MERCOSUL AGREES TO TRADE NEGOTIATIONS WITH CUBA,

UNCLAS BRASILIA 001685

SIPDIS

SENSITIVE

DEPT FOR WHA/BSC, WHA/EPSC AND WHA/CCA
NSC FOR KBREIER
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON
USDA FOR JBPENN, U/S, FAS
DEPT PLEASE TO USTR FOR SCRONIN

E.O. 12958: N/A
TAGS: ETRD
SUBJECT: MERCOSUL AGREES TO TRADE NEGOTIATIONS WITH CUBA,
BUT GOB SAYS TALKS AT PRELIMINARY STAGE

SENSITIVE BUT UNCLASSIFIED


1. (SBU) Summary. During a summit held in Asuncion,
Paraguay on June 20, Mercosul leaders announced their
decision to initiate trade talks with Cuba. According to
Brazil's Foreign Ministry, a decision has not yet been made
on the type of final agreement to be negotiated. Depending
on the nature of the final agreement, Cuba could become an
associate member of Mercosul. End Summary.


2. (SBU) A brief, single line in Mercosul's joint communique
from its June 20 summit in Asuncion, Paraguay, announced the
bloc's decision "to initiate a process for negotiating with
Cuba with the view to signing a free trade agreement within
the ALADI framework." The Mercosul bloc has been considering
trade negotiations with Cuba for some time. According to
Gilberto Siqueira, Deputy in the Foreign Ministry's Regional
Integration Division under the South American
Under-Secretariat, Mercosul decided to move forward on the
talks now because of the bloc's positive trade relations with
Cuba. In 2003, two-way trade between the Mercosul bloc and
Cuba was on the order of only $120 million, about 80 percent
reflecting Brazil-Cuba trade. However, in 2004 trade between
Brazil and Cuba grew by 93 percent with strong growth in both
directions; Brazil's imports from the island totaled $45
million in 2004 and its exports to Cuba reached $132 million.



3. (SBU) Now that the political decision has been made,
Siqueira said preliminary technical discussions, which he
characterized as exploratory, can proceed. Although the
communique mentioned a "free trade agreement" as the
objective, a decision on the form and substance of the
agreement will depend on the outcome of the technical talks.
According to Siqueira, no decision has been made yet on the
scope or depth of a final agreement, which could range from
an Economic Complementary Agreement that provides limited
concessions in the form of tariff preferences on a small
universe of products, to a free trade agreement along the
line of those negotiated to obtain Mercosul associate
membership, as the Andean countries concluded in 2004.


4. (SBU) Should the decision be made to negotiate the
latter, Cuba could become an associate member of Mercosul. In
addition to any trade concessions it might negotiate,
associate membership would provide Cuba with the ability to
readily consult with Mercosul members, although associate
membership does not necessarily provide the right to joint
the bloc for the purpose of trade negotiations.


5. (U) Post will continue to report on this issue as we
learn more about the GoB's intended course of action.
Danilovich