BUENOS AIRES -(Dow Jones)- Argentina's foreign minister, Rafael Bielsa, said Wednesday his country would continue to pursue improved commercial relations with the U.S., but warned it would not compromise its relationship with Brazil for favors from Washington.
"Around five months ago, Argentina put on the table a range of products that we hope can come under the Preferential Tariff Agreements ... We are going to insist on this. But I don't want people to think that this is some kind of rabbit trap," Bielsa said.
Bielsa's comments come as Deputy U.S. Trade Representative Peter Allgeier arrives in Argentina on Thursday for talks on the hemisphere-wide Free Trade of the Americas Agreement. Local reports have indicated that the U.S. official would promise progress on bilateral trade matters in return for Argentina adopting a more positive attitude to the FTAA than has Brazil.
Bielsa said he hoped Allgeier's visit to the Argentina "will be constructive," but reminded reporters during a news conference with foreign correspondents that Argentina's relationship with Brazil is a "strategic priority," which involves the two countries' "walking side by side" on key issues.
Bielsa promised a "pragmatic and constructive" approach to FTAA, but refused to give firm backing to the FTAA negotiations to be completed by the original - and U.S. supported - deadline of 2005.
"It's always better to meet deadlines...But it makes no sense to make a bad accord on time. Better arrive late and well," Bielsa said.
The U.S. wants to create a 34-nation, hemisphere-wide free-trade bloc reaching from Alaska to Argentina by 2005.
In the past, Brazil, which is co-chairing the FTAA talks with the U.S., has been quite skeptical about the hemispheric accord - all the more so as the U.S. has so far failed to offer big changes to the huge subsidies it offers farmers. However, until recently Argentina has been more enthusiastic - leading to occasional tension between Buenos Aires and Brasilia.
Argentine-Brazilian relations enjoying a new lease of life in the aftermath of Brazilian President Luiz Inacio Lula da Silva's visit to Argentina last week. The two countries are looking at ways further integrating their already closely coordinated positions in trade talks. Argentina and Brazil are the two heavyweights on regional trade bloc Mercosur, whose permanent members include Uruguay and Paraguay.
In recent months, the two South American nations have called for a more staggered approach to FTAA under which less-developed nations would be given more time to open their markets than the industrialized nations.
Meanwhile, Bielsa denied Argentina's relationships with key European countries were being damaged by the escalating tensions between President Nestor Kirchner's government and mostly foreign-owned utility companies.
"It's absolutely reasonable that a government - via diplomatic means - tries to protect the capital that its firms invest in a third country. On the other side ... the (Argentine) government is only trying to protect the interests of its citizens," Bielsa said.
The comments come after Argentina announced it was fining local water provider Aguas Argentinas and electricity companies Edesur SA and Edenor SA for recent service cuts. Aguas is owned by French company Suez (SZE), while Edesur is controlled by Chilean firm Enersis SA (ENI), which is in turn a unit of Spanish utility Endesa SA (ELE). Edenor is owned by Elecricite de France (F.EDF).
Many utility companies say Argentina's decision in early 2002 to convert rates from dollars into devalued pesos and then cap them has resulted in huge financial problems for the sector and made it impossible for them to maintain service quality. The electricity sector in particular has warned of a "crisis" unless the government raises rates.
The government rejects these complaints, charging some companies with failing to carry out investments they had promised and warning it will only allow permanent rate rises at the end of next year, when the review and renegotiation of all 61 public-service contracts is completed.
The tensions over utility rates reportedly made some European countries hesitant to support Argentina's attempts to win a three-year accord with the International Monetary Fund. That accord was wrapped up last month.
Bielsa said he has been in close and permanent contact with foreign embassies on the utilities issue - conversations, he said, that were quite reasonable and correct. He said the government had not received undue pressure from foreign governments and warned that in any case "the president will not accept that."
Bielsa said he "hoped and believed" Argentina's relations with European governments will not be affected by the utility issue.
Meanwhile, Bielsa also admitted Argentina may face embargoes on government property overseas because of lawsuits brought about in connection with the country's record sovereign debt default in December 2001.
"No government in a serious country can guarantee that a judge from that country won't embargo some goods," Bielsa said. However, he denied such rulings would represent serious problems for Argentina.
Press reports have warned that lawsuits filed by Argentine creditors could lead to the seizing of Argentine goods and may even make it impossible for Kirchner to fly to certain countries in the presidential plane.
Meanwhile, Bielsa said Argentina plans to bring its ongoing debt negotiations to the table when the G20 developing nations meet in Mexico this weekend. This week, senior officials from the Economy Ministry started the first round of meetings with bondholder groups in Europe, Asia and the U.S. Finance Secretary Guillermo Nielsen, who is currently making stops in Germany and Italy, will attend the talks in Mexico.
"Argentina will take a number of issues to the meeting," Bielsa said. "The issue of debt and the possibility of coming up with a response to external credit crises is going to be one of the themes."
-By Laurence Norman, Dow Jones Newswires; 5411-4311-3127; laurence.norman@dowjones.com
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