Brazil’s president-elect, Luiz Inácio Lula da Silva, arrived in Argentina on Sunday within the framework of the CELAC summit which will be held tomorrow in the village. The state visit also includes a meeting with President Alberto Fernández and the signing of bilateral agreements. At what point has this rapprochement reached after years of bad relations between the countries (during the government of Jair Bolsonaro): last year the local trade balance returned to the red. Mercosur is struggling to regain weight and the Brazilian president wants to deepen relations with South America.
In economic terms, after two years of surplus, the deficit with Brazil reached 2.25 billion dollars in 2022 and returned to the usual red color -the rule since 2004-, which will continue this year, according to estimates by the Abeceb consulting firm. In any case, the red was lower than it was between 2004 and 2018, when it averaged $3.5 billion a year.
“Red was the consequence of imports that grew well above exports”, indicates the Abeceb ratio. And he adds: “In detail: while imports amounted to 15,358 million dollars and grew by 29.3% on an annual basis (yoy), exports reached 13,104 million dollars (+9.7% y/y )”.
In his report, the consultant details the main differences today in the economies of the two partners:
- Inflation: inflation Brazil’s forecast for all of 2023 will be 4.8%, while Argentina’s is 84%.
- Activities: As regards activity, the balance leans better towards Argentina. The local economy ended 2022 with a growth forecast of 5.5%, while that of our neighbor would grow by 3.2%. By 2023, our neighbor’s economy is expected to slow to +0.7% in 2023, a similar dynamic to that of Argentina, which will grow close to 1%.
- Occupation: Employment also shows positive data in Brazil: unemployment fell by 3.9% in the third quarter (compared to the same period of 2021) and reached its lowest level since 2015.
The podium of imports in 2022
Abeceb has drawn up a ranking of imports and from there it can be deduced that the first two places were occupied by goods of the automotive industry: “Parts and accessories for motor vehicles” and “Motor vehicles”. Both products showed growth on an annual basis (+43.2% the former and +19.2% the latter), and represented just over 20% of total imports from Brazil.
“Iron Ore and Concentrates” they are the third most imported product from Brazil in 2022, although it should be noted that they have decreased by 17.6% year on year. Its importation is important as Argentina does not produce iron ore locally; and this is a necessary input for the production of seamless steel pipes in the country, as well as for the automotive industry.
The import of “Paper and cardboard” closes the podium -keys for the national packaging of food products- and “Piston engines and their parts”. Imports of both items grew compared to 2021 (+33.0% and 53.0%, respectively).
The export podium
On the other hand, there are exports which, as in the case of imports, the two most exported goods came from the automotive industry: “Vehicles for the transport of goods and special uses” and “Vehicles for the transport of people”. Both products grew in interim terms (+7.4% the former and +37.6% the latter), and represented just over 1/3 of Argentine exports to Brazil.
Third, there’s the export of “Unmilled wheat and rye”which explains 12.3% of the total shipments to the neighboring country.
The podium is closed by the export of “Piston engines and their parts” Y “Liquefied Propane and Butane”. The purchase of both items has grown compared to 2021 (+25.3% and +51.0%, respectively).
“Lula’s return to the presidency has raised expectations of a 2023 in which the bilateral relationship with Brazil could deepen”, underline the consultancy. And he adds: “If it is true that Lula would seek greater regional integration in South America and this could give a further boost to bilateral trade, one needs to be cautious about the possibility of substantial changes in the trade flow with Brazil. How come?”.
What are the main obstacles to the integration between the two?
The consultant also highlights that the main obstacles to integration among residents are the following:
- Volatility and incompatible macroeconomic policies in both countries, the lack of systemic competitiveness, except in the food sectors, and in some industrial and service niches; Y scarce funding for regional integration projects.
- In institutional matters: the lack of leadership of Mercosur (neither free zone nor customs union); non-tariff barriers and excessive intrazonal bureaucracy; Few agreements other than strictly tariff ones (services, investments, public purchases, intellectual property, technical and labor standards).
- The sectoral barriers are: the largest relative size of Brazilian companies; infrastructural problems in both countries and a logistic structure focused on extra-zone trade; the failure to promote more competitive niches or those with greater investment needs (Software, Biotechnology, Energy, Infrastructure); and the experience of productive integration policies with limited results. Other more specific obstacles are the national promotion schemes (Automotive, Machinery, BK, Consumer Electronics); regulatory differences (Pharmacy, Food) and phytosanitary barriers.
“In short, while Lula’s readiness to move towards greater regional integration could give some impetus to bilateral trade – or translate into progress on some outstanding issues such as the use of local currencies for trade-, the truth is that no substantial changes are expected in trade relations with Brazil”.
NS
Source: Clarin
