Southern Cone Joins US in Economic Pact

BRAZIL, Argentina, Paraguay, and Uruguay were set to join with the United States yesterday in a historic first step toward closer economic ties by signing an agreement on a regional free market. Devised in the spirit of President Bush's Enterprise for the Americas plan for a hemispheric free-trade zone, the framework sets an agenda and a time frame to discuss trade and investment in the region. The new US free-trade zone with Canada and Mexico is also part of the Bush plan.

The four Latin signatories are part of the Southern Common Market, or Mercosur. They will talk with the US next month about patent protection, US agricultural subsidies, restrictions on dumping, and dispute settling mechanisms.

To join in a free-trade zone with the US, the four Latin countries must comply with a US requirement that they resolve local problems with debt, import barriers, privatization, inflation, economic stabilization, and patent protection.

"It will generate industrial modernization," says Buenos Aires economic consultant Carlos Bruno. "Argentina has a domestic market of 30 million, Brazil has [one] of 170 million. If you produce for 200 million, you can be competitive on the world market."

Other economists say these countries should first become more competitive by reducing government intervention and tax burdens.

"It's not the number of people that determines the size of a market," says Ruben Almonacid, an Argentine economist living in Brazil. "If a country is efficient, it will be able to export.... Look at Japan."