* Latin American, European leaders meet to deepen trade ties
* Europe says time to wrap up long-stalled Mercosur deal
* Both sides to present new offers this year to open up
By Robin Emmott
SANTIAGO, Jan 26 EU leaders won a promise from
Argentina and Brazil on Saturday to revive stalled talks on a
free-trade deal that would be a major prize for Europe as it
emerges from crisis, but disputes over key issues mean a
breakthrough appears distant.
At a summit in Santiago, German Chancellor Angela Merkel led
the Europeans in a new push in the negotiations with the South
American trade bloc Mercosur that is made up of Argentina,
Brazil, Paraguay, Venezuela and Uruguay.
In a region whose economies are in markedly better shape
than Europe's, Merkel's persistence appeared to pay off after
she met her Brazilian and Argentina counterparts and warned them
not to revert to the kind of protectionism of the 1930s that
deepened the Great Depression.
"A tremendous effort has been made to install new momentum
into the discussions," the EU's Trade Commissioner Karel De
Gucht told Reuters during the summit. Asked if there had been a
breakthrough, he said: "I think we have to be careful with that
word. It's moving on the political front."
Five years after the global financial crisis and with the
euro zone in its second recession since 2009, the European Union
needs Latin America's buoyant economies. But it is frustrated by
Brazil and Argentina's policies to protect local industry.
Both sides have now agreed to exchange offers by the end of
the year on how far they are willing to go in opening up sectors
ranging from services to agriculture and De Gucht said the
European Union will reciprocate Mercosur's offers.
"We need to have open markets in terms of free trade and not
protectionism," Merkel told a meeting of business leaders.
"History taught us that in the '20s and '30s," she said, flanked
by the pro-free trade presidents of Mexico and Chile.
Negotiations on a trade pact with Mercosur began in the
1990s and were relaunched in 2010. If successful, the accord
would encompass 750 million people and $130 billion of annual
But talks have yet to make real progress due to disputes
over European farm subsidies and moves by Brazil and Argentina
to shield local industry from cheaper, foreign-made imports.
In a further complication, Venezuela became a member of the
bloc last year. Its president, Hugo Chavez, is an outspoken
critic of free trade.
In the meantime, Brussels has signed free-trade deals with a
number of Latin American countries, including Mexico, Peru and
Chile, exposing a split between the free-trade advocates on the
Pacific side and the more closed economies, such as Brazil,
Argentina and Venezuela, on the other side of the continent.
Standing out in orange among other leaders' dark suits,
Merkel shared a joke with Brazilian President Dilma Rousseff and
Argentina's Cristina Fernandez as about 60 leaders posed for a
"Within Mercosur, those in favor of this agreement have won
the battle," said Gianni Pittella, vice president of the
European Parliament, which has to approve the EU's trade pacts.
'LATIN AMERICA'S DECADE'
Europe wants to retain its influence in a region it
conquered 500 years ago and where it remains the biggest foreign
investor as China steps up its investment in mining and energy.
After decades of hyperinflation and financial crises, Latin
America's economic fortunes are now better than Europe's. Latin
America's economic output is expected to grow almost 4 percent
this year, while the 17-nation euro zone will probably contract.
Latin America's per capita gross domestic product could
double by 2030, according to the InterAmerican Development Bank,
meaning Europe will have more potential buyers of its cars,
luxury goods, banking services and pharmaceuticals.
Gathered at a luxury hotel in a part of the Chilean capital
dotted with newly built glass skyscrapers, Colombian President
Juan Manuel Santos declared it was "Latin America's decade."
But differences with Argentina and Brazil represent a new
hurdle to a Mercosur deal, one that Germany as Europe's top
exporter is especially keen to see resolved.
Argentina's fiery, left-leaning Fernandez, slapped sweeping
controls on imports in February 2012 in a bid to prop up the
trade surplus and keep industry competitive as labor costs soar.
According to Global Trade Alert, an independent body
monitoring commerce, Argentina is the world's worst offender
when it comes to protectionist measures because the policies
affect so many industries and sectors all over the world.
Neighboring Brazil - Latin America's largest economy - has
also raised import barriers on goods ranging from European steel
to powdered milk. In the first 10 months of 2012, Brazil opened
47 trade defense cases, more than double the number in all of