The trade revival between Argentina and Brazil has generated expectations in the private sector. Businessmen from both countries believe that the signed agreements are a significant progress on that roadbut they also see limitations due to the differences between economies and the lack of foreign currency in Argentina, as well as policy changes. All of these factors warn that they make a common currency difficult.
“Because of Argentina’s scarce reserves, any agreement on bilateral trade in a currency other than the dollar will generate an advantage. The truth is that the hard currency for international trade is the dollar, the common currency already exists. Now, due to macroeconomic turmoil, Argentina has a dollar shortage, so seeking a bilateral trade instrument bodes well”said Everton Guimaraes Negresiolo, CEO of ArcelorMittal Acindar and president of the Argentine-Brazilian Chamber of Commerce, Industry and Services (Cambras).
Entrepreneurs observe several barriers to integration. For starters, Brazil’s GDP is $1.6 trillion, nearly four times that of Argentina, according to World Bank data. Today, 1 dollar it is quoted at 5 reais in Brazil and $180 pesos at the official value and $360 at the CCL in the case of Argentina.
The neighboring country ended a disinflation process last year with a rate of almost 6% per year after a sharp rise in rates, while the INDEC got 94.8%, the highest level in 32 years. And Argentina has already had nearly two decades of trade deficit with Brazil.
“The imbalances, the differences in GDP, reserves, exchange rate methodology, independence of the Central Bank of the two countries, pose very important challenge for there to be a common currency”underlined Guimaraes Negresiolo, who also warned about the uncertainty of the exchange rate: “Argentina cannot fall into the trap, it needs to import to grow, there are many inputs that are not there, it is important to increase exports” .
With more than 100 member companies, Cambras attended the meeting led by Lula and Fernández on Monday together with more than 300 businessmen at the Bicentenario Museum, where concern for the economic instability and the “distancing” between countries. “Strengthening institutions goes beyond political colors,” said Analía Canale, executive director of Cambras, where companies such as Molinos, Arcor, Basf, Gol, Santander, Ford, Mercedes Benz, Danone, PAE, Tenaris and Toyota are listed.
In addition to the single currency, the agreement provides for financing from Brazil for Argentine imports, the revitalization of the local currency payment system and financing of the Néstor Kirchner gas pipeline. Of all the announcements, however, executives believe the most “doable” is the mechanism to finance imports for one year through Banco do Brasil and Banco Nación. This will allow the use of foreign currency to be postponed, although companies have yet to see the fine print.
“Today many import operations have been lost because they did not have the capacity to finance them for 180 days. Brazil is interested in financing Argentina because for them they are real exports,” said Andres Malvestuto, CEO of Randon Argentina , a company that produces trailers and semi-trailers. “Opening a financing line would help given the lack of foreign currency,” added Rosana Amato, regional commercial director of Steck Industria Eléctrica.
Precisely, one of the issues in the corporate agenda is the lack of foreign trade credit in Argentina, limited by funding quotas and restrictions on the transfer of dollars abroad. Entrepreneurs believe that the 180-day financing terms are very long and that the commercial debt that companies accumulate is a “snowball”.
In the automotive industry, whose exports account for a third of the total with Brazil, they also believe the ads are positive. “The same investment plans continue for next year, in my sector there is a natural integration, in many cases the parent company is in Brazil and when there are discussions to strengthen Mercosur it is better for everyone,” said Marcellus Puig, the company’s chief executive officer in Argentina, where he announced a $300 million investment last year.