US Chile Free Trade Agreement deals blow to Brazil's Mercosur Vision

Summary

Bilateral trade negotiations between Chile and the United States have caused a foreign policy crisis in Brazil. Brazilian President Fernando Henrique Cardoso sees a bilateral free trade agreement between Chile and the United States as a threat to Mercosur, the South American customs union. Now that Chile is officially negotiating with Washington - and its neighbors are lobbying for similar accords - the Brazilian government has good reason to fear for the future of Mercosur.

Analysis

This week's Mercosur summit, in the Brazilian city of Florianopolis, was supposed to be a triumphant occasion for the country's president, Fernando Henrique Cardoso. After six months of negotiations between Mercosur and Chile, Cardoso and the presidents of Argentina, Uruguay and Paraguay were to officially approve Chile's application for full membership Dec.14-15.

However, last week's announcement that Chile and the United States officially have launched negotiations on a bilateral agreement dashed Brazil's expectations. Instead of celebrating Chile's entry into Mercosur, Cardoso will struggle this week to convince his colleagues the organization still has a future.

Created in 1991, Mercosur has a combined gross domestic product of nearly $1 trillion and a consumer market of 200 million people. It consists of Brazil, Argentina, Uruguay and Paraguay. Chile and Bolivia have been associate members since 1996 and 1997, respectively.

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