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South American Plans for Single Trade Bloc Need Investment
Dec. 8 (Bloomberg) -- South America's plans to create a trade bloc representing 360 million people and modeled on the European Union require the nations invest in joint energy and transportation projects, Chilean President Ricardo Lagos said.
``There can be no integration until we have roads, telecommunications, efficient ports and modern airports,'' Lagos said at a press conference in Cuzco, Peru late yesterday. ``We also have to integrate our energy resources: electricity, oil and gas.''
Lagos is among 12 regional leaders scheduled to meet today in the southern Andean city of Cuzco to sign an accord that would pave the way for a South American Union, a trade bloc spanning the continent and accounting for gross domestic product of $1 trillion.
The proposal, which would include a common currency for all 12 countries, is part of an effort by Brazilian President Luiz Inacio Lula da Silva to strengthen developing nations' position in global trade talks and diversify their partners beyond the U.S. and European Union.
``We are diligently working on regional integration policies,'' Lula said in a Nov. 23 interview in Brasilia. ``We managed to establish a strong relationship with Africa, the Araba countries, China, India, Russia and South Africa without having to damage our relations with the U.S. and the European Union.''
Chile
Lagos, whose country enjoys an A credit rating from Standard & Poor's, the highest in the region, said the trade bloc would benefit should Chile's neighbors follow its example of investing in social programs to help reduce poverty.
``The will is there, but if the social policies don't happen, we're dead,'' Lagos said.
The Cuzco summit will lay the groundwork for the merger of the Mercosur trade bloc, composed of Argentina, Uruguay, Paraguay and Brazil, with the Andean Community of Bolivia, Colombia, Ecuador, Peru and Venezuela. Chile, Suriname and Guyana also will join, and Mexico and Panama representatives will attend the summit as observers.
``For once, Latin Americans won't be creating paper cathedrals, but rather something tangible,'' Andean Community secretary general Allan Wagner said in an interview at the entity's headquarters in Lima. ``We're going to redraw the map in terms of commercial and socio-economic integration.''
Wagner said the bloc will seek to achieve economic integration within 15 years and will draw from the experience of the Andean Community, formed in 1969, and Mercosur, set up in 1991.
Separate Negotiations
The member states will continue to negotiate separately free trade agreements with the U.S. and other markets, Wagner said. He said the bloc would help open up new markets to boost the region's exports, which totaled $180 billion last year.
The South American Union also aims to promote investment in agriculture and industries to expand beyond commodities such as metals, oil and fishmeal.
Analysts such as Jeff Vogt, senior researcher at the Washington Office on Latin America, say the summit represents an opportunity to look at ways to promote more equal growth, create jobs and invest in joint infrastructure such as roads, bridges and power plants.
The South American Infrastructure Initiative, an entity set up by regional leaders in 2000, has already approved $4.2 billion in infrastructure projects to be built over the next five years, out of a $37 billion investment portfolio.
``It's a positive step that they're looking for common ground,'' Vogt said in an interview from Washington. ``It's a chance to stem people's loss of faith in democracy and market reforms in Latin America.''
Business Outlook
Dayal Gayoso, chief executive of asparagus exporter El Almendral, is among business executives who expect the new bloc will help lower trade barriers for agricultural produce.
``The ideal thing would be to copy the European Union model,'' Gayal, who grows asparagus in 540 hectares on the south coast, said in a phone interview in Lima.
Others such as Eduardo Montauban, president of the Peruvian Coffee Chamber, say they worry the new bloc will get snarled in bureaucracy.
The proposal would require integrating disparate economies in a territory that spans 17 million square kilometers. Brazil has a $490 billion economy and a population of 180 million, while Suriname, a former Dutch colony, has a GDP of $1.2 billion and less than 500,000 inhabitants.
``We have no expectations for this summit,'' Montauban said in a phone interview in Lima. ``It's just a salute to the flag.''
Last Updated: December 8, 2004 05:37 EST
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