NCPA - National Center for Policy Analysis

An Argentina-Brazil Trade Zone?

May 13, 2003

Argentina is poised to leverage its nascent economic recovery for closer trade and infrastructure ties with Brazil. This heightened integration between South America's two largest economies could provide the region with a more reliable engine for growth. But it could also signal trouble for the prospects of creating a free trade zone in the Americas by sometime near the 2005 goal -- an initiative supported by the United States.

Brazilian President Luiz Inacio Lula da Silva seeks to bolster commercial links with Argentina and put in some cash to facilitate trade. This is what da Silva and Argentina's likely next president, Nestor Kirchner, discussed last week during Kirchner's visit to Brazil:

  • Plans to create a $1 billion fund to finance both Brazilian and Argentina exports.
  • Integrated transportation, energy and communications networks between both countries.
  • The two men have also discussed establishing a common currency.

Critical to the region's future is the creation of a free trade zone for the Americas by sometime near the target date of 2005, as trade ministers agreed in Buenos Aires in 2001.

  • The zone will provide trade links between about 800 million people, or 15 percent of the world's population.
  • Brazil, which accounts for 40 percent of the Latin American market, has traditionally been a tough negotiator on trade, seeking to protect its own large market while it argues for dismantling trade barriers elsewhere.

With closer ties to Argentina, Brazil's ability to slow an advance of hemispheric trade talks would only grow. While an improvement of regional integration is always welcomed, a slowing of the creation of the trade zone would be unfortunate for the United States, Brazil, Argentina and the hemisphere.

Source: Editorial, "The Argentina-Brazil connection," Washington Times, May 13, 2003.

 

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