Brazilian exports to Argentina are at the highest level in the last four years. Between January and July of this year, they totaled US$ 8.9 billion, 34% more than in the same period of 2021, points out the Foreign Trade Secretariat (Secex). In the month of July alone, sales were almost US$ 1.4 billion, up by 39% over the same month last year .
It’s great news if it weren’t for the biggest economic crisis in 20 years in the neighboring country, which worries Brazilian exporters. They fear the consequences of this, which can already be felt by Argentines:
- The peso, the local currency, is in disrepute among the population: it accumulates a devaluation of 23,1% against the dollar since the beginning of the year;
- The inflation expectation for the next 15 months is 94,1%, according to projections collected by the Central Bank of the Argentine Republic (BCRA);
- The premium on the parallel exchange exceeds 100%, reflecting the difficulty in finding dollars.
“The crisis in Argentina comes precisely at a time when Brazilian sales there are growing”, says the president of the Association of Foreign Trade of Brazil (AEB), José Augusto de Castro.
With a share of 4.6% of exports in the first seven months of the year, the neighboring country is the third main destination for shipments from Brazil, behind China and the United States. Mainly passenger cars, auto parts and iron ore and its concentrates are sold there.
Lack of reserves may affect imports from Argentina
What is most worrying is the availability of dollars in the neighboring country, essential for commercial transactions. According to the Argentine portal Infobae, in the first six working days of August, the Argentine Central Bank lost US$ 1.1 billion in foreign exchange reserves. This money is being used to try to maintain the value of the peso.
Economist Ramiro Castiñera, from the Econometric consultancy, estimated to Infobae that, of the US$ 38 billions of gross reserves, the BCRA would have only US$ 2.9 billion available. The rest is from resources that are not in the institution. By way of comparison, Brazilian gross reserves are estimated at more than US$ 340 billion.
The expectations of the new minister of Economy, Sergio Massa, is that the reserves begin to stabilize with the advances on exports promised by various sectors, including agribusiness. This would help to reinforce them. At the same time, the Federal Administration of Public Revenues (AFIP, in its Spanish acronym, the Argentine equivalent of the Federal Revenue) is carrying out a blitz against importers who used legal remedies to guarantee the entry of goods at the official exchange rate.
In June, according to the National Institute of Statistics and Censuses (Indec, in its Spanish acronym, the Argentine equivalent of the IBGE), there was the first deficit in the trade balance since December 2020: an imbalance of US$ 94 million, explained by the strong increase in energy imports.
Interdependence makes the automotive sector more attentive
In Brazil, one of the segments that is most attentive to the Argentine economic situation is the automotive sector. “There is a strong relationship between the two countries. Argentina is like another unit of the Brazilian federation. And Brazil is as if it were just another Argentine province”, says the president of the National Association of Motor Vehicle Manufacturers (Anfavea), Márcio de Lima Leite.
Data from the Secretariat of Foreign Trade (Secex ) show that, in the first seven months of the year, Brazil exported US$ 2,23 billion in vehicles and auto parts, a growth of 19, 42% compared to the same period last year.
In the opposite direction, Brazilian imports of Argentine cars also increased. According to the Association of Automobile Factories (Adefa, in the Spanish acronym, the Argentine equivalent of Anfavea), between January and July, 9,000 units were sold for Brazil, which corresponds to an expansion of 15, 3% compared to the same months of 2021.
Argentine production mainly meets Brazilian demand. The equivalent of 38% of the local production of automobiles and light commercial vehicles is destined for Brazil.
Despite the good numbers verified over the course of 2022 in the Brazilian automotive industry, a warning signal was triggered in July. Total exports in the month fell , 4% in units compared to the previous month, or 5 thousand units, points to Anfavea. In values, the fall was 9.8%. “It is an effect of the Argentine situation. They are going through a time of change”, says Leite.
The president of Anfavea believes that the first signs given by the new Minister of Economy, Sergio Massa, are positive. Measures were taken that positively affect the cash flow of Argentine automakers. “This is an important sign of stability for Brazil” he says.
The greater presence of China in the Argentine market is a concern
Brazilian exporters are also concerned about the possibility of China gaining greater presence in the Argentine market. According to Indec, 19% of the goods imported by Argentina originate from China. Brazil is the second origin, with 19, 2%.
Faced with the problem of Argentina’s shortage of foreign exchange and the difficulty of raising funds, Castro, from the AEB, is concerned that China will come to the aid of the neighboring country and start to occupy more commercial spaces. “Who will give them credit? This is a risk we are taking”, highlights Castro.
The fear of a breakthrough by China is also shared by the National Confederation of Industry (CNI). The industrial development superintendent, Renato da Fonseca, recalls that Argentines are important buyers of Brazilian manufactured products. “The situation over there can affect business here”, he says.
But, according to him, there is one factor that can serve as a mitigating factor, at least throughout this year: it is that the Brazilian economy keeps relatively warm. Market forecasts indicate a GDP growth of around 2% this year, which favors the purchase of Argentine goods.
Imports of products from Argentina totaled US$ 7.2 billion in January and July. The value, 12% greater than that of the first semester of 2021, is the highest for the period since 2014. The main items purchased are vehicles for the transport of goods and special uses, passenger cars and wheat and rye.
