US embassy cable - 05BRASILIA1685

UNCLAS BRASILIA 001685 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/BSC, WHA/EPSC AND WHA/CCA 
NSC FOR KBREIER 
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D 
USDOC FOR 3134/ITA/USCS/OIO/WH/RD/DDEVITO/DANDERSON/EOL SON 
USDA FOR JBPENN, U/S, FAS 
DEPT PLEASE TO USTR FOR SCRONIN 
 
E.O. 12958: N/A 
TAGS: ETRD, Trade 
SUBJECT: MERCOSUL AGREES TO TRADE NEGOTIATIONS WITH CUBA, 
BUT GOB SAYS TALKS AT PRELIMINARY STAGE 
 
 SENSITIVE BUT UNCLASSIFIED 
 
1.  (SBU) Summary.  During a summit held in Asuncion, 
Paraguay on June 20, Mercosul leaders announced their 
decision to initiate trade talks with Cuba. According to 
Brazil's Foreign Ministry, a decision has not yet been made 
on the type of final agreement to be negotiated.  Depending 
on the nature of the final agreement, Cuba could become an 
associate member of Mercosul.  End Summary. 
 
2.  (SBU) A brief, single line in Mercosul's joint communique 
from its June 20 summit in Asuncion, Paraguay, announced the 
bloc's decision "to initiate a process for negotiating with 
Cuba with the view to signing a free trade agreement within 
the ALADI framework."  The Mercosul bloc has been considering 
trade negotiations with Cuba for some time.  According to 
Gilberto Siqueira, Deputy in the Foreign Ministry's Regional 
Integration Division under the South American 
Under-Secretariat, Mercosul decided to move forward on the 
talks now because of the bloc's positive trade relations with 
Cuba.  In 2003, two-way trade between the Mercosul bloc and 
Cuba was on the order of only $120 million, about 80 percent 
reflecting Brazil-Cuba trade.  However, in 2004 trade between 
Brazil and Cuba grew by 93 percent with strong growth in both 
directions; Brazil's imports from the island totaled $45 
million in 2004 and its exports to Cuba reached $132 million. 
 
 
3.  (SBU) Now that the political decision has been made, 
Siqueira said preliminary technical discussions, which he 
characterized as exploratory, can proceed.  Although the 
communique mentioned a "free trade agreement" as the 
objective, a decision on the form and substance of the 
agreement will depend on the outcome of the technical talks. 
According to Siqueira, no decision has been made yet on the 
scope or depth of a final agreement, which could range from 
an Economic Complementary Agreement that provides limited 
concessions in the form of tariff preferences on a small 
universe of products, to a free trade agreement along the 
line of those negotiated to obtain Mercosul associate 
membership, as the Andean countries concluded in 2004. 
 
4.  (SBU) Should the decision be made to negotiate the 
latter, Cuba could become an associate member of Mercosul. In 
addition to any trade concessions it might negotiate, 
associate membership would provide Cuba with the ability to 
readily consult with Mercosul members, although associate 
membership does not necessarily provide the right to joint 
the bloc for the purpose of trade negotiations. 
 
5.  (U) Post will continue to report on this issue as we 
learn more about the GoB's intended course of action. 
Danilovich