Associated Press
March 22, 2001
By Claude E. Erbsen

BRASILIA, Brazil (AP) -- Brazil is prepared to unilaterally block the early start of the hemisphere-wide Free Trade Area of the Americas, Foreign Minister Celso Lafer said Thursday.

The United States has been pushing for the 34-nation common market to be launched by 2003 instead of the earlier target date of 2005. Brazil has been resisting the speedup and Lafer told The Associated Press that Brazil views "the previously agreed upon schedule as fundamental."

Lafer said any change in the timing for the start of the FTAA "must be by consensus" and added, "We can block the consensus individually. If necessary we will block it."

Asked if this means that a stepped-up timetable for FTAA is now "a dead horse," Lafer said "in our view it is."

The FTAA is one of the critical issues on the agenda for Brazilian President Fernando Henrique Cardoso's meeting with President George W. Bush in Washington next week, and at the April 20-22 Inter-American summit in Quebec.

The FTAA, a U.S.-initiative originally proposed by President George Bush, and later a key element of President Bill Clinton's trade policy, would create a vast free trade area from Alaska to Patagonia and include all countries in the western hemisphere except Cuba.

Lafer's comments came less than 24 hours after Argentina, one of its most important trade partners, announced emergency economic measures which helped drive down the value of the Brazilian currency, and threatened Brazilian exports of capital goods to its southern neighbor.

Lafer took a wait-and-see attitude toward the Argentine measures, saying that "a strong Argentina is a priority for all members" of the four-nation trade bloc called Mercosur which also includes Paraguay and Uruguay. Bolivia and Chile are associate members.

He said "we do not oppose" the Argentine measures, and noted that all Mercosur members have had to cope with economic crises in the past. But he added that "in due course" the impact of the measures on Mercosur and its members would have to be reviewed. He declined to say when such a review would take place, saying Argentina needs time to put its economic plan in place.

While Lafer would not criticize the Argentine measures, which include elimination of tariffs on imported capital goods, and raising tariffs on consumer goods, the Brazilian media and other government officials view the steps as damaging to Mercosur and to the Brazilian economy.

Last year Brazil exported about $1.7 billion in duty free capital goods to Argentina. Dropping duties on such goods coming from other countries is expected to damage Brazil's exports to Argentina.

Under Mercosur rules, the member countries have common tariffs for goods coming from non-member nations. Brazil now has to either drop its own tariffs to match Argentina's, or give Argentina a waiver to recognize the unilateral action taken by new finance minister Domingo Cavallo. Cavallo Wednesday telephoned his Brazilian counterpart Pedro Malan to inform him of his planned action.

Brazil -- whose economy is bigger than those of all other South American economies combined -- has not been an enthusiastic supporter of FTAA, and has been concentrating on strengthening Mercosur.