Amid Brazilian allegations that Argentina has delayed the approval of import licenses for Brazilian products, Brazil’s foreign trade office released statistics showing that trade with Argentina was 20.5% lower than at the same point one year ago.
Overall trade for this year has been marked at $1,345 billion. During 2020, bilateral trade between Brazil, South America’s largest economy, and Argentina, the region’s second-largest economy, fell by 27.9%.
This report from Brazil comes just a week after it criticized Argentina for delaying the approval of ‘non-automatic’ import licenses, which it argues has resulted in millions of dollars worth of product being arbitrarily held at the border. The Jair Bolsonaro-led country considers Argentina to be acting in contravention of its commitment to Mercosur agreements as well as World Trade Organization (WTO) rules.
Among the most affected parties is the Brazilian National Association of Automotive Vehicles Manufacturers (Anfavea), which claims that $100 million of its exports are being held at the Argentinian border. WTO rule stipulates that imports cannot be held at the border for more than 60 days. The two countries’ auto industries also have a bilateral agreement which puts in place a ten-day limit on the release of imports from the other country. However, it is claimed that the process is taking upwards of 90 days for some imports.
Argentina now has a huge trade deficit of $363 million with Brazil. From January to August 2019, however, the country held a trade surplus of $130 million in its bilateral trade with Brazil.
Tensions between the neighbors have been brewing for quite some time now under the leadership of right-leaning Bolsonaro and his leftist Argentinian counterpart Alberto Fernández. In fact, Bolsonaro has previously said that if Argentina “causes trouble, Brazil will leave Mercosur”. Furthermore, even before Fernández had replaced his predecessor Mauricio Macri, Bolsonaro described him and his running-mate and former president Cristina Fernández de Kirchner, who ruled from 2007 to 2015, as “left-wing criminals”. Upon Fernández’s victory, Bolsonaro refused to visit Buenos Aires alongside regional leaders to attend the new Argentinian president’s inauguration ceremony, saying that Argentina “chose poorly” and that he had “encouraged the other one”.
Argentina, for its part, has been diversifying its trade portfolio. In April 2019, the country’s Chamber of Exporters released a report detailing that China had usurped Brazil as Argentina’s largest trading partner. Fernández has not backed down under criticism from Bolsonaro, either, and has labelled him a “violent and racist misogynist”.
German Chancellor Angela Merkel recently voiced her “considerable doubts” over whether to proceed with the European Union’s (EU) trade deal with Mercosur, due to the latter’s member-states’ disregard for environmental protection. In particular, Merkel is concerned about deforestation in the Amazon rainforest, which has been vastly accelerated under Brazilian President Jair Bolsonaro. Aside from environmental concerns, a Mercosur that is dealing with its most economically powerful member threatening to withdraw from the organization altogether has also drawn into question the economic viability of such a deal.
At the turn of the year, Argentina reported that its inflation rate in 2019 was 53.8%, the highest such figure since 1991, and the second-highest in Latin America after only crisis-torn Venezuela, demonstrating the sheer magnitude of the situation. The cost of living has increased by close to 4%, and prices in the health, communications, home maintenance equipment, and food industries have sky-rocketed as well. Despite the tight monetary programs implemented in late 2018 after a currency crisis, Argentina has not only failed to reduce inflation but has also deepened the country’s recession.
Hence, one wonders whether Argentina can really afford to put its crucial trade relationship with Brazil, and in turn the EU, in harm’s way.
Brazil-Argentina Trade Contracts By Over 20% Amid Worsening Bilateral Ties
Tensions between the neighbors have been brewing for quite some time now under the leadership of right-leaning Bolsonaro and his leftist Argentinian counterpart Alberto Fernández.
September 8, 2020
IMAGE SOURCE: CRONISTAArgentinian President Alberto Fernández and his Brazilian counterpart Jair Bolsonaro