Brazil and Venezuela have agreed to build a $2.5bn (€2bn) oil refinery, the highlight of a South American summit to boost trade and co-operation.
State-owned Petroleos de Venezuela (PDVSA) and Brazil’s government oil company Petrobras signed the agreement late yesterday, as the presidents of eight South American nations prepared to meet today in the Brazilian capital.
It’s the first summit of the South American Community of Nations, which was created last December.
The presidents of Argentina, Bolivia, Chile, Paraguay, Peru, Venezuela, Ecuador and Brazil are attending, as well as delegates from Colombia, Uruguay, Guyana and Suriname.
Chavez and Silva were in the spotlight yesterday, as they announced plans to jointly build a refinery complex to process up to 200,000 barrels of heavy oil daily. The complex, to be built in the north-eastern Brazilian state of Pernambuco, will refine oil from both countries for the Brazilian market.
“This is the way our two nations, ever closer, will proceed,” Chavez said after the chief executives of the two oil companies signed the refinery agreement.
The agreement calls for Petrobras to drill in Venezuela’s oil-rich Orinoco Belt area, and Chavez said Petrobras will operate oil fields that contain twice as much petroleum as US reserves.
“It is not every day we get a partner of this size,” Silva said.
Financing of the complex will be equally split between state-run PDVSA and Petrobras, and the refinery will be ready to operate in 2010 or 2011.
Foreign ministers debated a Chilean proposal to speed up regional trade with a drastic cut in trade tariffs to sharply expand regional trade by the end of the decade. Chile puts an average tariff of 4% on imports, while Brazil’s levy is 14%.
But many countries, including Brazil, have reservations about the idea of creating a Free Trade Zone in South America by 2010. Brazil has led opposition to quick approval of a US proposal for a hemispheric Free Trade Area of the Americas.
Disagreements over free trade have stalled the full entry of Chile and Bolivia into the Mercosur trade bloc, founded by Brazil, Argentina, Paraguay and Uruguay. Chile and Bolivia are associate members, with import tariffs lower than what Mercosur demands.
Trade among South American nations totalled $25bn (€21bn) last year and is expected to reach $30bn (€25bn) this year. But the amount is less than a fourth of Brazilian exports.
Still, South America is bullish on integration.
“There’s no doubt we’re in an irreversible process. South American integration is a must,” said Peruvian Foreign Minister Oscar Maurtua.
The South American Community aims to build highways and railroads and improve waterways to make trade and travel easier. Brazil and Peru are building a highway to link Brazil to the Pacific Ocean.
A Summit of the Americas is to be held next month in Mar de Plata, Argentina, and US President George W. Bush is expected to attend.