Argentina and Brazil announced on Monday a trade agreement that will allow the Central Bank having dollars that it did not have and in this way put a stop to the bleeding of reserves, in a year in which it is expected that due to drought, foreign currency income is affected; for which the specialist in international markets Marcelo Elizondo, crossed out the measure as “another stroke of magic“that decompresses the BCRA.
The Ministers of Economy of Argentina, sergio masaand his pair from Brazil, Fernando Haddadannounced the day before an agreement between Banco Nación and Banco do Brasil for the financing of national imports from Brazil.
“We have decided to move forward with an agreement between Banco do Brasil and Banco Nación with a guarantee scheme which will allow us to speed up the process of supply and export of companies from brazil to argentina and of supply of Argentine companies with Brazilian companies”, pointed out Dough about
It has for the Argentine economy a stronghold which is that, this financing that Banco do Brasil provides to Brazilian companies to provide to Argentina stop needing dollars from our central bank”.
Due to exchange tensions, the Central Bank adjusted interest rates again
Massa added that the agreement would be used for part of the supplies of “intermediate goods” of the companies that source from the South American giant.
Imports without the need for dollars
According to the Tigrense’s words, Banco do Brasil will assume a commitment with Brazilian companies and Banco do Brasil with Argentine companies. “Increasing the Banco do Brasil line of credit for 366 days, the obligation to pay foreign currency for one year and one day; and that’s him positive impact that there will be in the BCRA reserves because the payment operation is automatic by Banco Nación and the financing in reais is carried out by Banco do Brasil to Brazilian companies”, explained Mass.
It should be noted that Argentina closed 2022 with an accumulated bilateral deficit of US$ 2,250 million, according to preliminary data from the Brazilian Ministry of Economy. In this way, the exceptional situation of 2019 and 2021 was covered, years that surplus appeared for Argentinaand returned to the usual bilateral redness. The rule since 2004 according to a report by the consultancy ABCEB.
In any case, the 2022 deficit was lower than in previous yearss (2004-2018) when it averaged US$3.5 billion annually.
The red was a consequence of imports that grew well above exports. In detail: while imports totaled the US$ 15,358 million and grew 29.3% year-on-yearexports reached US$ 13,104 million (+9.7% yoy), explains the consultant.
“This was one of the things that was being requested from Argentina due to the lack of dollars in the BCRAthe possibility of doing a business change used the local currencythat is, the peso and the real,” he told PROFIL Gustavo PeregoDirector of ABCBE.
What is the specific objective?
“The objective of this proposal is that local currencies can be used at the time of the transaction and that both Banco Nación and Banco do Brasil can operate as guarantors from a sovereign fund that would be the one that would grant the guarantee to the banks to be able to transact with local currencies”, explained Perego and added: “This would help to give it greater fluidity mainly to the need for imports that Argentina has, which today is strangled due to shortage of dollars for important insurance”.
“Possibly the greatest beneficiary If this were to apply, it would be the automotive sector which is the one that is suffering the most today from the need to import parts”, he added.
All the details of “Sur”, the common currency between Argentina and Brazil
“The agreement comes at a time when Argentina has to give greater dynamism to the bilateral relationship with Brazil, which is why it is positive. However, this pact is going to impact favorably to exports from Brazil to Argentinasince they intend to gain a little market at the entrance of Chinese industrialized products”, Perego said.
In the same line, he responds to this medium marcelo elizondointernational business specialist and President of the Argentina office of the International Chamber of Commerce (ICC).
“What is being achieved with Brazil at this moment it is not minorbecause we import US$ 15,000 million to Brazil and this mechanism allows the Central Bank toreduce the stress on the demand for foreign exchange. Other dollar access magic hit que it was not foreseen for the BCRA”, Elizondo asserted.
Would it reduce the trade balance deficit on the Argentine side?
“No. I don’t think I can reduce it because Argentine foreign trade It has a problem of structural deficit. When the economy is working Well, it presents a lack of competitiveness, so you have to do internal work to be more competitive. One point that the Government should work on is the rules for facilitating trade with Brazil”, objected Perego.
advantages and disadvantages?
“The advantage It is not for Argentine importers but for the BCRA, since it has a fixed exchange rate at a value well below market, lor that generates an excess demand or an infrastructure supply, because he does not have enough dollars to meet the offer. It not only affects savings, but also trade that is subject to limits by the SIRA. It also removes the uncertainty for the Argentine importer of whether the Central is going to give you the dollars you need or not to complete the importElizondo explained.
“Now, watch out. is that it forces the Argentine company to borrow because it is financed for 366 days. So the question is: How much is that dollar that is owed going to have to be paid?”, was questioned.
And along the same lines, he concluded: “So, on the one hand, the pressure is reduced and access to dollars is guaranteed, but financing is required and dollars are owed for 366 days, without knowing how much the dollar will cost. Possibly there will be another government and we do not know the exchange regime”.
LR/MCP
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