Cynics will point to previous failures since free-trade negotiations began five years ago. Most notable was the two sides' abandonment, three years ago, of a December 2000 deadline. The reason why economic integration efforts fell down on that occasion, basically the Andeans' fear of competition from agricultural and manufactured goods from Brazil, continues to exist.
There are, however, some significant differences this time around, particularly in the personalities involved. Brazil's new leftwing president, Luiz Inácio Lula da Silva, is pursuing an agenda which in years gone by would have been called terceiromundista, in that he seeks to unify developing world countries to defend their interests in international forums with a common voice. In the context of South America in particular, Brazil is promoting subcontinental integration as a means of wresting greater concessions from the US in negotiations for the formation of the hemispheric trading bloc desired by Washington, namely the Free Trade Area of the Americas (FTAA).
Of course, this is in no way a departure from the foreign policies of his predecessor Fernando Henrique Cardoso. However, there is a new urgency to Lula's advocacy of South American integration, not least because he has other left-of-centre counterparts in Argentina, Peru and Ecuador, all of whom dislike US big-power politics as much as they welcome US investment.
CAN eagerness
It was actually the Andean countries that surprised Mercosur with their eagerness to firm up the timetable for integration at the Montevideo meeting. Brazilian foreign minister Celso Amorim admitted he was `positively surprised' by the Andean countries' proposal that talks should be accelerated in order for a definitive agreement to be signed by 31 December. That deadline had acted more as a notional target in discussions until the CAN members proposed firming it up on 4 August.
Such an idea is no big surprise coming from Peru, where President Alejandro Toledo sees closer links with Brazil, and through it with Mercosur, as a means of opening up export markets for his country's products in the region. Indeed, foreign minister Allan Wagner announced during the Montevideo meeting that Toledo and Lula hope to sign a free-trade agreement when the Brazilian is in Lima later this month. Such an accord would be bilateral but, given internal Mercosur rules, would open up the entire southern trading bloc to Peruvian goods.
More surprising in the CAN proposal was the participation of Colombia, Ecuador and Venezuela, all of whom have traditionally been more reticent with regard to an agreement with Mercosur. Bolivia already has a free-trade agreement with Mercosur, and has been an associate member of the southern bloc for several years. Chile is not a member of CAN and, like Bolivia, it is an associate member of Mercosur, with an FTA already in place. Signing a deal with Brazil would thus be a step towards Peru becoming an associate member.
Bargaining chip
Should an FTA between Mercosur and CAN be in place by the beginning of 2004, setting deadlines for tariff elimination between the two regions, it would strengthen the South Americans' hand in FTAA negotiations with Washington. They could legitimately argue that they'd covered much of the ground for economic integration amongst themselves already, inviting the US to join a party that was already underway rather than set the rules for a new one.
Africa visit delayed
Beyond South America, Lula seeks closer ties with other developing countries and, in this context, his plans suffered a delay at the beginning of this month, when the delicate negotiations in congress to get the pension reform bill approved forced him to postpone a visit to five African nations.
Lula had planned to visit South Africa, Mozambique, Angola, Namibia and São Tomé, leading a delegation of businessmen seeking export and investment opportunities in the five countries. He postponed at the last minute, however, and now plans to go in November, when he is also scheduled to visit the Middle East.
The Doha Round
These visits, aside from the direct objective of driving more business Brazil's way, are also designed to garner support for his government's stance on matters such as the Doha Round of trade liberalisation talks to take place under the auspices of the World Trade Organisation (WTO).
Brazilian commodity exporters were in Washington at the end of July for talks at the WTO. They made it clear to WTO director general Supachai Panitchpadki that Brazil could go as far as withdrawing its support for the Doha Round unless the US and Europe display a real willingness to address the concerns of the developing world with regard to their agricultural protectionism.
Brazil is currently working on a position statement on the whole issue, and promises to submit it to both Mercosur and the Cairns Group of major agricultural exporters for their approval. It will clearly need their support and that of other developing countries if it opts to block progress within the Doha Round.
The two major bones of contention with Europe and the US are barriers to the entry of goods from the developing world (quotas and tariffs) and the subsidies the developed world offers its own farmers to produce competing crops.
The EU has announced plans for a significant reduction in its farm subsidies, which is a ray of hope on that front. Tariffs are still a huge problem, however; so much so that the WTO's special negotiator for agriculture, Stuart Harbinson, suggested a compromise solution that would see tariffs of up to 15% reduced by a quarter, while ones over 90% would be almost halved.
This is clearly not enough for the exporters, however. `The problem right now is that for Brazil and its Cairns partners, Harbinson's proposal is a floor, where for Europe, it's a ceiling,' commented the economist Marcos Sawaya Jank from São Paulo university, who is also president of the Brazilian exporters' lobbying effort.
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