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S. America cool toward U.S. trade pitch?
by Staff Writers
Sao Paulo (UPI) Dec 20, 2011

Mercosur offers Palestinians free trade
Montevideo, Uruguay (UPI) Dec 21, 2011 - Latin American trade bloc Mercosur offered the Palestinian Authority a free trade pact months after many of the U.N. member governments gave the Palestinians recognition as a future state.

Mercosur has been seeking free trade accords with the European Union but the latest announcement gives the Latin American bloc a special place as the first group of nations outside the Arab world to clinch preferential commercial deal with the Palestinians.

At least 128 -- 66 percent -- of the 193 member states of the United Nations have recognized a future state of Palestine. Many of the countries that don't recognize a state of Palestine recognize the Palestine Liberation Organization as the "representative of the Palestinian people."

Palestinian foreign affairs head Riyad al-Maliki signed the agreement on behalf of the Palestinians, and thanked Brazil, Argentina, Uruguay and Paraguay for having recognized the Palestinian territories as a sovereign and independent nation.

The signing took place during the organization's presidential summit in Montevideo.

Maliki said the accord would help the Palestinians.

"We hope that (the Mercosur countries) can help us end the suffering of the Palestinian people and reach a peace agreement between Palestine and Israel," he said. "We are glad to know we have so many friends in the region."

In the West Bank town of Beit Jala, near Bethlehem, Palestinian chief negotiator Saeb Erekat called the agreement very important to Palestinian institution-building but warned that Israeli controls are stifling his people's economy.

Talks on the free trade agreement began about a year ago. Aside from the growing political support for the Palestinian side in Latin America, Mercosur has also set sights on the Middle East as a major potential trade partner. The deal with the Palestinians gives Mercosur a much needed entry into an area of lucrative commercial possibilities.

Latin America's trade with the Arab Middle East is growing but Argentina remains the only significant partner. Argentina is also host to one of the largest Jewish communities in Latin America.

The Palestinians have free trade agreements with the European Union, Turkey and all Arab nations, while Mercosur has a free trade agreement with Israel that came into effect in March.

Israeli officials described the accord as unhelpful to the Middle East peace process but Mercosur has indicated its wants to get more closely involved with any search for an Arab-Israeli settlement.

Analysts said the Mercosur deal could be significant because it would give Latin American partners a first-hand experience of trade conditions in the Palestinian territories.

The deal could be symbolic unless Israel eased terms for Palestinian imports and exports involving the West Bank and Gaza Strip, analysts said.

U.S. President Barack Obama is pitching for more trade with Latin America at a time when potential partners hope to extract maximum concessions out of Washington, which they see as needier than their booming economies.

Obama's aides have been pushing for a refloating of the idea of free trade agreement with Latin America since the president visited Brazil last March. Like Obama's diplomatic initiative, outlined in November, for greater political rapport with the region, the trade proposal is fraught with complications because U.S. ties with individual Central and South American countries no longer fit any pattern.

Some of the countries are at ease with a U.S. partnership, others remain hostile and still others are undecided about pursuing closer relations.

In the meantime, Latin America is being wooed by China and the European Union as a potentially lucrative market. Both the Chinese and the Europeans are also seeking individual countries in Central and South America and the Caribbean for partnerships, trade deals and bilateral cooperation that is both economic and political.

Russia isn't far behind and has forged military ties with populist governments, including Venezuela, that won't buy or won't be given access to U.S. weapons and technology export programs or offered closer economic ties.

Obama singled out Cuba and Venezuela for further criticism, the latter for ties with Iran. But both Cuba and Iran continue to thrive in partnerships in the region despite the U.S. objections.

This contrasts with Latin America's ties with the U.S. public and corporate sectors that have seen their standing undermined over the years, first because of U.S. preoccupation with political and military issues in the Middle East and second because of the region's newly acquired economic independence.

Latin America's confidence and sense of independence has received frequent boosts from increased commodity exports adding to regional liquidity and by China's significant inroads into Latin America's economies, out of Beijing's self-interest in clinching energy and raw material deals.

U.S. Trade Representative Ron Kirk used an interview with Brazilian newspaper O Estado de Sao Paulo to spell out Washington's plans to pursue greater trade, possibly within the frame of a new free trade zone.

Kirk's call for a greater opening of the Brazilian economy to U.S. exports met with mixed reactions from the business community, which is facing mounting pressure from Brazilian President Dilma Rousseff to cut imports and boost sales abroad.

Brazilian exports took hits throughout this year as its currency, the real, appreciated against the U.S. dollar, making Brazilian goods in some sectors unattractive to potential buyers. Brazil is still doing well overall, however.

Kirk said there was a historical reasoning behind a U.S.-South American trade pact.

"Historically," he said, "since we achieved NAFTA (free trade agreement including the United States, Canada and Mexico in 1994) many people in the U.S. have insisted we do something similar with the southern part of the continent.

"We've started with Chile and Peru and we hope, expect, others will be willing to join the initiative."

Kirk said the Obama administration hoped an agreement could be reached with the Southern Hemisphere despite the failure of a previous attempt at such a deal. Talks on a Free Trade Association of the Americas fell through in 2005 during a summit of the Americas in Mar del Plata, Argentina.

Kirk called for a greater opening of the region's largest economy, Brazil. The United States lost its position as Brazil's main trade partner to China in 2009.

"Our hope is that once the chalice of the Brazilians is full, they can spare a few drops to the poor neighbors from North America. We would like to have half the growth rate of Brazil," Kirk said.

No matter how strong U.S. cooperation with Chile and Peru grew, he said, Washington looked to "the potential of Brazil that can also change life for neighbors in the region."

He said greater U.S. trade with Brazil would lead to a "more balanced alliance" that could benefit the whole region.

Kirk said the United States looked beyond short-term business in connection with the FIFA World Cup 2014 and the 2016 Olympics and hoped to develop closer ties with Brazil in energy, technology and trade.

Obama canvassed for more trade when he met with Rousseff.

Obama also backed Boeing's bid to supply the F/A-18E/F Super Hornet as the fighter jet of choice for Brazil. His five-day tour covered Brazil, Chile and El Salvador.

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Paraguay presses for better trade terms
Montevideo, Uruguay (UPI) Dec 22, 2011 - Landlocked Paraguay pushed its demand for better terms of economic collaboration and trade with its Mercosur partners, increasingly a sore point because of what Paraguayans see as unfair treatment by Argentina and Brazil.

Paraguay has seen its economic performance increasingly inhibited by Argentine and Brazilian government measures as well as alleged obstruction by business and trade groups in the two countries.

Argentine blockades of Paraguayan merchandise, blamed on Argentine labor unions, caused extensive damage to Paraguayan trade passing through the Paraguayan river to the Atlantic.

Paraguay's electricity sharing deal with Brazil also has had frequent snags over pricing, supply and distribution of responsibilities for the operation of the Itaipu hydroelectric dam complex on the Parana River.

Paraguay wants better prices, a greater share of electricity to help electrify its impoverished rural and urban areas and freer access to the Argentine national grid to sell electricity to Uruguay.

At the Mercosur summit talks in Montevideo, Paraguayan President Fernando Lugo appeared to be trying to exploit a diplomatic stalemate over Venezuela's membership of the trade group and extract more concessions from neighboring member states.

Lugo called for a more coordinated integration of the Mercosur region's energy policies and closer economic collaboration that could benefit his country.

Mercosur is aiming to expand its global profile, building trade ties in East Asia, Europe and the Middle East, Paraguay as a small country believes the larger members stand to benefit most from the expansion. Mercosur covers about 5 million square miles of territory, a population of more than 267 million and a combined gross domestic product of $2.9 trillion.

Paraguay, with a population of about 6.4 million and a gross domestic product of less than $20 billion, is still dependent on the fortunes of its soy crop and soy exports. Lugo wants to reduce that dependence, promote manufacturing and services and diversify the economy. But, for all that, he needs easier access via the Paraguay River to international maritime trade.

Lugo said, "For Paraguay it is crucial to increase trade and for Mercosur to guarantee the free flow of goods and the free access to the Brazilian and Argentine markets as contemplated in the Mercosur charter."

He said that greater integration of energy produced in the three countries was also important.

"We want energy integration in a spirit of solidarity," he said, in a reference to what Paraguayans consider unfair trade practices by Argentina and Brazil. Paraguay generates almost 10 times more power than it consumes but sells that power to Brazil and Argentina at rock-bottom prices because of decades-old contracts.

Paraguay recently received the green light from Mercosur to sell power to Uruguay. But it faced Argentine demands for high tariffs to let Paraguay transmit the power to Uruguay over the Argentine grid.

As a result, the deal didn't go through.

Now, however, Lugo is in demand for entirely different reasons. Mercosur wants to admit Venezuela to its membership but is prevented from doing so until Paraguay's congress ratifies Venezuela's membership.

Last week Mercosur leaders said they would seek to change the pact's charter to circumvent the Paraguayan Parliament. But Paraguayan lawmakers have warned Lugo to stay clear of such a deal if he wants to avoid being impeached for undermining the sovereignty of the Parliament. The stalemate continues.


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