Brazil has maintained a favorable trade balance with Argentina in 19 of the last 30 years

The trade balance between Argentina and Brazil has been in deficit for the Argentine economy in 19 of the last 30 years, with a determining incidence in sectors such as automobiles, iron agglomerates, oil, electric power, and tractors.

The historical evolution, according to INDEC data, indicates that Brazilian exports tilted the trade balance in favor of that country during three years of the government of former President Carlos Menem (1992, 1993, and 1994), as well as between 2003 and 2015, when Néstor Kirchner and Cristina Fernández de Kirchner served as prime ministers, in their respective periods.

The negative Argentine trade balance was replicated in the first three years of the administration of former President Mauricio Macri (2016 to 1018).

It was reflected again during the term of the current president, Alberto Fernández (2020-2022).

The worst performance occurred with Macrismo in power, when US$17.988 billion was imported, representing a negative trade balance of US$8.662 billion.

Brazil’s exports to Argentina went from US$715 million in 1990 to US$15.979 billion in 2022, with an increasing curve (in line with Argentine exports) between 2002 and 2008.

In any case, the record of imports from Brazil occurred in 2011 when the main trading partner sold US$22.327 billion, a figure that has declined, particularly in 2020, due to the effects of the pandemic (US$8.685 billion).

A report by the Observatory of Economic Complexity (OEC) indicates that between 1995 and 2021, Brazil’s exports to Argentina grew at an annualized rate of 4.71%, going from US$4.176 billion in 1995 to US$12.392 billion in 2021.

This scenario reflects the disparity between Argentina’s trade balance with Brazil and the permanent dollar bleeding to sustain local industrial activity.

To boost trade between both countries, President Alberto Fernández, along with the Minister of Economy, Sergio Massa, and his economic team, are in Brazil to negotiate new conditions to avoid using the dollar in transactions.

Brazil’s executive secretary of the Ministry of Finance, Gabriel Galípolo, anticipated that Brazil would propose to Argentina the creation of a special line of financing for Brazilian companies that sell to Argentina in local currencies and thus maintain the flow of bilateral trade between the two main Mercosur partners.

“We are proposing the creation of for financing Brazilian companies that sell to Argentina and are those companies that sell services and goods from Brazil given the restrictions that are verified in Argentina,” said Galípolo, co-author of the project, along with Finance Minister Fernando Haddad, to create a common South American foreign trade currency called “Sur.”

Galípolo explained that 210 Brazilian companies regularly trade with Argentina.

Galípolo recalled that Brazil stopped financing its exports and compensation mechanisms with Argentina during the governments of Michel Temer and Jair Bolsonaro, which allowed China to advance as the main seller of Argentines.

“The historical evolution, according to INDEC data, indicates that, in the mentioned period, Brazilian exports tilted the trade balance in favor of that country during the three years of the government of former President Carlos Menem (1992, 1993, and 1994), as well as between 2003 and 2015, when Néstor Kirchner and Cristina Fernández de Kirchner occupied the first magistracy, in their respective periods.”

“In the last five years, due to Brazil’s lack of mechanisms to finance Brazilian exports and Argentine imports, we have lost approximately US$6 billion of space in the trade balance with Argentina to China, which has been providing financing mechanisms in alternative means of payment, such as swap, or giving credit to the exporter,” the official told GloboNews.

Galípolo highlighted that Argentina is a differentiated export market since it consumes value-added products, which are necessary to maintain Brazilian employment, and stressed that the need for this line of credit is aggravated this year by a drought in Argentina, which reduced exports by 40%, a loss of around US$17 billion.

“This hurts the situation in Argentina a bit this year. But for Brazil, we have 210 companies that trade with the country, mainly in more value-added industrial goods,” said the official.

With information from Télam