Brazilian Minister Acknowledges Asymmetries in Mercosur

by Dave

– Business – redOrbit

interview with Minister Marco Aurelio Garcia, special adviser to the Brazilian President’s Office on international affairs,

[Agencia Brasil] Thanks to the strengthening of the Brazilian economy and currency, our firms are expanding their business into the South American countries and expanding their industries into new markets. How do you view that process?

[Garcia] I view it as a positive factor, especially since we have two problems here. We currently have very unbalanced trade relations in Brazil’s favour. We have a trade balance surplus with every country in the region except Bolivia (because of the gas imports). This shows that trade relations often do not resolve the asymmetries existing between the South American economies; on the contrary, they even make them worse. One way in which we can compensate for that – aside from the multilateral mechanisms such as funds, infrastructure programmes, and financing that Brazil has been providing for the construction of public works in those countries – is precisely in the area of investments. And to a large extent, Brazil is being sought out to stimulate the countries that need investments.

[Agencia Brasil] Are there specific areas preferred by Brazil and its partners?

[Garcia] That depends greatly on the country. There are investments in the areas of petroleum, gas, and mining. Petrobras is present today in Argentina, Colombia, and Peru. We have mining companies such as the Rio Doce Vale Company, and we have a strong presence in the industrial area, and that is in our interest because one way to establish a more balanced relationship with the countries in the region is to help them move forward with an industrialization process – whether complementary to our industries or those of Argentina or on their own. Brazil has been greatly stimulating the industrial and agricultural development of Venezuela.

[Agencia Brasil] Does the model being designed by the Brazilian Government involve greater economic integration?

[Garcia] That is at least the movement that we have been trying to encourage. Our economy is a market economy; it is possible for us to stimulate investments – to guide them – but not to say where a particular factory is going to go. But government policies are fundamental on that point.

[Garcia] We are financing a tripartite public works project by Brazil, Bolivia, and Chile that would make it possible to open a road from Porto Alegre through Argentina to Chile. That will completely alter Pacific-Atlantic integration. Brazil has also opened an extremely important line of credit for the Bolivia Northward project and is prepared to finance the power transmission line from Itaipu to Asuncion in Paraguay.

[Garcia] Paraguay is a country with sizable agriculture, and we can provide agricultural cooperation. I have the impression that in Paraguay, the essential thing is to know whether the Paraguayans want to develop an industrial programme for their country. They have a very important asset, which is electricity: they have the highest amount of electricity per capita in the world. A big share of that electricity is exported, but it could be shifted to Paraguayan industry. I am sure there would be interest on the part of Brazilian businessmen, and a number of Brazilian firms are getting ready to announce investments there in the area of capital goods. I feel there is a possibility of that being extended to other sectors such as consumer goods for the domestic market and also for export. Another subject we have been discussing there even longer is the biofuel industry. It would be perfectly easy for them to begin producing ethanol and biodiesel.

[Garcia] Brazil has
signed a new automotive agreement with Argentina.
For the first time in
a long time, it is a six-year agreement, meaning that it creates
stability. The previous agreements were annual, so they had little
impact. Under this six-year agreement, one of the first effects we are
noting is that Argentina has now resumed its automobile production,
although it has lost many auto parts companies in recent years.
It is
possible, however, that the auto parts industry will come back because
that agreement, being of six years duration, has a number of potential
effects on the automotive industry. We accept that. The agreement will
be extended to Paraguay and Uruguay.
This means we would have the
possibility of seeing to it that Paraguay and Uruguay also share in
that division of labour.

Garcia] It establishes very favourable conditions for the process of
reindustrializing Argentina. The Brazilian automobile industry has
accepted it. To give you an idea, many companies that were in Cordoba
(Argentina) moved to Brazil, but they may very well return. Moreover,
we have the possibility of making Paraguay and Uruguay part of it. We
were talking to the Argentine minister about the possibility of
beginning a process of integration with the Argentine aeronautical
industry based on very sizable purchases that Argentina will make from
Embraer (Brazilian Aeronautics Company). Argentina’s aeronautical
industry was very important in the past.