Associated Press | December 20, 2001 | By SERENA PARKER, Associated Press Writer
BUENOS AIRES, Argentina - A march by angry Argentine shoemakers protesting cheap Brazilian imports underscores the difficulties leaders of the Mercosur trade bloc face at a summit starting Thursday.
With Argentina mired ever deeper in a four-year economic slump and its fixed exchange rate at odds with Brazil's floating currency, analysts say the leaders of the South American common market will find it hard to agree on fresh policies.
The presidents and foreign ministers of the bloc, comprised of Argentina, Brazil, Paraguay and Uruguay, plus associates Bolivia and Chile, meet Thursday and Friday in Uruguay's capital, Montevideo. It is the world's third-largest trade bloc.
Waving banners reading "Enough of Mercosur!" and "No to Made in Brazil," the shoemakers chanted anti-Brazilian slogans and then torched a Christmas tree decorated with Brazilian shoes.
Their rage reflects difficulties in promoting free trade, when local economies are sick and not booming.
"I'd compare Mercosur to a neighborhood where one of the houses is on fire," said Miguel Diaz, director of the South America Project at Washington's Center for Strategic and International Studies.
"Instead of getting buckets to put out the fire, the neighbors are building walls between their houses to protect themselves," he said.
That bodes ill for this week's summit.
Authorities in Brazil, the bloc's main promoter, said details of a new, common farming import tariff could be worked out.
But most analysts expect the focus to be less controversial issues such as defense and crimefighting cooperation.
"There's always something rhetorical to be said but given the multiple problems in Argentina there isn't much of a contribution to be made," said Riordan Roett, director of the Western Hemisphere Program at Johns Hopkins University.
Four years of recession have brought Argentina, the second-largest economy in South America, to its knees - along with Mercosur.
Argentina's unemployment has soared to near-record levels of over 18 percent. The economy is shrinking, poverty is rising and tax revenues are dwindling, meaning the cash-strapped government can do little to assuage desperate Argentines' anger.
At the core of the bloc's problems are differences between Argentina and Brazil.
Argentina has pegged its peso to the dollar for the past decade, bringing price stability, but making local production expensive.
Brazil also kept its real at par to the dollar for five years, but was forced to devalue in January 1999 when its central bank almost ran out of reserves.
Since then, Brazil's economy has recovered and attracted a slew of factories from Argentina, where production costs remain high and the local market has slumped.
That was a main reason for the shoemakers' protest.
In Brazil, Flavio Fischer of a regional shoe industry association, told local news agency Agencia Estado that he sympathized with the Argentine protest.
But he said Argentine producers also had free access to Brazilian markets.
"If they are competitive, they can produce shoes and enter Brazil," said Fischer. "Before this crisis, when the exchange rate was favorable to them, they weren't worried."
He said Brazilian producers faced a similar challenge from cheap Chinese labor.
"We have to get round that by improving our quality," Fischer said. "There's not much point in sitting around and complaining."
At a recent meeting, Mercosur trade representatives recommended that the bloc should be revived by harmonizing fiscal and monetary policy and avoiding unilateral decisions.
"The foreign exchange rate is the main issue," said economist Nicolas Caruso of Scotiabank Quilmes. "Argentina has been asking for exceptions to ... the common external tariff and a serious trade bloc can't have flexible parameters."Associated Press:
