Venezuela and Brazil Make Headway on Cooperation

Venezuela and Brazil Make Headway on Financial, Technological, and Agricultural Cooperation

May 28th 2009, by James Suggett – Venezuelanalysis.com

Venezuelan President Hugo Chavez (left) and Brazilian (ABN).

Mérida, May 28^th 2009 (Venezuelanalysis.com) --On Tuesday the governments of Brazil and Venezuela advanced on a series of joint projects including infrastructure, hydrocarbon and hydroelectric energy production, chemical fertilizer production, literacy training, public finance, and a joint oil refinery. They also discussed Venezuela's nationalization of several Argentine-owned steel companies, and set timeline for Venezuela's entry into the Common Market of the South (MERCOSUR).

Brazilian President Luiz Inacio Lula da Silva and Venezuelan President Hugo Chavez met in the Brazilian city of Salvador da Bahia, and reiterated their commitment to mutually beneficial integration.

"We have advanced in an extraordinary manner in our relations with Venezuela," said Lula. Chávez spoke of the significance of these relations in the midst of the world economic crisis. "This crisis is slamming the world, and this crisis should impel us and obligate us... there is nothing more we can do except pick up the pace, more united each day."

Venezuela's National Electric Corporation CORPOELEC signed an accord with the Brazilian construction firm Queiroz Galvao to build the second dam in a large hydroelectric complex in southwestern Venezuela. Also, Venezuela will contract the Brazilian engineering firm Odrebrecht to expand the metro system in Caracas.

To strengthen Venezuela's agricultural sector, which greatly declined in the second half of the twentieth century as oil production grew to dominate the economy, Venezuela's state petrochemical company PEQUIVEN and Brazil's Brasquem laid out plans to build factories for the production of ammonia and urea-based fertilizers in Venezuela. The two governments also signed agreements to help promote the production of citrus fruits, yucca, and coffee on family farms in Venezuela.

The science and technology ministries of Brazil and Venezuela discussed the connection of fiber optic lines between the two countries, and developed plans to introduce Brazilian digital television technology in Venezuela and as a tool for Latin American integration. The two governments also discussed the possible creation of a bi-national zone for the development of medium industry along their common border in southeastern Venezuela.

To improve literacy in Brazil, Venezuelan educators will travel to Brazil's Bahia state to supervise literacy educational programs based on the model of Venezuela's national literacy program, Mission Robinson, which taught approximately 3.5 million people to read between 2003 and 2007, earning special recognition from the United Nations. Venezuelans are expected to help train half of Bahia's two million illiterate citizens to read, said Adeum Sauer, the education secretary of Bahia, on Tuesday.

Brazil's large public banks, Caixa Economica Federal and Social Development Bank (BNDES), signed accords with the Venezuelan Finance Ministry to finance a series of bi-national projects, including the restoration of Venezuelan slums and the construction of public housing. BNDES President Luciano Coutinho said his institution will provide $4.3 billion to bi-national projects.

Abreu e Lima Refinery

During Tuesday's meeting, Venezuela's state oil company PDVSA and Brazil's Petrobras agreed spend 90 more days negotiating PDVSA's participation in the construction of the Abreu e Lima oil refinery in Northern Brazil. Chávez and Lula had ceremoniously initiated joint construction of the project last year, but PDVSA and Petrobras were unable to agree on whether PDVSA would supply oil to the refinery at subsidized prices, among other matters, so Petrobras moved ahead on the project alone.

President Chávez said he had hoped to come to an agreement on the refinery during Tuesday's meeting. "I confess that I am frustrated. It is shameful. We were not able to close the deal," he said.

MERCOSUR and Nationalizations

On Tuesday, Lula publicly reiterated his administration's support for Venezuela to become a full member of the Common Market of the South (MERCOSUR), a free trade bloc that includes Brazil, Argentina, Paraguay, and Uruguay. Also, Lula and Chávez worked out a timeline for Venezuela's integration into the bloc. Venezuela's membership must still be approved by the Brazilian and Paraguayan legislatures.

Meanwhile, Argentina's largest private industrial federation, the Argentine Industrial Union (UIA), is putting pressure on the Argentine government to reverse its decision to admit Venezuela to the market, in retaliation against Venezuela's nationalization of steel companies that were partially owned by the Argentine Techint Group over the past year. The nationalizations "represent a substantial change with respect to the circumstances under which the Argentine Congress approved Venezuela's admittance to MERCOSUR," the UIA stated.

On Wednesday, Argentine President Cristina Fernández de Kirchner asked Chávez to explain his position on the nationalizations, after news reports that Chávez had told Lula during Tuesday's meeting that Venezuela is in "a phase of nationalizations of companies in the country... except the Brazilian ones."

"An affirmation of this type, if it existed, would imply a grade of discrimination and discretion that exceeds the sphere of sovereignty of each independent state," Fernández said on Wednesday.

The Venezuelan Foreign Relations Ministry replied that Chávez's comments to Lula were taken out of context and that the media had used them in "a fierce defamation campaign."

Chávez had commented to Lula that while the Brazilian firms were willing to abide by Venezuela's national development plan, the Techint Group had been exporting Venezuelan steel to be manufactured into tubes in Mexico, then selling these tubes to PDVSA at inflated prices.

Venezuela "reiterates its willingness to continue deepening all types of ties that today unite us for our mutual benefit, and manifests its profound appreciation and reiterates its confidence in all Argentine businesses that wish to accompany us in our mutual process of growth and consolidation within a framework of equity and justice," the Ministry stated.

On Wednesday, Fernández defended Venezuela's nationalizations as a "sovereign" decision of the Chávez administration.