Brazil plans trade incentives for neighbors

By: | at 07:00 PM | International Trade  

The Brazilian government is preparing to offer a series of trade incentives for South American neighbors Bolivia, Uruguay and Paraguay, the Brazilian financial newspaper Valor Economico reported.

According to the newspaper, Brazilian President Luiz Inacio Lula da Silva met with six of his cabinet ministers to discuss possible incentives for neighboring nations to be announced at the next official meeting among Mercosul trade bloc participants on Jan. 18 and 19 in Rio de Janeiro.

The Mercosul trade bloc includes Argentina, Brazil, Paraguay, Uruguay and Venezuela.

Brazil’s presidential press office was unable to confirm details of the report.

According to the paper, Brazil’s government plans to announce a credit line worth $30 million for Bolivia, via the Brazilian National Development Bank, or BNDES, for the acquisition of tractors. It also plans to announce other credit lines and the construction of a biodiesel plant in Bolivia, the paper said.

In the meantime, Lula also reportedly told advisers to study measures to increase the number of border officials and accelerate the entry of Uruguayan products to Brazil, and vice versa.

The measure is a demand of the Uruguayan government, which claims that trade between both nations suffers with the lack of Brazilian officials on its side of the border.

In addition, the Brazilian government plans to increase compensation to Paraguay for the use of the jointly-owned Itaipu hydroelectric dam.

Currently, both nations are discussing payments on debts arising from the construction of the dam.

The dam’s construction was largely financed by Brazil’s government, leaving debt which currently totals approximately $19 billion. Paraguayan repayments on the debt were linked to U.S. inflation during renegotiation in 1996.

The dam, with generating capacity of 12,600 megawatts, was completed in 1983.

Valor Economico, however, did not detail what compensation mechanisms are under discussion by the Brazilian government.

According to the newspaper, the series of measures is an attempt by the government to increase South America’s integration process, and according to analysts, could be used by the Brazilian government as a counterweight to Venezuela’s President Hugo Chavez, who is using Venezuela’s oil revenues to provide financial support and build influence across the region. (Dow Jones & Company, Inc.)


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