Business Week

Foreign Minister Maria Soledad Alvear discusses the country's push for free trade agreements and relations with the U.S. Considered the most disciplined free-market economy in Latin America, Chile started opening to foreign competition in the early 1980s and today boasts an average 6% tariff on all imported goods. The country of just 15 million inhabitants has free trade agreements with the European Union, Canada, Mexico, and Korea, and special trade accords with most of Latin America.
When the North American Free Trade Agreement was approved back in 1993, Chile was promised it would be the next country to get a free trade deal with the U.S. Although President Bill Clinton was unable to win fast-track negotiating power, Chile went ahead with the talks anyway, two years ago. Then the Bush Administration won fast-track authority last August. The two countries finalized negotiations late last year, around the same time a similar U.S.-Singapore trade deal was wrapped up. Yet Bush signed the Singapore agreement in early May in a White House ceremony and made Chile wait for a June 6 signing -- in Miami. Why? Officials in Washington said they were "disappointed" with Chile's failure to support the Iraqi war from its seat at the U.N. Security Council. Political analysts in Washington and Santiago believe the delay was aimed at making the Chileans aware of how deep that disappointment was. On May 28, the day after the U.S. finally announced the June 6 signing date, Chilean Foreign Minister Maria Soledad Alvear talked with BusinessWeek's Latin America Correspondent Geri Smith about U.S.-Chile relations and the prospects for free trade. They met in the Foreign Relations palace in downtown Santiago. Alvear, 52, a lawyer, formerly served as Chile's Justice Minister and as the Minister for Women after Chile returned to democracy in 1990 after 17 years of military rule. Edited excerpts of their conversation follow: Q: What is the significance of the Chile-U.S. free trade agreement for the Chilean economy? A: I'm very happy about it. We've negotiated a free trade agreement that's very good for both countries. Chile has a clear export strategy aimed at developing the economy and in particular aimed at diversifying our exports. We couldn't do that without this agreement. It's a seal of quality for our country as a reliable place to make investments. We have signed agreements with the U.S., the European Union, South Korea, Latin America, and soon we'll sign with the non-EU nations. This gives us a very interesting horizon. Q: This is said to be a "third-generation" trade agreement because it covers intellectual property, electronic commerce, services, and government procurement. In that sense, it could be a template for other trade agreements around the world. But some Chileans say the government wanted the agreement so badly it caved in by not insisting on eliminating U.S. anti-dumping rules. Chile also agreed to loosen its restrictions on capital flows even though those restrictions have protected the country from financial volatility in recent years. A: We were very conscious that we weren't going to manage to eliminate U.S. anti-dumping rules, which are being looked at in multilateral forums like the World Trade Organization. Nevertheless, we agreed to mechanisms for dispute resolution that are quite modern. And with regard to capital controls, we're satisfied with what was achieved. Q: How would you describe U.S.-Chile relations now, after the Iraq flap? A: They're good. I was in Washington less than a month ago and had the opportunity to meet with Secretary of State Colin Powell, with U.S. businesspeople, and with members of Congress. I perceived that while the U.S. didn't like the fact that Chile was opposed at that time [to the Iraq U.N. Security Council resolution], that they view the free trade agreement positively. We have a very full agenda of economic issues. We have work to do together on issues of democracy and human rights. We're working together on the Free Trade Area of the Americas. We've worked together to help the Organization of American States find a solution for the [political] problems in Venezuela. We're working together in many arenas. Q: How long will it take to rebuild relations with Washington? A: I believe each side understands the other's position, that there was a specific difference [of opinion], with the best of intentions, at a certain point in time...and at this point we have to look toward the future. The Singapore agreement was finished first because Singapore didn't have an agriculture chapter, and they didn't require translation of the agreement into another language. So, if you look at it objectively, there was never a delay [in signing Chile's agreement]. Q: Some say the Chile-U.S. Free Trade Agreement is a template for the proposed Free Trade Area of the Americas, the 34-nation accord currently under discussion for the hemisphere. A: This is a FTA negotiated between a small emerging-market country and the most developed economy of the world. If we're capable of reaching such an agreement, that improves the possibility of reaching a larger agreement among 34 countries with different levels of development around the region. Some countries in the region believe that it's perilous for small developing countries to sign commercial agreements with industrial countries, but we are proof that it's not. The negotiation between Chile and the U.S. and the negotiations now under way between the U.S. and Central America will be very interesting and important for the Free Trade Area of the Americas. Q: Chile already has agreements with all of Latin America except the Caribbean. Why is the Free Trade Area of the Americas important to you if you already have most of the region covered? A: Because Chile is a small economy, and we have placed a big emphasis on exports. Having clear rules for all of the countries in the region will be an important stimulus. Chile's decision to open up to the world allowed us to double our gross domestic product in the 1990s -- something that had previously taken us 50 years to do. At the same time, we were able to halve the number of Chileans living in poverty. We're very conscious of the fact that this process of market openings mean growth for countries. And if the countries carry out good social policies to lift people out of poverty, even better. That's why it's important that the region enjoy stable, solid democracies. Latin America has lived through very painful periods. Today we have recovered our democracies, but the problem now is maintaining governability. Many of the problems we see in Latin America today are caused by painful poverty and pent-up demands from society. We believe there's a way out of this situation, and it's important to work together to increase the possibility of development and reduction of poverty. Q: In just a few months, Chile will mark the 30th anniversary of the bloody military coup that ousted Socialist President Salvador Allende. The military ruled for 17 years, and Chile has been a functioning democracy only since 1990. You've been a Cabinet Minister in all three governments since then. How do you feel the country has changed? A: If a person had been asleep all these years and woke up today, he would not recognize the country. Of course, the most important thing was the restoration of democracy, freedom, and respect for human rights. Chile was an isolated country, and when it returned to democracy it had to reinsert itself in the world. Today, it's a key member of the most important political forums, including the U.N. Security Council. If you look at census figures, you'll find that 80% of the young people in college today had parents who didn't attend college. Among the poor, the number of households that own a washing machine has doubled [in these 13 years]. The role of women in public life has been remarkable. Chile has a woman serving as Defense Minister. When she and I go to Buenos Aires to meet with our Argentine [male] counterparts, they will see two women, and that reflects in many ways the changes Chile has gone through. Q: As one of Chile's most prominent politicians, a leader of the Christian Democratic party, you're often mentioned as a probable front-runner for the next presidential elections to be held in 2006. Is it your goal to be President of Chile? A: We are only halfway through the term of President Lagos. It's still too early to define [who the next candidate will be for the center-left coalition]. But if you ask me if a woman could be President of this country, I would say yes. With so many threats in the world of terrorism, people are looking for leaders who work well in teams, who exercise power in a more inclusive way, by sharing more than imposing. That's often described as a feminine style of leadership, although it can be exercised either by a man or by a woman. In any event, I believe that men and women are equally able to exercise that responsibility. If [being nominated for the presidency] were to happen, I would definitely have to consider it.

<a href=www.vheadline.com>Venezuela'a Electronic News Posted: Tuesday, June 10, 2003 By: David Coleman

Venezuelan Guayana Corporation (CVG) officials say the state-owned heavy industry conglomerate intends to free up a large bauxite deposit in which BHP-Billiton has shown an interest to mine bauxite and produce alumina.

CVG president, Major General (ret.) Francisco Rangel Gomez says the CVG had had to rescind a dormant exploration contract held by British Delta Minerals before the El Palmar deposit could be offered but that Delta Minerals had held the contract for more than a decade without carrying out any work on the property.

In a curious parallel with procedure on the Las Cristinas gold mine project in El Callao, where Placer Dome's work contract was irrevocably rescinded last year, Rangel Gomez says "what we have is a lack of contract compliance ... nothing was done for 12 years!"

Major General (ret.) Francisco Rangel Gomez "Without any doubt we will be making a decision before the year is out," Rangel Gomez said, pointing out that the CVG has total autonomy from the President of Venezuela to handle all mining contracts in Venezuela's Guayana region.  The CVG is currently in negotiations with Delta Minerals to end the contract, in full compliance with their obligations and Venezuelan law.

BHP-Billiton had asked to participate in the El Palmar development with an initial investment of US$1.3 billion for the construction of a bauxite mine and an alumina plant which could be expanded to include a primary aluminum smelter, with an increased total investment estimated at $4.3 billion.

CVG mining director Armando John says El Palmar contains bauxite reserves estimated at 150 million tonnes.  The CVG has drawn up a new national aluminum development plant focused on a primary aluminum output goal of three million tonnes comparable with Venezuela's total annual aluminum output at just over 607,000 tonnes.

CVG Alcasa has just signed a $650 million aluminum smelter project with Swiss-based Glencore International AG consortium to build a fifth production line to double capacity to 450,000 tonnes.

Tue June 10, 2003 06:46 PM ET By Chris Baltimore

WASHINGTON (<a href=reuters.com>Reuters) - Federal Reserve Chairman Alan Greenspan said Tuesday shrinking supplies of U.S. natural gas mean the nation must build more gas import terminals to create a "safety valve" that will help stabilize prices.

An unusually low stockpile of natural gas has grabbed the attention of the Bush administration and lawmakers. Greenspan, who usually appears on Capitol Hill to discuss broad economic trends, was asked to testify at the House Energy and Commerce Committee on the impact of high gas prices.

Natural gas costs $6 per one million British thermal units (Btu) in the spot market, double the level of one year ago.

If natural gas prices remain high, Greenspan said there eventually could be "some erosion" in the U.S. economy.

While energy industry experts urged the panel to open more federal lands to drilling, Greenspan focused on the role that liquefied natural gas (LNG) imports could play.

LNG is "a crucial safety valve in maintaining price stability in oil, and it could be in gas as well," he said.

LNG is natural gas cooled to minus 259 degrees Fahrenheit, which converts it to a liquid for shipment. After arriving at a terminal, it is converted into dry gas for conventional uses.

"Access to world natural gas supplies will require a major expansion of LNG terminal import capacity," he said. "Without the flexibility such facilities will impart, imbalances in supply and demand must inevitably engender price volatility."

Building new U.S. LNG terminals often faces resistance from environmental groups concerned about the potential for an explosive accident or sabotage of an LNG tanker.

Several LNG projects have been proposed in recent months, including the expansion of Georgia's Elba Island terminal and new facilities off Louisiana, Texas, California, the Bahamas and Mexico. LNG terminals now exist in Cove Point, Maryland, Everett Massachusetts and Lake Charles, Louisiana.

ChevronTexaco Corp. CVX.N , ConocoPhillips COP.N , Marathon Oil Corp. MRO.N , and Exxon Mobil Corp. XOM.N have announced plans to make LNG a bigger part of future operations.

Algeria, Nigeria, Trinidad, Russia and Venezuela are among the potential exporters of LNG to the U.S. market.

Earlier, energy industry executives urged the House panel to ease gas supplies by lifting drilling restrictions on federal lands in the Rocky Mountains and some offshore areas.

Greenspan sidestepped the politically volatile issue, saying he could not judge the environmental trade-offs.

"I'm an economist. My view is if you're looking for natural gas you've got to know whether it's there," he said. "The only way to find out is to drill a hole."

U.S. gas supplies are 29 percent below the five-year average. Demand has soared as consumers and industry find more uses for gas.

"We see a storm brewing on the horizon and we need to prepare for it," said committee chairman Rep. Billy Tauzin, a Louisiana Republican. "Drilling companies are at work everywhere they are allowed to go," he said, but "vast areas of land" are off-limits in the Rocky Mountains and offshore.

In the Senate, which is debating a broad energy bill this week, a fight looms over a Republican demand for an inventory of natural gas deposits in the Outer Continental Shelf -- including Florida and California, where drilling is banned.

Environmental groups contend plenty of land is already available, and restricted areas protect fragile habitats and national parks. The Interior Department reported two-thirds of 59 million acres of federal land in Colorado, Utah, Wyoming, Montana and New Mexico were available for drilling.

Guy Caruso, head of the U.S. Energy Information Administration, said gas supplies should be adequate this summer if temperatures are in the normal range. Prices are forecast at $5 to $6 per million Btu this year, and longer term are likely to fall to $3 to $4 per million Btu, he said.

Demand for natural gas is forecast to top 35 trillion cubic feet (Tcf) by 2025, a jump of 52 percent from this year. If the drilling ban in offshore waters was lifted, an extra 58 Tcf of gas could be produced, Caruso said. Ending restrictions in the Rocky Mountains would add an estimated 70 Tcf of gas, he said.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, June 10, 2003 By: Patrick J. O'Donoghue

Venezuelan violinist, Alexis Cardenas Marcano ( born in Maracaibo in 1976) has won second place at the International Youth Musical in Montreal, Canada last Saturday, June 7 ... Belgian Yossif Ivanaov just beat him to the first place

Matthieu Arama (France) came third, Nicolas Koeckert (Germany) fourth, Oleg Kaskiv (Ukraine)  fifth and Julia Sakharova (Russia) sixth.

Cardenas has received an extra career boost winning the festival's Public's Favorite Prize, while Diana Galvydyte received mention for the best interpretation of an unpublished work.

Although Cardenas is not well known in Venezuela, the second place at Montreal has placed him on the map as a promising young violinist and is seen as a springboard to international recognition.

<a href=www.vheadline.com>Venezuela's Electronic news Posted: Tuesday, June 10, 2003 By: Patrick J. O'Donoghue

While the government is busy at a Supreme Tribunal of Justice (TSJ) hearing to revoke an Appeal Court decision lifting an arrest warrant against rebel Petroleos de Venezuela (PDVSA) executives for their role in the December-January national stoppage that brought PDVSA to its knees, rebel leader Juan Fernandez, who has just returned to Venezuela, reports that his Gente de Petroleo organization is undergoing a re-launch to convert itself into an abuse-monitoring body. 

"The group will lodge complaints and call for action against any situation that goes against freedoms, rights and defense of democracy." 

Gente del Pueblo acted as a shadow PDVSA during and in the weeks following the strike's failure ... its role has gradually fizzled out as the new PDVSA managed to get production back to normal. The group's last stand is to defend the Intesa Company that had monopolized PDVSA's computer system. 

Fernandez confirms that the recall referendum has become one of the "new" group's priorities and boasts that it will be a resounding victory for the opposition.  Referring to the TSJ hearing, he says he and his colleagues are innocent until proved guilty, warning that if Venezuelan justice, then they will internationalize the conflict. "Citizens rights have been violated because the Attorney General's Office and the 50th Control judge established arrest procedures that were illegal." 

Rebel white collar "trade  union," Unapetrol leader, Horacio Medina denies charges that the executives plan to start a political party, indicating that they do not intend to get into politics and prefer to create a network of civil sector groups (Gente del Mar, Gente del Barrio etc.) that oppose President Chavez Frias.