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September 30, 2014
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Brazilian minister to visit BA

Argentine and Brazilian Presidents Cristina Fernández de Kirchner and Dilma Rousseff embrace in Chile on Monday.
By Fermín Koop
Herald Staff
Concern is increasing over dwindling bilateral trade

Alarm bells are ringing in Brazil after the US$297-million deficit registered in the first two months of the year in foreign trade with Argentina, with Brazilian government officials deciding to travel to Buenos Aires at the end of the week to meet with their local couterparts in what was described as an urgent meeting to discuss commercial relations.

Brazil’s Development, Industry and Commerce Minister Mauro Borges and presidential adviser Marco Aurelio García will meet on Friday with Economy Minister Axel Kicillof, Cabinet Chief Jorge Capitanich, Industry Minister Débora Giorgi and Trade Secretary Augusto Costa to discuss the trade relationship between the countries.

President Dilma Rousseff’s adminsitration is reportedly concerned about the Customs blocks that Buenos Aires imposes on imports, which has generated pressure on the government to find a solution by the powerful Sao Pualo Industries Federation (FIESP).

Trade between the neighbouring countries has been on the wane.

Agentina registered a US$71-million trade deficit with Brazil in February, which is 16.9 percent higher when compared to the same month last year and which contributed to a final US$297-million deficit in the first two months of the year, according to a report from economic consultancy Abeceb, which relied on figures from Brazil’s Development Ministry.

“Both countries have registered a drop in their economic activity. Brazil is suffering a massive capital outflow and that caused the economy not to grow at all, while Argentina is still struggling with the consequences of the devaluation,” Esteban Domecq, head of Invecq agency, told the Herald. “To solve this problem, there has to be clear rules and macroeconomic foresight about the future exchange rate.”

This will be Borges first official visit to Argentina in his role after he replaced Fernando Pimentel a month ago. Borges and Aurelio García are likely to discuss with Kicillof the customs barriers imposed by Buenos Aires on Brazilian products with its affidavit system, which often causes a delay in imports.

The Brazilian officials will also try to negotiate with the government a line of credit with a state bank that would be applied to all areas of trade between the two countries.

After the steep devaluation of the peso in January, Argentina is hoping exports to Brazil will increase in the upcoming months to improve the trade balance between the two countries, which in January produced the smallest surplus since 2001. At the same time, a lower number of imports in the retail sector is expected.

“This is the fourth time Brazil starts a year with low economic growth previsions, which explains the current scenario. Argentina has ups and downs but we’ll have to see how this year goes,” Martín Burgos, an economist specialized in trade, told the Herald. “Brazil’s purchases from Argentina have dropped, with vehicles being the worst affected sector.”

The total value of trade between the neighbouring countries in February reached US$2.259 billion, which is the lowest figure in almost four years after the US$2.157 billion registered in February 2010.

Exports reached US$1.094 billion, having falling 23.4 percent, while imports reached US$1.165 billion after a 9.7-percent drop — both compared to the same month last year. Argentine exports represented six percent of the total imported goods to Brazil.

Such low export figures had not been registered since February 2012, when sales to Brazil were US$947 million. The drop can be explained by the decreased export of gas, wheat, fuel, rice, auto parts, vehicles, buses and cellulose, placing Argentina in third place behind Brazil’s main trade partners China and the United States.

The value of imports was the lowest registered since January 2010 when US$977 million worth was purchases. According to Abeceb’s report, lower sales were seen in oil, shoes, vehicles, auto parts, plastics and measurement instruments. Argentina bought goods mainly from China, the United States and Brazil. The country’s purchases from Brazil represented 7.3 percent of Brazil’s exports.

@ferminkoop
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