March 11, 2014
Argentina-Brazil mend fences on trade
The neighbours clear way for joint proposal on tentative agreement with European Union
The recent changes in President Cristina Fernández de Kirchner’s Cabinet has smoothed trade friction between Argentina and Brazil and cleared the way for a joint proposal for free trade with the European Union, Brazilian Trade Minister Fernando Pimentel said yesterday after meeting with Cabinet Chief Jorge Capitanich and Economy Minister Axel Kicillof.
Argentina has agreed to allow the importation of Brazilian goods — mostly cars and shoes — that had been stopped at the border, Pimentel said, and to present an offer to the Mercosur trade bloc in order to achieve a free-trade agreement with the European Union.
“This issue that was upsetting our exporters has been resolved. All goods that are now in problems will begin to be released next week,” Pimentel told reporters. “There’s been a change of team and we think that is positive.”
Argentina has been restricting Brazilian imports since last year even though both are members of the Mercosur trade bloc.
Shut out of financial markets since a massive default a decade ago, Fernández de Kirchner has introduced import restrictions to improve the country’s trade balance and generate needed foreign currency.
“The problems started in 2012 with the government’s decision to not automatically renew import licences,” Mauricio Claveri, coordinator of foreign trade at Abeceb, a local consultancy, told the Herald. “At the beginning of 2013, former domestic trade secretary Guillermo Moreno authorized a lot of imports but when problems with Central Bank’s international reserves began, the door for imports closed again.”
Imports Chamber (CIRA) spokesman Miguel Ponce said the organization was anxious to get the details of the agreement, noting that while it was not clear the amount of Brazilian goods that were stuck at the border, almost no imports were authorized last month.
“Nobody knows exactly which sectors suffered the imports ban or the exact number of goods that failed to enter the country,” he told the Herald. “Still, the major areas affected were industrial and electronic goods and the food and metallurgical industries.”
Free-trade on its way
While Brazil and two smaller members of Mercosur — Uruguay and Paraguay — are ready to present their offers for the negotiation of a free-trade accord with the EU, Argentina’s involvement has been in doubt due to its policies to protect local industry.
“Brazil sees the agreement as a change to integrate with the world, while Argentina’s economy is more closed in order to protect its industries and reserves,” Claveri said. “Now the whole block will do a joint presentation soon, after Argentina submitted an offer that didn’t meet the European Union’s expectations.”
Despite previous conflicts, Pimentel said Argentina was on board and a joint Mercosur offer will be presented to Brussels on December 18 or 19, after officials from the four Mercosur nations give it the final touches next week at a “decisive” meeting in Rio.
“We will have our offer ready by next week” Pimentel said, with President Dilma Rousseff’s foreign affairs adviser Marco Aurélio García at his side. “Argentina has an offer and will present it. That’s clear now.”
Attempts to negotiate a free-trade deal have not succeeded in a decade and a half, stumbling over Mercosur access for European manufactured goods and EU access for Mercosur’s agricultural products facing high European farm subsidies.
Mercosur’s newest member, Venezuela, will be at the meeting but will be left out of negotiations with Europe as it is not ready to compete.
Ponce said the agreement was needed because of the upcoming free-trade agreement between the EU and the United States, which could be signed by the end of 2014.
“That agreement could lead to a loss of markets for Mercosur. That’s why everybody is in a rush to sign with the EU,” he said. “We would have to compete with US products in the EU and with EU products in the US.”