Cablegate: Brazil Sways Mercosul On Ftaa Offers

This record is a partial extract of the original cable. The full text of the original cable is not available.





E.O. 12958: N/A



1. (U) Following through on its rhetoric to strengthen and
unify Mercosul, Brazil's new government has acted forcefully
and decisively to forge consensus with its Mercosul partners
over FTAA initial offers. Foreign Minister Amorim, first
securing the Argentine pledge of solidarity in Buenos Aires
on February 4 was able to bring Uruguay and Paraguay into the
fold during a February 5 Ministerial meeting in Montevideo.
A week earlier, there had been dissension in the Mercosul
ranks at Brazil's insistence that investment and government
procurement offers from the group be delayed beyond the
February 15 deadline (reftel).

Where the Offers Stand

-- Goods

2. (SBU) As previously reported (reftel), Mercosul plans to
submit by February 15 a consolidated offer as a group; the
list will cover industrial and agricultural products. A
chapeau for the offer will present some general conditions
including reference to a single-undertaking, balance between
commitments in market access with obligations in other areas,
GATT, etc. In a February 7 discussion with econoff, Tovar da
Silva Nunes, head of Itamaraty's FTAA Coordinating Office
(COALCA), provided the following rough breakdown of the
Mercosul goods offer as a percentage of Mercosul-FTAA trade:

Category A (immediate duty-free): 18 percent
Category B (tariff elimination in 5 years): 3 percent
Category C (tariff elimination 5-10 years): 18 percent
Category D (tariff elimination over 10 years): 60 percent.

Product coverage of the offer is comprehensive (total above
is less than 100 percent due to rounding error). NOTE: local
press reported incorrectly that the above percentages refer
to number of products. According to Da Silva Nunes, the
number of tariff lines relating to categories A, B, and C
combined is roughly 54 percent. END NOTE.

3. (U) Da Silva Nunes claimed that Brazil's offer had been
more ambitious before the Mercosul consolidation process.
Given the disparity in the productive structure of the
Mercosul partners, he explained that the general rule used to
produce a joint list was to adopt the most cautious position
presented by one of the Mercosul partners. So, if three
countries had placed a product in the A category, but the
fourth had it in Category C, it was placed in Category C on
the combined list. Apparently this process had to be applied
to over 7,000 tariff lines, he noted, not always with a
result that made sense for Brazilian business.

4. (U) Brazil's decision-making body for foreign trade
issues, CAMEX, met yesterday to approve the offer. According
to press reports, the Ministries of Fazenda and Agriculture
had wanted a more ambitious offer, but Itamaraty and the
Ministry of Development, Industry and Trade (MDIC) prevailed
with the Mercosul offer as agreed to in Montevideo.

-- Services

5. (SBU) According to Da Silva Nunes, Mercosul continues to
plan to present services offers by February 15, but that
decision is still not final since ministerial consultations
within the GOB are on-going. In addition, the GOB is
evaluating whether recent changes in its civil code will
require slight revisions to its offer (a new civil code which
passed at the beginning of the year includes several
provisions relating to the establishment of businesses). The
services submission will be under a Mercosul chapeau, with
separate, positive lists attached (reftel). As Da Silva
Nunes explained, Mercosul countries have to supply separate
offers because GATS plus for one would not necessarily be
GATS plus for another. (Note: Brazil had indicated that its
offer will only apply to commitments at the central or
federal level. Da Silva Nunes said that Paraguay has asked
Brazil to consider whether, as negotiations proceed, it would
be willing to make commitments at the sub-federal level.)

-- Investment and Government Procurement

6. (SBU) While no time-line for submission of investment and
government procurement offers has been decided, Da Silva
Nunes suggested that Mercosul would definitely want to submit
these offers in advance of the Trade Negotiating Committee
(TNC) meeting April 9-11. He claimed Mercosul will want to
be in a strong position in the TNC meeting to argue for the
establishment of certain modalities and would not want its
position undermined by not having submitted offers in all of
the market access areas.

7. (U) Da Silva Nunes stressed that these are initial offers
and that once offers are on the table, Mercosul will evaluate
whether or not it has to quickly improve its offers to be
compatible with what others have presented.

Public Access to Information on Offers

8. (SBU) Econoff inquired as to GOB plans regarding public
dissemination of information contained in FTAA offers. Da
Silva Nunes said no decision has been made yet. He said that
the GOB will probably release all the details of its own
offers. He noted that it would be helpful to know what other
FTAA partners are planning or would prefer in terms of
treatment of their offers. He believed the GOB would act
according to the wishes of each of its FTAA partners.

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