This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 03 BRASILIA 003052 
 
SIPDIS 
 
DEPT FOR WHA/BSC, WHA/AND AND WHA/EPSC 
DEPT PLEASE PASS TO USTR MSULLIVAN 
USDOC FOR 3134/USFCS/OIO/WH/EOLSON 
USDOC FOR 4332/ITA/MAC/WH/OLAC/MWARD 
NSC FOR SCRONIN 
 
E.O. 12958: DECL: 11/17/2015 
TAGS: ECIN ETRD ECON VE BR
SUBJECT: BRAZIL - PROCESS FOR VENEZUELA'S MEMBERSHIP IN 
MERCOSUL JUST BEGINNING 
 
Classified By: Classified by Charge Phil Chicola for reasons 1.4 
(b) an 
d (d) 
 
¶1. (SBU) Summary.  Brazil's decision to approve Venezuela's 
request for membership to Mercosul came from the top levels 
of the GoB, without substantial internal debate.  While the 
process for admitting Venezuela to the bloc is moving 
forward, the Foreign Ministry appears to be approaching the 
issue in a measured way, stressing that Venezuela will have 
to comply with a number of technical requirements to gain 
entry.  Mercosul Presidents are expected to okay a program 
for Venezuela's accession during the December 9 summit, 
however the timing, and even eventual completion, of 
Venezuela's entry into the bloc remains an open question. The 
Brazilian private sector is divided on the issue.  End 
Summary. 
 
¶2. (SBU) On November 9, Emboff met with EconCouns at 
Argentine Embassy to discuss, inter alia, the issue of 
Mercosul expansion.  Our contact there frankly admitted that 
he was not aware of any official Argentine position in favor 
of full Venezuelan membership in Mercosul and it could well 
be that Buenos Aires eventually comes out the other way.  To 
date, we were told, virtually no discussion of the modalities 
of Venezuela's assumption of full membership had taken place 
and it was unlikely that Mercosul experts would be able to 
hold such a conversation prior to the December 9 presidential 
summit in Montevideo.  Currently, Brazilian and Argentine 
negotiators were working full-time in preparation for the 
November 30 Brazil-Argentina Friendship Day celebrations in 
Foz do Iguacu.  Both Brazil and Argentina hope that the 
crowning achievement for the November 30 event would be a 
bilateral accord on safeguards on sensitive goods ) and 
achieving the elusive consensus on this perennially 
controversial issue would be difficult. 
 
¶3. (SBU) Our contact then ticked off a host of reasons why 
full Venezuela membership in Mercosul would be problematic: 
 
--  Currently, Brazil and Argentina dominate Mercosul 
decision-making with Paraguay and Uruguay trailing along 
behind.  Introducing oil-rich Venezuela into the mix could 
prove to be a destabilizing element, with Caracas playing the 
Brazilians against the Argentines and vice versus to increase 
Venezuelan influence. 
 
--  On regional trade issues, Mercosul is seeking 4 1 talks 
with the U.S. and a FTA with the EU.  A 5 1 agreement 
(Venezuela being the fifth) with the USG looked to be a 
non-starter and the addition of Venezuela would similarly 
complicate talks with the EU. 
 
--  There would be enormous technical difficulties in 
reconciling Venezuela's Andean Pact common external tariffs 
with those of Mercosul (and as of yet, work on this issue had 
not even begun). 
 
--  The admission of Venezuela would pose difficult questions 
regarding the future of Mercosul, such as:  if Mercosul is to 
eventually embrace South America how would it differ from the 
South America Community of Nations, and why not seek to offer 
full membership to countries such as Mexico and Cuba? 
 
¶4. (SBU) The claims of the Argentine EconCouns 
notwithstanding, local press continues to report that it is 
Argentina and Uruguay, not Brazil, which are pushing for 
Venezuelan membership in the Mercosul club.  They cite 
Venezuela's purchase of Argentine debt and its ability to 
supply fuel, along with political affinity between Kirchner 
and Chavez, as underpinning Argentina's position, while 
explaining Uruguay's support as deriving from its leftist 
political leanings and Venezuela's decision to build a 
refinery in that country. 
 
¶5. (SBU) Brazil's decision to approve Venezuela's request for 
membership came from the top levels of the GoB, without 
substantial internal debate.  A high-level Foreign Ministry 
official responsible for Mercosul trade negotiations with 
countries outside the region (e.g. EU, India, Southern 
African Customs Union) told Econoff he was not party to 
internal GoB deliberations and was taken by surprise by the 
announcement made during the mid-October Ibero-American 
Summit.  The EU Trade Officer in Brasilia likewise told 
Econoff that EU inquiries in all four Mercosul capitals 
confirmed that no technical work had been done prior to the 
announcement. 
 
¶6. (SBU) The timing of any eventual Venezuelan entry into the 
bloc is unclear at this point.  According to Antonio Simoes, 
Foreign Minister Amorim's economic advisor and Secretary of 
Policy Planning, now that the political decision has been 
taken to enable Venezuela to join, the admission process must 
be negotiated.  During the upcoming Mercosul summit, the 
bloc's presidents are expected to take the first step by 
signing-off on an accession program, which Mercosul 
negotiators are still finalizing.  While not having details, 
Simoes assumed that Venezuela would be asked to take on all 
the standard commitments of Mercosul members ) Treaty of 
Asuncion, application of the Common External Tariff, etc. 
After the summit, the process of negotiating with Venezuela 
over the particular requirements will commence. Already the 
issue of how/whether Venezuela can remain a member of the 
Andean Pact as well as be a member of Mercosul has been 
raised as an issue. 
 
¶7. (U) The Brazilian private sector is split on the issue. 
One group is focused on the potential export opportunities 
and the "complementary nature of the Brazilian and Venezuelan 
economies" ) i.e., export market for industrial goods. 
Between January and October this year, Brazilian exports to 
Venezuelan grew by about 60 percent in comparison with the 
same period last year, reaching USD 1.8 billion.  Imports 
increased as well, 40 percent in the period, but still only 
reached USD 218 million, providing Brazil will a sizable 
trade surplus.  The requirement that Venezuela would have to 
open its market to the other four bloc members is also seen 
as a vast improvement over the bilateral Mercosul-Venezuela 
FTA in which 91.2 percent of Brazil's tariffs would be 
eliminated within five years compared to only 16 percent for 
Venezuela. 
 
¶8. (U) On the other side, certain business people are worried 
that Venezuela's admission to Mercosul will further 
complicate Brazil/Mercosul's trade negotiations with other 
partners.  They point to Venezuela's vociferous opposition to 
the FTAA, as well as its potential to undermine negotiations 
with the EU.  This, all at a time when trade friction between 
Brazil and Argentina over the latter's demand for a safeguard 
mechanism is highlighting strains among existing Mercosul 
members.  Rubens Barbosa, former Ambassador to the United 
States and current chair of the Trade Council within Sao 
Paulo's Trade Federation (FIESP) has characterized the 
decision to include Venezuela as both an economic and 
political mistake. 
 
¶9. (SBU) In a conversation with Econoff November 16, Simoes 
played down possible complications for Mercosul in on-going 
trade negotiations, noting that Venezuela's only product of 
interest is oil. (Note: This would seem to us to be a rather 
naive perspective, that Venezuela would contain its impact 
along the line of economic interests, rather than seek to use 
the group to pursue wider foreign policy objectives. End 
Note.)  Simoes also mentioned two previous instances when 
countries (Mexico and Chile) had planned to join Mercosul as 
full members, but then backed-out once faced with the 
specific conditions.  While emphasizing that he was not 
making comparisons, Simoes' comments suggest he sees the 
possibility, if not the hope, that Venezuela might in the end 
choose not to follow through with its stated intentions. 
 
Comment 
------- 
¶10. (C)  In responding to inquiries, President Lula and the 
Foreign Ministry always cast Venezuela's request to join 
Mercosul in a positive light, although neither seem to be 
going out of their way to actively promote the idea.  In a 
conversation with Mission's Senior Commercial Officer, the 
Vice-Minister of Development, Industry and Trade implied a 
lack of GoB enthusiasm by noting that Chavez's first two 
attempts to join Mercosul were rebuffed and noting GoB 
concern that Uruguay is trying to railroad the entry process. 
 
¶11. (C)  Politically it would have been difficult for 
President Lula to oppose Venezuela's admission to the bloc 
given his relationship with Chavez and his need to pacify the 
left-wing of his party.  However, Foreign Minister Amorim is 
careful to point out that there will be certain requirements 
for membership and a process to be followed.  It will be 
interesting to see whether President Lula and his political 
advisors will continue to roll the Foreign Ministry's 
technical people or not.  That will give us a good reading on 
how far Lula will go to please his left-wing constituency. 
 
Chicola