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03BRASILIA356 2003-01-31 17:40:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Embassy Brasilia
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1. (U) Brazilian dailies Gazeta Mercantil and O Estado
reported today on the progress of market access discussions
this week between Mercosul FTAA negotiating teams meeting in
Asuncion. The dailies note that a consensus position
regarding all of the FTAA market access offers has not been
achieved. O Estado reported that Brazil had been unable to
convince its Mercosul partners to delay submission of offers
for services, investment and government procurement beyond
the February 15 deadline, and speculated that this would
pressure Brazil to accelerate preparation of its offers.

2. (SBU) ECONOFF subsequently spoke to Ana Patricia Neves
Tanaka, an official who follows the FTAA market access
negotiations within Itamaraty's FTAA Coordinating Office
(COALCA), to clarify the situation; Tovar da Silva Nunes,
head of COALCA, is still in Asuncion. Although no final
decision will be made until Mercosul Ministers meet in
Montevideo on February 5, it is expected that, as previously
reported, joint Mercosul offers for industrial and
agricultural goods will be made by February 15.

3. (SBU) Contrary to what was reported in O Estado, Neves
Tanaka confirmed that Brazil still plans at this time to make
a separate services offer also by February 15 (ref A); she
expects that the other Mercosul countries will do likewise.
Driven by differing legislation and national interests, the
Mercosul partners have reportedly agreed to proceed with
individual offers in services, investment and government
procurement. According to Neves Tanaka, the main
disagreement surrounds Brazil's interest in delaying its
market access offers for investment and government

4. (SBU) Brazil is reportedly facing opposition to its
proposal to delay investment and government procurement
offers because Argentina, Uruguay and Paraguay have theirs
prepared and want to meet the February 15 deadline. The
expectation in Itamaraty has been that Mercosul proposals in
the areas of services, investments, and government
procurement would be presented under common preambles, with
separate market access offers attached.

5. (SBU) Neves Tanaka believes it is unlikely that Brazil
will change its decision to delay investment and government
procurement offers until after February 15. This would leave
its Mercosul partners in the uncomfortable position of having
to decide if they will all hold back, or present an even less
than united front by moving forward without Brazil.

6. (SBU) Neves Tanaka explained that the first three days of
the meeting this week were political in nature and that
discussions yesterday and today are technical. Technical
work is focused on developing the joint goods offers. One
thorny technical issue being discussed is how to treat
products for which the Mercosul members have different
tariffs rates due to the many exceptions that have been taken
to the group's Common External Tariff. No additional
information regarding characteristics of the Mercosul goods
offers is available at this time (ref B).