FREE TRADE NEGOTIATIONS WITH THE EU: Political problems over Central American deal with EU
Politics has emerged as a problem in the negotiations between Central America and the European Union over a free trade agreement. At the latest round of talks, in San Salvador, Nicaragua, Guatemala and El Salvador were unhappy about the EU demand that Central American countries join the International Criminal Court (ICC). The US is putting pressure on its allies to spurn the ICC.
The third round of EU-Central America talks, which opened in San Salvador on 14 April, was critical in deciding the points to present at the summit of EU and Latin American leaders, scheduled to take place in Peru on 16 May.
One major sticking point is the refusal of the EU to maintain the "Generalized System of Preferences Plus" (SGP+), Europe's unilateral extension to the World Trade Organization's SGP program, which allows poorer nations to maintain some tariffs on imports, even while their exports to developed regions enjoy minimal tariffs. Currently, SGP+ allows 60% of Central American goods to enter Europe tariff-free, although the programme is set to expire at the end of 2008.
Another point of contention is the refusal of Nicaragua, Guatemala and El Salvador to join the International Criminal Court (ICC) and of El Salvador to join the International Labour Organisation which sets minimum standards in labour markets. The EU warned El Salvador that if it did not join the ILO by the end of this year it will be excluded from any SGP+ deals.
The EU is backing away from making joining the ICC a condition for signing the Association Agreement. El Salvadorean officials cited "constitutional limitations", while El Salvador's President Tony Saca said that joining the court would force the military and guerrillas into the legal spotlight, pointing out that the countries had only recently ended civil wars. The EU said
He said that previous governments had agreed concessions which allowed concession holders to clam ownership of the deposits they were developing. He said that such concessions were illegal because they violated the constitution. Constitutionally, concession holder should only have a limited right to develop the deposits they hold. In all circumstances, the constitution stipulates, the deposits remain the property of the state.
The row in Bolivia could affect the huge iron ore project at Mutún, in the south of the country, which is being developed by an Indian company, Jindal Steel.
Bolivia's mining minister, Luis Alberto Echazú, estimates that the Mutún project will create 5,000 jobs and a further 12,000 jobs indirectly. He claimed that 90% of these jobs would go to Bolivians. The El Mutún deposit has 40bn t of iron or an 10bn t of manganese.
In Ecuador, the constituent assembly's ruling is highly preliminary. It is not at all clear, legally and constitutionally, that the constituent assembly can issue such decrees which then have the force of laws.
The constituent assembly's role is to draft a new constitution which then has to be ratified by a referendum. The government, however, has upheld the assembly's decision and argues that in the absence of a congress, the constituent assembly has the right to make new laws.
The constituent assembly has not got on with this task as quickly as it and President Rafael Correa expected. The constituent assembly session, which began last November, has already been extended to July and may yet be extended further. The assembly has 130 members of which 79 come from Correa's Acuerdo PAIS.
Currently, Ecuador has approved 4,112 mining concessions of which 3,1000 will now, because of the constituent assembly's ruling, revert to the government. The assembly has also called for the setting up of a new Empresa Nacional de Minería, which will both regulate and operate mines. The constituent assembly's ruling was approved by 95 votes to 25.
Copper
The rightwing opposition tried to embarrass President Michelle Bachelet on 17 April with a motion criticising China;s human rights record in Tibet. Bachelet only returned from a trip to China on 16 April. One of the highlights of the trip was an agreement by ChinaMinmetals Corporation to take an equity stake in the Gaby copper project owned by the Chilean state mining company, Codelco.
The executive president of Codelco,Jos'e Pablo Arellano, who accompanied Bachelet to China, refused to say exactly how much China was investing in Gaby. Gaby has an annual output of 170,000t of fine copper.
China has overtaken the US as Chile's main export market, thanks to a surge in its demand for copper and the consequent surge in the international copper price. In 2007, Chile's trade with China came to US$14.67bn, up 65% of 2006. Of this US$10.25bn consisted of Chilean exports to China. This was 79% up on 2006. Most of the exports are metals, principally copper.
Deputies had wanted the Tibet motion passed while President Bachelet was in China but government business managers managed to delay it. One independent deputy said that it was shameful that the government had, for the first time since the return of democracy in 1990, tried to muzzle congress from speaking up for human rights.
Codelco is profiting hugely from the renewed surge in copper prices. Arellano said that in 2007, Codelco earnt the government US$1m a hour every day of the year. In 2007, Codelco produced around 1.8m t of copper.
Codelco's proven reserves amount to about 20% of the world's known reserves. Arellano said that the government had not plans to privatise Codelco, despite the deal with ChinaMinmetals.
Exports
In March, Chile's copper exports (which include those from private companies such as Escondida and Antofagasta) came to US$4.1bn. In March 2007 copper exports earnt US$2.7bn.