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### Viewing cable 06MONTEVIDEO465, MERCOSUR AGREES ON STEPS FOR VENEZUELA'S ENTRY

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
06MONTEVIDEO465 | 2006-05-25 20:27 | 2011-07-29 00:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Montevideo

`

    VZCZCXYZ0008
    RR RUEHWEB

    DE RUEHMN #0465/01 1452027
    ZNR UUUUU ZZH
    R 252027Z MAY 06
    FM AMEMBASSY MONTEVIDEO
    TO RUEHC/SECSTATE WASHDC 5812
    INFO RUCNMER/MERCOSUR COLLECTIVE
    RUEHCV/AMEMBASSY CARACAS 0412
    RUEHSG/AMEMBASSY SANTIAGO 2856
    RUEHLP/AMEMBASSY LA PAZ MAY OF COMMERCE WASHDC
    RUEATRS/DEPT OF TREASURY WASHDC
    RHEHNSC/NSC WASHDC

` `

    RHEHNSC/NSC WASHDC","UNCLAS MONTEVIDEO 000465

    SIPDIS

    SIPDIS

    STATE FOR WHA/BSC AND EB/TPP
    DEPT PASS USTR
    NSC FOR CRONIN
    TREASURY FOR OASIA FOR DOUGLASS
    USDOC FOR ITA/MAC/WBASTIAN
    SOUTHCOM FOR POLAD

    SENSITIVE

    E.O. 12958: N/A
    TAGS: ETRD ECON PREL UY
    SUBJECT:  MERCOSUR AGREES ON STEPS FOR VENEZUELA'S ENTRY
    URUGUAYAN MINISTER RAILS AGAINST ARGENTINA AND BRAZIL

    REF:  MONTEVIDEO 448

    ¶1. (SBU) Summary:  On May 24 in Buenos Aires, the four
    Mercosur countries and Venezuela agreed on a draft
    document detailing the necessary steps for Venezuela's
    entry into the trading bloc.  While Venezuela will have to
    adopt the Common External Tariff (CET) within four years,
    it will be allowed to join as a full member once the
    document just negotiated is signed and ratified by all
    five parliaments.  This could presumably occur way before
    the four-year CET deadline, thus giving Venezuela full
    membership without having complied with all of the
    obligations.

    ¶2. (SBU) Meanwhile in Montevideo, Uruguayan EconMin Astori
    reacted angrily to warnings to Uruguay by the Argentine
    and Brazilian foreign ministers about signing trade
    agreements outside of Mercosur.  Astori railed against the
    double-standards and "imperialist" tendencies of his
    neighbors, whose attitude had "exceeded all limits".  All
    is not well within Mercosur, although Chavez is getting
    his way.  End Summary.

    ¶3. (U) According to the negotiated deal, Venezuela will
    have to subscribe to the Treaty of Asuncion, the Protocol
    of Ouro Preto and the Protocol of Olivos, and will have
    four years within which to adopt Mercosur norms and the
    Common External Tariff (CET).  Sensitive products would
    benefit from a transition period until between 2010 and
    2014, depending on the country.  While Chavez celebrated
    in a Caracas press conference the accession of Venezuela
    to a "new Mercosur", the Argentine MFA released a
    disclaimer to rectify a previous statement claiming that
    Venezuela was now a full member.  The new statement
    specified that the draft agreement had not yet been
    signed", as earlier stated, but that only a text "had
    been agreed upon".

    ¶4. (U) In a press interview, the Uruguayan MFA negotiator
    also threw some cold water on Chavez's boisterous claims.
    He clarified that the draft document did not hold legal
    validity until approved by the governments and parliaments
    of the four current members.  "There is a whole mechanism
    that will begin to take place no earlier than 2007," this
    MFA official was quoted as saying.  "We still need
    annexes, ratification documents, a lot of things."  Still,
    the document is expected to be signed by all five
    countries in July at the Cordoba Summit for the change of
    presidency.

    ¶5. (SBU) Another participant from the Uruguayan MFA
    provided us with inside details of the negotiations.
    Chavez had applied strong pressure through a barrage of
    phone calls, he said, and both Brazil and Argentina had
    also pressed hard for a deal to emerge quickly.  The
    Venezuelans had opened up with their expected proposal for
    immediate full membership (reftel).  The final compromise
    deal at least obligates them to adopt the CET within four
    years.  Still, Venezuela will be able to gain full
    membership once the text is signed and ratified by the
    five parliaments.  It is quite possible then, if such
    ratification takes place quickly, that Venezuela could
    become a full member before having adopted the CET.
    According to the MFA official, Venezuela will also be able
    to participate in all of Mercosur's external trade
    negotiations from the time of signature of the document.
    Along with the pressure, a ""sweetener"" was thrown in to
    gain Uruguay and Paraguay's approval for the deal, our
    contact told us, in that a list of specific products from
    these countries will be allowed to gain immediate duty-
    free access to the Venezuelan market.

    ¶6. (U) Meanwhile in Brasilia, Argentine ForMin Taiana
    reportedly reiterated that Mercosur statutes prohibit
    members from signing bilateral trade agreements with third
    parties.  Asked about Uruguay's stated intentions to
    negotiate several free trade agreements (FTA), Taiana said
    that this initiative "would be considered in the plenary",
    in reference to the July Mercosur Summit in Cordoba for
    the change of presidency.  Taiana's statement comes a day
    after Brazilian ForMin Amorin was quoted in the Brazilian
    press as having warned Uruguay of the risk of "expulsion"
    if it negotiated trade agreements outside of Mercosur.

    ¶7. (U) In Uruguay, EconMin Astori reacted strongly by
    defending his country's "new and fundamental decision of
    international economic insertion" through an expansion of
    trade relationships with the U.S., India and China.  Our
    policy is "absolutely legitimate, absolutely compatible
    with our belonging to Mercosur and a reflection of the
    necessity that a government obviously has to defend the
    national interest," Astori said.  He railed against "the
    bilateralism between Argentina and Brazil, to the
    detriment of the small economies of the region," and their
    imperialist attitude."  "The attitudes of Argentina and
    Brazil in Mercosur have exceeded all imaginable limits,"
    Astori said, adding that a trade bloc "cannot accept that
    the two most economically powerful countries sign their
    own bilateral agreements, such as the recent competitive
    adaptation mechanism," and then prevent other members from
    pursuing their own interests by looking for other markets.

    ¶8. (SBU) Comment:  It appears that Chavez got what he
    wanted from the Buenos Aires meeting.  The agreement may
    very well allow him to become a full member of Mercosur
    way before he has to take the bitter pill of adopting the
    CET if, as is likely, the parliaments from all five
    signatory countries ratify the agreement in short order.
    This gigantic "hole" in the Mercosur's CET would make
    Uruguay's request for an FTA waiver pale in comparison.
    The feeling of frustration from the smaller Mercosur
    members cannot be understated, as they perceive that the
    trading bloc's rules that restrict them are made for the
    larger members to break.  The arrival of Venezuela on the
    scene is likely to increase this tendency.  Chavez is
    known for making his own rules.  End Comment.

    NEALON

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