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Thursday, 19 April, 2001, 09:56 GMT 10:56 UK
Brazil sceptical of free trade deal
Market, Salvador de Bahia, - Brazil
Brazil's tropical climate allows the cultivation of crops which cannot be grown in the United States.
By the BBC's Tom Gibb in Brazil.

President George W Bush is going to have his work cut out at the Summit of the Americas building up enthusiasm for the Free Trade Area of the Americas in Latin America's largest economy, Brazil.

The FTAA is an option, not destiny

Brazilian Foreign Minister Celso Lafer
A cartoon in the paper published by the MST, Brazil's radical landless movement, sums up attitudes not just on the left - but in much of business and industry as well.

It shows Brazil as a prisoner with a large ball and chain around it with ALCA - the Spanish and Portuguese acronym for the free trade area - written across.

The title of the cartoon is "ALCATRAZ".

Brazil, with represents 40% of South America's GDP, has the most to lose from getting rid of tariffs for trade with the rest of the Americas.

I am in favour of free trade, but I am not in favour of getting ripped off.

Luis Haffers, president of the Brazilian Rural Society

Over the last two decades the country has built up a strong industrial sector protected by tariffs - selling to its own market of 170 million people as well as the other countries of Mercosur, the South American trading bloc.

Difficult competition

Take away the protection and most Brazilian firms, especially those making products like machine tools for factories, would have a hard time competing.

"It would be a massacre for the majority of Brazilian firms," said economist Nogueira Batista.

The majority of foreign investment in Brazil - comes not from North America but rather Europe and Asia.

Take away the import tariffs and European car manufacturers could close their Brazilian factories and move to where they can find cheap Mexican labour, exporting the cars to Brazil from there.

There are companies which would benefit. Brazil has a highly successful aircraft manufacturer which, even without free trade, has managed to seal lucrative deals in the US market.

Brazil's Agriculture Minister Marcos Minicius Pratini de Moraes
'No country in the world is doing more than Brazil to protect its cattle. Not Canada, not the United States,' Pratini declare

Currently Embraer is locked in a fierce dispute with its main rival, Canada's Bombardier, over cheap loans to encourage foreign sales.

Rural impact

With almost as many cows as people, and a tropical climate allowing the cultivation of crops which cannot be grown in the United States - farmers ought to also benefit. But this depends greatly on whether President Bush can lift agricultural subsidies in the United States.

While these stay in place, Brazilian products like beef and soya find it hard to compete. So Farmer's organisations are suspicious.

"I am in favour of free trade," said Luis Haffers, the president of the Brazilian Rural Society, "but I am not in favour of getting ripped off."

Earlier this year the United States, Canada and Mexico did little to gain trust in Brazil when they banned the import for Brazilian beef for several weeks, alleging fears of mad cow disease - even though there have been no cases in Brazil.

The Brazilians interpreted this as a below -the -belt tactic in their trade dispute with Canada over aircraft exports.

Ironically however, the Brazilian government may actually be hoping that President Bush does have a hard time getting changes in US agricultural policy through the US congress.

Mercosur backing

Other South American countries, like Argentina, which mainly export agricultural goods, also see ending US subsides as a pre-condition for an America's wide free trade deal.

If President Bush is unable to deliver, this will make it much easier for Brazil to persuade other Latin American countries to delay the implementation of FTAA.

At preliminary meetings in Argentina, Brazil won a slight reprieve.

The United States had wanted to speed up the FTAA negotiations with a deadline of the end of 2003.

But Brazil was supported by other Mercosur countries in sticking to the present timetable of finishing negotiations by the start of 2005.

Brazil is simultaneously seeking to speed up trade talks with Europe and Asia.

The FTAA, the Brazilian Foreign Minister Celso Lafer likes to say, most be "an option, not destiny."

The Summit of the Americas will only be the start of a long process of hard negotiations.

The FTAA, aiming to open up trade between countries with huge variations in size and wealth, has a rough road ahead of it.

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