“We still have the technical work,” said Alberto Fernández in the joint conference he gave with Lula da Silva, after almost four hour meeting in the Alvorada Palace, in Brasilia. As confirmed by sources from the Ministry of Economy, next week there will be a meeting between Massa and his partner, Fernando Haddad. The Vice President of Brazil, Gerardo Alckmin; the Vice Minister of Economy, Gabriel Galípolo; and the head of the state National Bank for Economic and Social Development (Bndes), Aloizio Mercadante.
When asked if Massa will travel to Brasilia again, at the Palacio de Hacienda they answered that Haddad is expected to come to Buenos Aires next week.
Argentina would benefit from closing an agreement with Brazil to “de-dollarize” and expand the financing of foreign tradein a context of net reserves just above the $1 billionand who is your main business partner.
In April, the trade deficit with Brazil was US$776 million, a growth of 221% year-on-year, driven by the import of soybeans from Brazil in the face of the drought, according to a report by Abeceb. In the first four-month period, the accumulated trade deficit was US$ 1,774 million, 79% of what there was in all of 2022. “You have to go back to the first quarter of 2018 to find a larger commercial red,” the consultant added.
However, Massa also tries to convince Brazil of the economic benefits of the measure for that country, outside of the “political affinity” that stands out in the Foreign Ministry. On the one hand, for powerful Brazilian industries to increase their exports to Argentina, since it is estimated that sales fell by about US$4 billion in the period 2014-2019, a piece of land lost in the hands of Chinawhich provided the financing.
On the other hand, speed up the current bilateral trade, and reduce the terms of the payment of the operations from the dispatch of the goods, which today is in 180 days, according to the Brazilian media outlet Oglobo. The term could be reduced in the event that a credit line in reais is released to finance Brazilian companies.
The alternatives that are on the table are: a scheme similar to the one announced with China, to that the SIRA be approved directly in reais; longer-term financing to Brazilian companies; and finally a guarantee system on future flows from Argentina of incremental exports.
Despite the fact that the financial aid announcements were made in January, when Lula da Silva was in Argentina, since then the Argentine ambassador in Brazil has already been 11 meetings for this topic. Besides short circuits between Lula da Silva and the president of the Central Bank, Roberto Campos NetoThere are also other types of obstacles. On the one hand, to release the credit line, the approval of the Brazilian Ministry of Finance is required, in order to be able to use the Export Guarantee Fund (FGE)which would use Treasury resources, and thus cover amounts owed by Argentina, in the event of default, Oglobo reported.
As for the financiers of these lines, it could be the National Bank for Economic and Social Development (BNDES), the same one that also proposes to finance the second section of the Néstor Kirchner gas pipeline, which in the medium term could guarantee cheap energy from Vaca Muerta to the Brazilian industry. On the other hand, Lula da Silva reported that they will look for the financial guarantee to come from the BRICS bank. There is also a bureaucratic obstacle there: the contingency fund for currency crises that is in article 7 of the BRICS statute can only be used by the partners, who today are Brazil, Russia, India, China and South Africa. Otherwise, the Brazilian Treasury would be the final guarantor, a “risky” measure, according to the Brazilian press.
Local currency payment system (SML)
Although the Local Currency Payment System (SML) has existed for 15 years, is used in less than 10% of imports, according to Abeceb. “The result of the negotiations will mark the course of bilateral trade forward, where a positive result would allow imports to continue without the use of dollars, thanks to financing through central banks,” the consultant concluded.
Source: Ambito
