Brazil & Southern Cone - May 2006 (ISSN 1741-4431)

President Nicanor Duarte has stated his intention to negotiate free-trade agreements with countries outside Mercosur. 

On his return from the EU summit in Vienna, Duarte said that Paraguay had been forced to look beyond Mercosur to break into new markets. The move follows severe criticism of Mercosur from Uruguay's President Tabaré Vázquez, who commented that "Mercosur is more a problem than a solution for Uruguay".

In an interview with the country's leading newspaper, ABC Color, on 15 May Duarte said that it was "inevitable" that his country would look for preferential treatment in other markets given Mercosur's failings. As well as not providing enough support for the smaller nations such as Paraguay and Uruguay the president said that the paper-mills dispute between Argentina and Uruguay had exposed the internal conflict in Mercosur, which is "not going through its best moment". Duarte also pointed towards Mercosur's difficulty in formalising a free trade agreement with the European Union as more evidence of the need to modify the regional agreement. These points were also backed up by Brazil's Foreign Minister Celso Amorim who admitted that "we have not done everything we should have done for the smaller economies in Mercosur".

Both Amorim and his Argentine counterpart Jorge Taiana said that the trade issues would be discussed at the next summit but added that there were currently rules in place that prohibited members from signing individual free-trade agreements and established that commercial negotiations should be carried out together. Duarte wants this to be made more flexible. According to Paraguay's deputy minister for foreign affairs, Belela Herrera, the country wants to remain in Mercosur but also to increase its trade. The government has shown an interest in signing commercial agreements both with the US and with Taiwan (where Paraguay remains their only political ally in South America). 

Further disagreements with Paraguay's neighbours have also occurred over the gigantic Itaipú dam which is one of the world's largest hydroelectric projects. Brazil has the dominant position regarding energy volume and rejects Paraguay's request to have a larger share of the energy produced and a sharp review of energy prices.