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October 24, 2014
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EU ambassador: Brazil is pushing hardest to seal Mercosur trade deal

Alfonso Diez Torres praises Argentina’s recent efforts to seal a deal with the Paris Club.
By Fermín Koop
Herald Staff

EU’s ambassador in Buenos Aires talks to the Herald about free-trade talks

The Mercosur and the European Union are close to beginning the final round of negotiations on a free trade agreement, with both blocs likely to exchange offers in July after the World Cup, the EU’s ambassador in Argentina, Alfonso Diez Torres, told the Herald.

In an interview at the EU’s office in Recoleta, Diez Torres noted that while European officials have already finished drafting the bloc’s offer, Mercosur is still working on the final details of its proposal.

The EU insists that ensuring preferential access to the European market could mean a big boost for Mercosur economies, considering the EU accounts for 20 percent of its total trade.

On local issues, Diez Torres said that while the government’s agreement with the Paris Club represents an opportunity to encourage more foreign investment, he also warned that doubts remain about the direction ahead for the country’s economy.

What’s the current status of the negotiations between the EU and Mercosur?

They’re quite advanced. The European Commission has already said the EU’s offer is ready, and now a consultation process is being carried out between member states. It’s strictly a consultation and no formal approval is needed. For its part, Mercosur is taking final steps toward merging all national offers to reach a final joint offer. We think the countries will finish negotiating soon.

When do you estimate the offers will be exchanged?

Considering the World Cup is about to begin, the exchange could be carried out in July after it finishes. But talking about dates isn’t appropriate, the exchange will be carried out when we are ready.

Should the delay be seen as an ominous sign of failing to reach agreement?

No, there are no deadlines, and we shouldn’t think that a delayed start is something negative or risky for the negotiation. We want to have a positive and constructive negotiation, and in order to do so we need to have the best possible offers.

What are some of the basic characteristics the offers must have?

Both blocs agreed that the offers must be better than the ones presented during the last round of negotiations in 2004.

Argentina has complained about EU subsidies on agricultural production. Is that something the EU is willing to look into?

It’s all part of the negotiation. There are some kinds of subsidies that we’re willing to negotiate, such as export subsidies. But there are others that have no direct link to production, don’t distort trade and are due to social policies. Therefore they shouldn’t be addressed in the agreement.

Do you foresee a scenario in which an agreement can not be reached? Is this the last chance?

It’s true that the negotiation has gone on for too long. It was interrupted between 2004 to 2010. Both blocs decided to try again with the commitment of putting all their efforts into negotiations. We don’t foresee any other scenario than sealing an agreement. In any negotiation, everyone has to give in on certain things, because you can’t win on all fronts. Those who think they might be at a disadvantage in the short term with the agreement will see a different scenario in the long-term.

So you have high hopes that an agreement will be sealed?

Yes, I do. It’s very beneficial for both blocs. It’s hard to achieve because there are some sensitive sectors where we need to find balance. But we are still sure that if there are two partners in the world that are capable of having their economies integrated, it is the EU and Mercosur.

Why were there so many delays to the negotiation? What changed?

It’s a complex negotiation that would lead to the creation of the largest free-trade zone in the world. There were political and economic circumstances that provoked changes and difficult times in both regions. There were also some doubts in Mercosur over the impact the agreement would have on their industrial sector. But it has to be assessed in the long term.

Argentina was mentioned as one of those countries with doubts about the impact of a deal...

The Argentine government has a reasonable interest in not risking the industrialization process, which is one of the key elements of its economic plan. They think that less developed industries won’t be able to compete with more competitive industries. It’s understandable but an agreement like this takes those issues into account while implementing temporary measures to cope with them. Protectionism may seem beneficial in the short-term but in the medium and long-term, it’s not.

Is there greater interest from Brazil than the rest of the Mercosur countries to reach an agreement?

Yes, the Brazilian government and its industrial sector have had a more active role in pursuing an agreement.

What will be the main benefits of the agreement for both blocs?

The agreement creates certainty, trust and predictability, which lead to more investment. Argentina and other Mercosur countries are looking for funds for their industrial sectors, and signing the agreement is the best type of guarantee.

Are European companies interested in investing in Argentina?

There has always been an interest, but circumstances haven’t been the best in the past. There are lots of European companies in the country, and they’re capable of investing more and further growth. Reaching an agreement would be the best sign for them to decide to invest here.

Will the recent agreement with the Paris Club help to boost investment?

Yes. Investment requires funds, and this agreement opens the door for companies to obtain the money in their home countries to invest in Argentina.

What are the areas that would be of most interest to European companies?

Argentina needs to develop more infrastructure and better logistics to exploit its natural resources. Transport is a key area in a country as large as Argentina, as well as energy and agriculture.

Do you foresee a more auspicious economic scenario for the country, considering recent developments like the Paris Club deal and the compensation for Repsol?

The European Union views the measures by Argentina to normalize its economy and establish stronger relationships with other international economies with optimism. We hope the government continues down this path, which hasn’t ended yet. Argentina needs to create more confidence among investors, as they need a reason to come here instead of going to other countries. Failing to recognize there are still doubts would imply ignoring reality.

Where are there still doubts?

Argentina’s main challenge is to create a social and inclusive economy that is also sustainable. A fair society is needed but without risking economic fundamentals.

@ferminkoop

 

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