Ministers will negotiate to reduce negative trade balance with counterparts.
Economy Minister Axel Kicillof and Industry Minister Débora Giorgi will jet off to Brasilia tomorrow in a bid to swing the automobile trade balance in Argentina’s favour, with the sector accounting for the majority of a total US$3.15 billion trade deficit.
With car production down 16 percent in Argentina and 8.4 percent in the first quarter of 2014 compared to the same three months last year, both parts are keen to extend the existing pact.
Both countries have a history in collaborating to protect their respective auto sectors, with multinational firms including Fiat, Renault and Volkswagen setting up major plants in both Brazil and Argentina.
In 2012, Argentine barriers sank Brazil’s exports to the neighbouring market by 20 percent, and although trade gradually started to flow again thereafter, recent developments have brought back concern.
On Friday, INDEC revised 2013 figures and reported a surplus of US$8 billion for the year, US$1 billion lower than before.
The country’s trade balance plunged 92 percent in the first quarter of the year, compared to the same period last year, with the surplus coming in at US$121 million, according to INDEC
Contraction in March
In March, Brazil’s Trade Ministry reported that the country bought US$1.218 billion’s worth of Argentine goods in March, 16.8 percent less than the same month of 2013.
Imports from Brazil clocked in at US$1.183 billion in the third month of the year, 15.3 percent below the same period of 2013.
Bilateral trade with the neighbouring country thus contracted a significant 16 percent in March, leaving a minor US$35 million surplus in Argentina’s favour.
Aside from the automobile sector, the Brazilian government pointed to drops in purchases of agricultural machinery and pharmaceutical and semi-finished products.
With car production down 16 percent in Argentina and 8.4 percent in the first quarter of 2014 compared to the same three months last year, both parties are keen to extend the existing pact, with the Cristina Fernández de Kirchner administration insisting at a meeting last week with Borges and Brazilian Finance Ministry executive secretary Paulo Cafarelli on the need to integrate Argentine auto-parts manufacturers further.
During Tuesday’s meeting in Buenos Aires, Brazil reportedly offered credit lines worth a total US$2 billion to ignite trade.
With Central Bank Governor Juan Carlos Fábrega giving his two cents as well, Argentina communicated it will only take on the credits if they fundamentally serve to balance the trade scale.
Cars struggling
The officials have seemingly taken the initiative to act before the stagnation in domestic trade affects exports further.
Used car sales plunged 14.75 percent in March compared to the same month of 2013, following in the vein of a wider drop in the automobile industry this year, seemingly as a result of the hiked luxury goods tax.
The latest data means there 423,642 used units have been sold between January and March within Argentine borders, an increase of 0.77 percent against the 420,414 bought during the first quarter last year.
New car sales dropped 10.38 percent by the end of March compared to February.
Brazil posted a trade surplus of US$2.561 billion for 2013 — the country’s worst result since 2000, and a sharp drop from 2012’s US$19.396 billion surplus.
Despite the sharp drop, Brazilian exports to Argentina actually rose by 8.1 percent from 2012 to US$19.616 billion, while Argentine exports to the country led by President Dilma Rousseff edged up a mere 0.1 percent to US$16.463 billion.
With regard to the auto sector specifically, Argentina mustered a US$389 million surplus in finished car sales for the year, but a whopping US$2.767 billion deficit in auto-parts.
The sector comprises the majority of trade with the Portuguese-speaking giant, with the trade balance weighing US$3.153 billion in Brazil’s favour.
The total traded between the countries in 2013 weighed in at US$36.079 billion, a 4.7 percent hike from 2012.
In March, Kicillof and Cabinet Chief Jorge Capitanich signed a deal with Brazil that seeks to guarantee importers will have enough US dollars to pay for exports, a move to increase trade between both nations that has been hit hard by a sharp depreciation of the Argentine peso.
However, with the United States Federal Reserve gradually cutting back on its stimulus packages, the Brazilian real will likely depreciate against the dollar, meaning purchases abroad, from Argentina, too, would become even more expensive.
—Herald with Telam