Landlocked Paraguay presses for better trade terms

Dec. 22, 2011 at 5:25 PM
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MONTEVIDEO, Uruguay, Dec. 22 (UPI) -- Landlocked Paraguay pushed its demand for better terms of economic collaboration and trade with its Mercosur partners, increasingly a sore point because of what Paraguayans see as unfair treatment by Argentina and Brazil.

Paraguay has seen its economic performance increasingly inhibited by Argentine and Brazilian government measures as well as alleged obstruction by business and trade groups in the two countries.

Argentine blockades of Paraguayan merchandise, blamed on Argentine labor unions, caused extensive damage to Paraguayan trade passing through the Paraguayan river to the Atlantic.

Paraguay's electricity sharing deal with Brazil also has had frequent snags over pricing, supply and distribution of responsibilities for the operation of the Itaipu hydroelectric dam complex on the Parana River.

Paraguay wants better prices, a greater share of electricity to help electrify its impoverished rural and urban areas and freer access to the Argentine national grid to sell electricity to Uruguay.

At the Mercosur summit talks in Montevideo, Paraguayan President Fernando Lugo appeared to be trying to exploit a diplomatic stalemate over Venezuela's membership of the trade group and extract more concessions from neighboring member states.

Lugo called for a more coordinated integration of the Mercosur region's energy policies and closer economic collaboration that could benefit his country.

Mercosur is aiming to expand its global profile, building trade ties in East Asia, Europe and the Middle East, Paraguay as a small country believes the larger members stand to benefit most from the expansion. Mercosur covers about 5 million square miles of territory, a population of more than 267 million and a combined gross domestic product of $2.9 trillion.

Paraguay, with a population of about 6.4 million and a gross domestic product of less than $20 billion, is still dependent on the fortunes of its soy crop and soy exports. Lugo wants to reduce that dependence, promote manufacturing and services and diversify the economy. But, for all that, he needs easier access via the Paraguay River to international maritime trade.

Lugo said, "For Paraguay it is crucial to increase trade and for Mercosur to guarantee the free flow of goods and the free access to the Brazilian and Argentine markets as contemplated in the Mercosur charter."

He said that greater integration of energy produced in the three countries was also important.

"We want energy integration in a spirit of solidarity," he said, in a reference to what Paraguayans consider unfair trade practices by Argentina and Brazil. Paraguay generates almost 10 times more power than it consumes but sells that power to Brazil and Argentina at rock-bottom prices because of decades-old contracts.

Paraguay recently received the green light from Mercosur to sell power to Uruguay. But it faced Argentine demands for high tariffs to let Paraguay transmit the power to Uruguay over the Argentine grid.

As a result, the deal didn't go through.

Now, however, Lugo is in demand for entirely different reasons. Mercosur wants to admit Venezuela to its membership but is prevented from doing so until Paraguay's congress ratifies Venezuela's membership.

Last week Mercosur leaders said they would seek to change the pact's charter to circumvent the Paraguayan Parliament. But Paraguayan lawmakers have warned Lugo to stay clear of such a deal if he wants to avoid being impeached for undermining the sovereignty of the Parliament. The stalemate continues.

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