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Brazil Industry Wants Chavez and Venezuela Out of Mercosur

Venezuelan President Hugo Chavez Several Brazilian industry organizations are strongly lobbying Congress and President Luiz Inácio Lula da Silva to stop the incorporation of Venezuela to Mercosur, on the terms originally agreed, according to Valor, a daily newspaper specialized in economy, which usually reflects the interests of the industrial sector.

Brazilian industrialists fear that Venezuela's incorporation will have a negative effect on Mercosur's negotiations with other markets such as the European Union, because of the political positions of Venezuelan president Hugo Chavez. They also have doubts about the benefits of access to the Venezuelan market since the tariffs' reduction timetable still has to be negotiated.

The incorporation of Venezuela has already been agreed by Mercosur full members but still must be ratified by the Congress of Brazil and Paraguay.

Among the dissenting organizations is Brazil's powerful National Industry Confederation, CNI, which has sent letters to all members of the Foreign Affairs Committee from the Brazilian Senate and to Foreign Affairs and Trade, Industry and Development ministers, Celso Amorim and Miguel Jorge, respectively.

"We're not contradicting the government's political stance, but rather attempting to explain that to join Mercosur, countries must at least comply with certain stages," said Soraya Rosar, head of CNI International Negotiations Office to Valor.

CNI which admits that exports to Venezuela have significantly increased is concerned with the speed with which Brazil will have to open its market to Venezuela.

"Venezuela is an important market for textiles but it should not cause difficulties for the opening to other larger markets," said Fernando Pimentel, CEO of the Brazilian Textile Industry Association, who admitted that the incorporation of Venezuela could create difficulties to other Mercosur trade discussions.

Venezuela's incorporation also faces stiff resistance in the Brazilian Congress following President Chavez attacks on senators which he labeled "US parrots" and oligarchs.

Brazilian exports to Venezuela in the first five months of this year jumped 31% over a year ago and totaled US$ 3.6 billion in 2006, up 60% over 2005.

Another organization, which addressed letters to Congress members, is the Brazilian Electric and Electronics Association, ABEE. They suggested that Brazilian Foreign Minister, Celso Amorim, should be summoned by Congress to explain the "fast and incomplete" incorporation of Venezuela to Mercosur.

According to the letter, Brazilian Congress members "will surely defend national interests and reject Venezuela's incorporation to Mercosur in the current negotiated terms."

"I totally support Venezuela's Mercosur membership but it's absurd that we should pay the price of incorporation without a matching advantage or benefit," said Humberto Barbat, president of ABEE.



  • Show Comments (6)

  • Richard Newquist

    Ethanol biofuel
    When I was commercial attache (adido comercial) in the US embassy in the 80’s, we worked on getting ADM to either agree to drop the US tariff (they were the only ones fighting to keep the tariff) or produce ethanol in Brazil.

    Our biofuel technology agreements with Brazil go back to 1986. At that time, as U.S. Commercial Attache stationed in Brasilia, Marilia Ribeiro and I crafted an agreement between the Brazilian Ministry of Transportation and the U.S. Dept. of Transportation for technical cooperation on ethanol biofuel production, engine development and fuel production and storage. US Dept. of Comm. Lionel Olmer signed on behalf of Sec. Elizabeth Dole and the Minister of Transport,Cloraldinho Severo signed for Brazil. Elizabeth Dole’s message to Brazil said: “I am pleased that our countries have concluded this formal basis for cooperative effort. There is much we can learn from each other…”

    An article that I wrote for Business America can be found on this at: http://www.findarticles.com/p/articles/mi_m1052/is_v7/ai_3225993

  • conceicao

    If the tariff on Brasilian ethanol were suddenly removed, the stock prices of Brasilian producer companies would rise more than proportionally. ADM stock, although the company has said it will pursue
    ethanol production in Brasil, would likely fall significantly. Further, the company could be subject to shareholder suits as the disclosures to shareholders in a recent 10-k that I read seemed weak to
    non-existent on the potential for an elimination of the tariff – I suppose the company is safe on this as the tariff is renewed for relatively short periods and investors are thus on notice that it could expire, but I still got the sense that the company is not really worried about the tariff going away. You also have to factor in the outsized influence Iowa has given it is the first to vote in the Presidential candidate selection process
    and also has been one of the closely contested States in recent Presidential elections. The fallout for the smaller ethanol companies, including especially those financed by local farmer capital, would be far
    greater – and thus the political support for the tariff in several key farm states is probably the most aggressive on any special interest issue across the political spectrum. It is probably a matter of survival for the
    producers on the margin. On the other hand, the tariff is a total abomination and its elimination would be a boon to both Brasil, the U.S. and, like Lula likes to say, the world as it would secure the creation of
    an international market for ethanol. I am not so optimistic about the elimination of the tariff in the near term.

  • sam

    Now a jet airplane involves greater technology than a Rolex watch. It is interesting to note that Swiss airplanes are almost unheard of along with their auto industry.

    Chavez is infected with neo marxism, the Bolivian/Petrobras theft is an example of the infection. Chavez is a disease. The U.S. will reduce the tarrif on ethanol because the agrarian subsidies have been a matter of contention in the U.S. The use of corn to produce ethanol has increased the cost of food. Programs that protect this absurd cycle will not continue to stand. The soil cannot repleat itself with corn. Ergo, if not today, then soon the importation of sugarcane based ethanol will be facilitated.

    A number of American companies have invested heavily in Brazilian ethanol. It is generally of interest of the U.S. government to facilitate business. I assume if the tariff on ethanol were suddenly removed the price of stock in ethanol producing companies would increase proportionately.

    One of Brazil’s largest producers just listed on the New York Stock Exchange. The consequence of immediately removing the tariff would cause the stock to soar.

    The agricultural sector in the U.S. has a strong lobby, but the increase in price of meats and poultry will effect political representation, and so political representation, the Congress and Senate will respond.

    Nothing happens overnight, except the rise of Bovespa.

  • CH.C.

    wELL SAID ….DOGGY DAD !!!!
    “even now it will be difficult for the Brazilians to compete with value added goods vis a vis American products”

    Brazil can produce only CHEAP COMMODITIES….with Noooo or litle, at best, value added products !!!!!

    Ohhhh…..Doggy Dad, with what technology do you think Brazil makes their telecomunications, mobile phones, their cars/trucks/tractors/buses (all made by foreign compoanies….anyway), PCs, servers and even their textile machinery ???????


    NOT EVEN THE GMO GRAINS, PESTICIDES….etc etc….needed to produce their cheap commodities !!!!!!

    Same for drugs !

  • doggydaddy

    Oh !
    Very messy indeed.. Venezuela is the most americanized country in South America. There has been American produced consumer goods available for years, the supermarkets have been American owned, the telephone company was built over 25 years ago by Americans, so unlike Brazil were a wide range of American goods has never been available here, even now it will be difficult for the Brazilians to compete with value added goods vis a vis American products. Commodities yes, Brazil will make inroads but the exportation of commodities does not produce alot of jobs, just more wealth for the wealthy.

  • conceicao

    You know that not only will this be used by the corn ethanol interests in the U.S. to extend the ethanol tariff against Brasil but also that Chavez would likely do whatever he could in the same context to
    discourage the development of an international ethanol market. Wouldn’t Lula be contradicting himself by supporting Venezuela’s Mercosur inclusion if Lula is, as he says he is, “obsessed” with the
    development of a global-leading biofuels industry?

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