Suffering from Threefold Crisis, Argentina Slows Trade With Brazil

RIO DE JANEIRO, BRAZIL – The fourth-largest destination for Brazilian sales, Argentina has been upsetting  businesses engaged in trade between the two countries, with delays of over three months in the release of imports.

“It has combined an economic crisis, a pandemic, and a debt crisis,” said Federico Servideo, president of the Brazil-Argentina Chamber of Commerce. According to him, authorizations with 10-day terms often take 60 to 120 days, due to the tightening of the exchange control system.

Recently, the Chamber of Importers of the Argentine Republic (CIRA) complained about over 1,000 unblocked permits, which are required to take the goods out of the port. Of these, a large part is Brazilian products.

Representing Brazilian exporters, the National Confederation of Industry (CNI) complains about the requirement for additional documents, which are not provided in the country’s internal rules, which results in delays in the release and legal uncertainty.

In addition, the CNI speaks of the recent increase in non-automatic permits for Brazilian products. According to a survey by the confederation, 52.3 percent of exports from Brazil to Argentina currently undergo this type of regulation. In 2019, this figure was only 18 percent, which, according to complaints from Argentine importers to the local press, had been the worst year in the last decade.

“The situation is being met with great concern, and the importing houses in Argentina have been emphatically voicing the need to resolve this situation,” says Servideo, who says that tensions are being resolved in the dialogue between the two countries.

Triple crisis

The Argentinians were into their third year of recession and faced galloping inflation and fiscal crisis when the pandemic struck. The country is now heading for its worst economic moment in 20 years.

Amid this scenario, the need for cash in dollars has become more urgent than ever, after the renegotiation of Argentina’s international debt was announced two weeks ago.

In addition to having to honor its commercial commitments, Argentina needs to join forces to survive the world’s longest quarantine. The country has been virtually closed for about 160 days because of the struggle to contain the spread of Covid-19 in its territory, where over 6,000 people have died after contracting the disease.

“With restricted access to the international financial market, the only way to attract more dollars to the country is by creating a trade surplus,” says José Augusto de Castro, president of the Foreign Trade Association of Brazil (AEB).

In order to achieve a trade surplus by exporting more, Argentina needs to import, given that a large portion of the items used by its industry come from abroad, says Servideo. Argentina’s trade flow with the rest of the world is in deficit, that is, the country imports more than it exports.

It should be noted that Argentina’s US currency reserves are very weak, around US$10 billion (R$50 billion). Brazil, which has a significant amount of money saved, holds approximately US$400 billion, for instance.

Race for dollars

Argentina’s long domestic crisis had already affected its imports, which dropped by half in the first five months of the year with the pandemic’s impact.

After 23 consecutive downward months, Alberto Fernández’s government decided to change its strategic positioning in international trade with the establishment of the Foreign Trade Office, announced two weeks ago to “promote domestic production, the search for markets for Argentine products and the planning of imports of goods and services that can be produced locally, with a sustainable approach in environmental terms.”

By late May, the Argentine Central Bank began issuing several regulations to establish even tighter exchange controls to prevent or reduce the payment of dollars abroad.

In the local press, the Argentine Ministry of Commercial Relations says the vast majority of import requests are authorized in less than two days. A minority is pending due to loading errors, inconsistencies, and missing information.

This is not the first time Argentina has experienced this situation. In 2015, during Cristina Kirchner’s administration, exchange controls were even tighter.

Source: Exame