Brazilian ambassador denied any "distancing" between Brasí­lia and Montevideo, on the contrary "there's a growing closeness" although we must increase trade to 1998 level, "help Uruguay reduce its trade deficit" and facilitate bilateral agreements to boost investments.

Brazil has significant investments in Uruguay in sectors such as energy, meat packing, breweries and finance.

"During President Lula's visit several bilateral cooperation instruments will be signed," anticipated Felí­cio including a new frontier cooperation and development agenda which extends virtually dual nationality rights to residents from both countries living along the Uruguay and Brazil.

Brazil apparently is also willing to help finance several Uruguayan auto parts companies to supply the bilateral automobile agreement, which is being re-drafted "because it's now clear it didn't favor Uruguay".

Ambassador Felí­cio admitted that once Venezuela is fully integrated to Mercosur, the block could then consider a 5+1 trade agreement with the United States, but "we'll see if it's possible". However he pointed out that "Venezuela was not accepted in to destroy Mercosur".

Felí­cio also recognized that although Mercosur in Uruguay's leading trade partner, United States figures second, "and has been so for several years".

Finally he said that Foreign Minister Celso Amorim had been wrongly quoted in his interview with the Financial Times.

Allegedly Amorim blamed the current disarray in Mercosur to Uruguay's bilateral free trade agreement with Mexico and attempts to master a similar accord with the United States.

"Amorim really said all Mercosur members have bilateral agreements with Mexico, including Brazil in the automobile industry," but things have changed and what was "interesting" at some point in the past, now "it's far more important that all Mercosur members remain united to negotiate, because together we are far stronger."

Anyhow in spite of the polite words from the Brazilian diplomacy, Lula will be arriving in Uruguay a week before US President George Bush begins his Latinamerica visit of Brazil, Uruguay, Colombia, Guatemala and Mexico.

"It's a happy coincidence and an excellent chance to talk about trade; Brazil and Uruguay will possibly have similar agendas with Mr. Bush, renewable energies, ethanol, biodiesel", pointed out ambassador Felí­cio who added that "we must recognize that each country is intent in addressing trade to other markets, but preserving the commitments we have with Mercosur."



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