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Identifier | Created | Classification | Origin |
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05BRASILIA3052 | 2005-11-18 19:22:00 | CONFIDENTIAL | Embassy Brasilia |
This record is a partial extract of the original cable. The full text of the original cable is not available. |
C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 003052 |
1. (SBU) Summary. Brazil's decision to approve Venezuela's request for membership to Mercosul came from the top levels of the GoB, without substantial internal debate. While the process for admitting Venezuela to the bloc is moving forward, the Foreign Ministry appears to be approaching the issue in a measured way, stressing that Venezuela will have to comply with a number of technical requirements to gain entry. Mercosul Presidents are expected to okay a program for Venezuela's accession during the December 9 summit, however the timing, and even eventual completion, of Venezuela's entry into the bloc remains an open question. The Brazilian private sector is divided on the issue. End Summary. 2. (SBU) On November 9, Emboff met with EconCouns at Argentine Embassy to discuss, inter alia, the issue of Mercosul expansion. Our contact there frankly admitted that he was not aware of any official Argentine position in favor of full Venezuelan membership in Mercosul and it could well be that Buenos Aires eventually comes out the other way. To date, we were told, virtually no discussion of the modalities of Venezuela's assumption of full membership had taken place and it was unlikely that Mercosul experts would be able to hold such a conversation prior to the December 9 presidential summit in Montevideo. Currently, Brazilian and Argentine negotiators were working full-time in preparation for the November 30 Brazil-Argentina Friendship Day celebrations in Foz do Iguacu. Both Brazil and Argentina hope that the crowning achievement for the November 30 event would be a bilateral accord on safeguards on sensitive goods ) and achieving the elusive consensus on this perennially controversial issue would be difficult. 3. (SBU) Our contact then ticked off a host of reasons why full Venezuela membership in Mercosul would be problematic: -- Currently, Brazil and Argentina dominate Mercosul decision-making with Paraguay and Uruguay trailing along behind. Introducing oil-rich Venezuela into the mix could prove to be a destabilizing element, with Caracas playing the Brazilians against the Argentines and vice versus to increase Venezuelan influence. -- On regional trade issues, Mercosul is seeking 4 1 talks with the U.S. and a FTA with the EU. A 5 1 agreement (Venezuela being the fifth) with the USG looked to be a non-starter and the addition of Venezuela would similarly complicate talks with the EU. -- There would be enormous technical difficulties in reconciling Venezuela's Andean Pact common external tariffs with those of Mercosul (and as of yet, work on this issue had not even begun). -- The admission of Venezuela would pose difficult questions regarding the future of Mercosul, such as: if Mercosul is to eventually embrace South America how would it differ from the South America Community of Nations, and why not seek to offer full membership to countries such as Mexico and Cuba? 4. (SBU) The claims of the Argentine EconCouns notwithstanding, local press continues to report that it is Argentina and Uruguay, not Brazil, which are pushing for Venezuelan membership in the Mercosul club. They cite Venezuela's purchase of Argentine debt and its ability to supply fuel, along with political affinity between Kirchner and Chavez, as underpinning Argentina's position, while explaining Uruguay's support as deriving from its leftist political leanings and Venezuela's decision to build a refinery in that country. 5. (SBU) Brazil's decision to approve Venezuela's request for membership came from the top levels of the GoB, without substantial internal debate. A high-level Foreign Ministry official responsible for Mercosul trade negotiations with countries outside the region (e.g. EU, India, Southern African Customs Union) told Econoff he was not party to internal GoB deliberations and was taken by surprise by the announcement made during the mid-October Ibero-American Summit. The EU Trade Officer in Brasilia likewise told Econoff that EU inquiries in all four Mercosul capitals confirmed that no technical work had been done prior to the announcement. 6. (SBU) The timing of any eventual Venezuelan entry into the bloc is unclear at this point. According to Antonio Simoes, Foreign Minister Amorim's economic advisor and Secretary of Policy Planning, now that the political decision has been taken to enable Venezuela to join, the admission process must be negotiated. During the upcoming Mercosul summit, the bloc's presidents are expected to take the first step by signing-off on an accession program, which Mercosul negotiators are still finalizing. While not having details, Simoes assumed that Venezuela would be asked to take on all the standard commitments of Mercosul members ) Treaty of Asuncion, application of the Common External Tariff, etc. After the summit, the process of negotiating with Venezuela over the particular requirements will commence. Already the issue of how/whether Venezuela can remain a member of the Andean Pact as well as be a member of Mercosul has been raised as an issue. 7. (U) The Brazilian private sector is split on the issue. One group is focused on the potential export opportunities and the "complementary nature of the Brazilian and Venezuelan economies" ) i.e., export market for industrial goods. Between January and October this year, Brazilian exports to Venezuelan grew by about 60 percent in comparison with the same period last year, reaching USD 1.8 billion. Imports increased as well, 40 percent in the period, but still only reached USD 218 million, providing Brazil will a sizable trade surplus. The requirement that Venezuela would have to open its market to the other four bloc members is also seen as a vast improvement over the bilateral Mercosul-Venezuela FTA in which 91.2 percent of Brazil's tariffs would be eliminated within five years compared to only 16 percent for Venezuela. 8. (U) On the other side, certain business people are worried that Venezuela's admission to Mercosul will further complicate Brazil/Mercosul's trade negotiations with other partners. They point to Venezuela's vociferous opposition to the FTAA, as well as its potential to undermine negotiations with the EU. This, all at a time when trade friction between Brazil and Argentina over the latter's demand for a safeguard mechanism is highlighting strains among existing Mercosul members. Rubens Barbosa, former Ambassador to the United States and current chair of the Trade Council within Sao Paulo's Trade Federation (FIESP) has characterized the decision to include Venezuela as both an economic and political mistake. 9. (SBU) In a conversation with Econoff November 16, Simoes played down possible complications for Mercosul in on-going trade negotiations, noting that Venezuela's only product of interest is oil. (Note: This would seem to us to be a rather naive perspective, that Venezuela would contain its impact along the line of economic interests, rather than seek to use the group to pursue wider foreign policy objectives. End Note.) Simoes also mentioned two previous instances when countries (Mexico and Chile) had planned to join Mercosul as full members, but then backed-out once faced with the specific conditions. While emphasizing that he was not making comparisons, Simoes' comments suggest he sees the possibility, if not the hope, that Venezuela might in the end choose not to follow through with its stated intentions. Comment -------------------------- 10. (C) In responding to inquiries, President Lula and the Foreign Ministry always cast Venezuela's request to join Mercosul in a positive light, although neither seem to be going out of their way to actively promote the idea. In a conversation with Mission's Senior Commercial Officer, the Vice-Minister of Development, Industry and Trade implied a lack of GoB enthusiasm by noting that Chavez's first two attempts to join Mercosul were rebuffed and noting GoB concern that Uruguay is trying to railroad the entry process. 11. (C) Politically it would have been difficult for President Lula to oppose Venezuela's admission to the bloc given his relationship with Chavez and his need to pacify the left-wing of his party. However, Foreign Minister Amorim is careful to point out that there will be certain requirements for membership and a process to be followed. It will be interesting to see whether President Lula and his political advisors will continue to roll the Foreign Ministry's technical people or not. That will give us a good reading on how far Lula will go to please his left-wing constituency. Chicola |