SAO PAULO (Dow Jones)--With its intransigence sparking cabinet strife and criticism from allies, Brazil could adopt a more conciliatory approach at Miami meetings next month on a free trade zone for the Western Hemisphere.
Key ministers in President Luiz Inacio Lula da Silva's government are demanding a greater role in efforts to craft the Free Trade Agreement of the Americas. They blame the foreign ministry, which has long controlled trade policy, for causing FTAA meetings held in Trinidad this month to fail.
Rumors are swirling that Samuel Pinheiro Guimaraes, the second in command at Brazil's foreign ministry and an historic FTAA opponent, will be marginalized and possibly demoted.
The foreign ministry denied such a move, and Foreign Minister Celso Amorim insisted Monday that no rupture has developed. "A division in the Brazilian government doesn't exist," he said at a conference in Rio de Janeiro.
Still, the rumored changes, if they come, would be a win for the U.S., the lead sponsor of the 34-nation free trade initiative and co-chair of the process with Brazil.
In Trinidad, where participants tried to agree on an agenda for the Miami ministerial, Brazil only offered to negotiate market access for industrial and agricultural goods. Unlike the U.S., it excluded rules on investments, services and government purchases from its offer.
That frustrated not only the U.S., but Uruguay and Paraguay as well. That's a danger for Brazil.
They make up half of the countries in the Brazil-led Mercosur trade bloc and may opt to strike bilateral deals with the U.S. if they don't see progress soon. Chile has already done so, providing small countries in the region an example to follow should efforts to craft the FTAA by 2005 fail.
Lula has apparently sanctioned the demands of Agriculture Minister Roberto Rodrigues and Trade and Development Minister Luiz Fernando Furlan, who are big promoters of exports and complained they were excluded from preparations for the Trinidad meetings. Finance Minister Antonio Palocci may also take on a more high-profile role in trade talk preparations.
Amorim, meanwhile, says he's interested in an FTAA deal but believes it's important to evaluate how trade will impact the balance of power in the region.
"Trade negotiations involve, in addition to commercial questions, ones of geopolitics and hegemonic potential," he said, apparently referring to the U.S.
For Amorim, the flap within the cabinet comes just several weeks after he engineered what is viewed as one of the biggest diplomatic victories of his career in Cancun, Mexico.
At World Trade Organization meetings there, he outmaneuvered the U.S. and European Union by rallying 22 developing nations into a bloc to demand rich nations cut hefty agricultural subsidies.
He's now trying to join that group's efforts with those of the the 17-nation Cairns group of agricultural giants to open protected food markets.
"Brazil has a legitimate position with regard to the FTAA, but the question is how far they can push this," said Mario Marconini, a former WTO official and head of the Brazilian Center for International Relations.
"But its position is losing some support, so we can expect Brazil to start being more constructive and less obstructive," he added.
-By Terry Wade, Dow Jones Newswires; 5511-3145-1479; terry.wade@dowjones.com
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