196
December 2012
MERCOSUR Summit
The 44th Ordinary Meeting of the Common Market Council (CMC) and Summit of MERCOSUR Heads of State, was held in Brasilia, Brazil, 7 December, at which Uruguay took over the bloc’s Pro Tempore Presidency. The most important points of this gathering[1] were to do with the expansion of the bloc (see the article on this topic in the current issue of the INTAL Monthly Newsletter): on the one hand, the signing of the Accession Protocol of the Plurinational State of Bolivia and, on the other, the progress linked to the adjustment of the tariff structure, and the adoption of the bloc’s regulatory acquis by the Bolivarian Republic of Venezuela.
The Communiqué of the MERCOSUR Heads of State highlighted concerns about the fragility of the global economy, and the need for the G20 to promote the application of expansionary policies and to strengthen the regulation of the international financial system in order to stimulate sustainable growth, while stressing the need to move forward with the macroeconomic coordination of the bloc’s countries. The leaders also underlined the importance of achieving a balanced outcome to the Doha Round negotiations of the World Trade Organization (WTO), with an emphasis on protectionism in the agricultural sector which affects the bloc’s exports.
 
Asymmetries
 
The Presidents reaffirmed the importance of overcoming disparities through the implementation of regional, cross-cutting, and integrated social projects in the framework of the MERCOSUR Strategic Social Action Plan (PEAS). Efforts will be made to ensure that PEAS projects are funded with resources from the MERCOSUR Structural Convergence Fund (FOCEM).
Several relevant decisions relating to the FOCEM emerged from the CMC Summit. First, the 2013 Budget was approved: to the US$99.7 million allocated for that year will be added a further US$104.9 million available from previous years (Table 1). In accordance with Decision No. 41/12, Venezuela will contribute an annual US$15.5 million to the FOCEM and a further US$11.5 million to finance Programs I, II, and III, as well as plurinational projects.


Table 1: MERCOSUR Structural Convergence Fund (FOCEM): 2013 Budget. Allocation of resources by country and Program IV

In millions of US$ and as percentage of total.

Beneficiary 2013 Allocation   Available from the previous year   Total  
  Millions
of US$
%
of total
Millions
of US$
%
of total
Millions
of US$
%
of total
Argentina 11.1 11.1% 22.5 21.4% 33.5 16.4%
Brazil 11.1 11.1% 19.5 18.6% 30.6 14.9%
Paraguay 45.8 46.0% 4.9 4.7% 50.8 24.8%
Uruguay 31.2 31.3% 58.0 55.3% 89.2 43.6%
Venezuela 0.0 0.0% 0.0 0.0% 0.0 0.0%
Program IV 0.5 0.5% 0.0 0.0% 0.5 0.2%
Total 99.7 100.0% 104.9 100.0% 204.5 100.0%

Source: CMC Decision No. 48/12.



Second, it was decided to consider a possible capitalization of the FOCEM, and a review of the contributions and resources received by each country in light of the incorporation of new States Parties.
Third, four projects were approved to be part funded by the FOCEM: (1) Railroad II Rehabilitation (Piedra Sola-Tres Árboles-Algorta-Paysandú and Queguay-Salto-Salto Grande sections) (US$127.3 million, two-thirds of which will be financed by the FOCEM); (2) Building Infrastructure for the Protection and Promotion of Human Rights in MERCOSUR (US$503,000, provided almost entirely by the FOCEM); (3) Arturo Jauretche National University Local and Regional Development Hub in the district of Florencio Varela (US$26.5 million, 53% of which is to come from the FOCEM) to seek social promotion for the most vulnerable sectors; and (4) Integrated Urban Sanitation in Aceguá (Brazil) and Aceguá (Uruguay).
 
External Agenda
 
There have been some important recent developments relating to the external agenda. On the one hand, MERCOSUR formally requested at the Summit the bloc’s participation as an observer in the Pacific Alliance, after Uruguay did so individually. The CMC also decided that the Co-operative Republic of Guyana and the Republic of Suriname may participate as guests at MERCOSUR meetings to discuss areas of common interest.
On the other hand, in recent months, some of the MERCOSUR economies have recently been involved in questions in the framework of the World Trade Organization (WTO) over measures applied both by them and by some trading partners.[2]
At the Council for Trade in Goods meeting, November 26, the European Union (EU), with the support of other countries, expressed its concern about the use of the Industrial Products Tax (IPI) by Brazil to protect its automotive sector, given that the amount to be levied is reduced the higher the national content of automobiles. Brazil, for its part, argued that the incentives of the Innovar Auto program, which aims to encourage technological development, are compatible with the rules of the multilateral trading system, since they depend on vehicles’ energy efficiency. At the same meeting, Brazil and Paraguay, together with 21 countries, signed a declaration urging Ukraine to reverse its intention to renegotiate commitments consolidated with the WTO. Uruguay also supports this initiative.
The WTO’s Dispute Settlement Body (DSB) saw some formal complaints involving Argentina, after no agreements were reached in consultations with their trading partners. On the one hand, Mexico, United States, the EU, and Japan requested an arbitration panel be set up to examine various measures imposed by Argentina on its foreign purchases. Similarly, Panama requested from the WTO consultations on certain restrictions that Argentina is allegedly applying to imports of goods and services. On the other hand, Argentina formally sued United States before the WTO for preventing the entry of meat and fresh lemons from Argentina, and the EU and Spain for the restrictions imposed on the importation of Argentine biodiesel.
Similarly, Argentina and Mexico agreed restart trading in the automobile sector, after the former suspended the application of Economic Complementation Agreement (ECA) No. 55 in the middle of this year. However, free trade as envisaged in ECA-55 will not apply; instead a quota will be set whereby Argentina may import from Mexico automotive products worth US$600 million (a reduction of 33%) over the next three years. In addition, the regional content to benefit from the agreement will go from 30% today to 40% by 2016.
 
Other relevant topics on the domestic agenda
 
Argentina became the first State Party to approve the MERCOSUR Customs Code, and there were two important meetings between the authorities of some of the bloc’s countries.
On the one hand, the presidents of Argentina and Brazil, Cristina Fernández and Dilma Rousseff, spoke at the 18th Argentine Industrial Conference. Both leaders stressed the importance of the bilateral relationship and, among other relevant aspects, the need to overcome the obstacles to integration between the two countries, to promote permanent dialogue between the public and private sectors, to strengthen the industrial sector through productive integration and the development of infrastructure, to stimulate innovation. The drop in bilateral trade (13.6% YOY between January and November of this year) is due, in Rousseff’s opinion, to the contraction of activity in the two countries and to administrative barriers to trade.
On the other hand, Brazil and Uruguay adopted an additional protocol for the free movement of goods and services, which provides, among other relevant aspects, for mechanisms and procedures on rules of origin, sanitary and phytosanitary measures, and anti-trust legislation. The two countries also made progress in the bilateral agenda in terms of productive integration, specifically as it relates to science and technology, telecommunications, software, and shipbuilding.




[1] See full list of CMC-approved Decisions at the Summit in Table 2.
[2] For more information on the participation of the MERCOSUR economies and the other Latin American countries in WTO disputes, see the January 2013 INTAL Monthly Newsletter No. 197.
 
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