Brazil calls for unity at Mercosur summit

Brazilian President Fernando Henrique Cardoso, second from right, speaks during a press conference of the 19th Mercosur summit meeting in Florianopolis, Brazil. From left to right is Chilean president Ricardo Lagos, Argentinian President Fernando de la Rua, and Cardoso

FLORIANOPOLIS, Brazil (Reuters) -- Brazil warned Chile Friday that South America would win more concessions from the United States if the region negotiated free trade together, but Chile's President Ricardo Lagos insisted his country would deal with the U.S. alone.

Chile shocked its neighbors and partners in Mercosur, the world's third-largest trade bloc, when Lagos announced on November 29 that he would begin free trade talks with the United States. Brazil reacted by suspending negotiations set for this summit to make Chile a full rather than associate member of Mercosur.

"It's not that we are stronger or weaker. We're together on the issues, but here we're talking about free trade," Lagos told Reuters at the end of the summit.

Brazil's President Fernando Henrique Cardoso urged unity, telling the presidents of fellow Mercosur members Argentina, Uruguay and Paraguay as well as bloc associates Chile and Bolivia that "We can fly higher together."

RESOURCES South American trading blocs     ALSO First warning for Bush: In trade talks, Brazil will take hard line

"I believe Mercosur can help Chile negotiate from a stronger position with the United States, if we do so together," Cardoso said.

But Lagos said the gap between its low external tariffs and those of its neighbors, the key obstacle to Chile's full membership of Mercosur, cannot be overcome. Chile's small open economy has turned itself into South America's most successful trading nation over the years, shipping out up to a fifth of its gross domestic product in exports each year.

The larger and more closed economies of Brazil and Argentina export less than 10 percent of their economic output.

Chile's import tariff stands at 9 percent and that is due to be trimmed to 6 percent while the Mercosur member nations have an average common external tariff of 14 percent.

Chile's 15 million people produce more than $70 billion in goods and services while the six Mercosur nations represent a $1.17 trillion economy with 225 million people.

Brazil has been the most reluctant to consider a tariff reduction but the four full members of the customs union agreed Thursday to reduce the tariff by a half percentage point.

The trade bloc intends to cut the common external tariff by another 2-1/2 percentage points at the next presidential summit in Paraguay next June, officials said.

Foreign and economy ministers of the six nations earlier this week also set debt, deficit and inflation goals in the hopes of harmonizing the six economies. The economic integration plan was welcomed by foreign investors as a hedge against inflation.

"Our interest in Mercosur remains intact. Macroeconomic and physical integration projects will help all of our people. Our negotiations with the Clinton and Bush administrations will benefit from your support," Lagos said.

The United States is Chile's top trade partner and source of foreign investment.

"We have the same conflicts with the United States as you do, such as its anti-dumping legislation," Lagos said. "This will be complex, lengthy and it won't be easy."

Chile's neighbors are resigned to Santiago negotiating its entry into free trade with the United States on its own but Brazil is convinced the region would fare better in hemispheric free trade talks, the so-called Free Trade Area of the Americas scheduled for Quebec in April, if Mercosur acts as a bloc.

Brazil wants time to nurture its industrial sector -- particularly autos, car parts and aerospace -- before fully opening it to competition from the region.

Copyright 2000 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Chile attempts to soothe trade partners at Mercosur summit
December 14, 2000
Brazil prepares to host Mercosur trade summit
December 13, 2000
Latin American trade blocs angry at Chile, U.S. talks
December 6, 2000
Clinton announces free-trade talks with Chile
November 30, 2000
Documents reveal U.S. funding for Chile coup
November 13, 2000
South American presidents meet, pledge economic unity
September 1, 2000
Chile swears in new president
March 11, 2000
Human rights report blasts Colombia, Cuba - praises Chile
December 9, 1999
In Chile, Clinton seeks patience on free trade
April 16, 1998

Mercosur (English/Spanish/Portuguese)
Republica Federativa do Brasil (Portugese)
Presidencia de la Republica de Venezuela (Spanish)
Presidencia de la Republica de Colombia (Spanish)
Presidencia de la Republica de Chile
Spotlight on Chile
Derechos Chile (in English)

Note: Pages will open in a new browser window

External sites are not endorsed by CNN Interactive.