Following a phone conversation April 28, in which they discussed Argentina’s financial crisis and the need for expanded bilateral cooperation, Argentine President Alberto Fernandez and his Brazilian counterpart, Luiz Inacio Lula da Silva, are meeting today in Brasilia for an extended discussion. It will have a focus on how Brazil might assist Argentina in expanding its trade with Brazil, but without having to use any of its scarce dollar reserves. This would involve the Brazilian Central Bank extending credit lines to Brazilian companies to finance their exports to Argentina, and receiving payment in pesos which would then be converted to Brazilian reales in Brazil.
Argentina is in a dire financial crisis, having suffered losses of $20 billion in agricultural export revenue due to a devastating drought this year, causing a decline in exports of more than 40%. Efforts to convince the IMF to offer a $5 billion bridge loan, or to accelerate payment of funds that would normally be made in three tranches between now and December, have gone nowhere.
Massa recently reached an agreement with China to pay for imports from that country in yuan, to the tune of $1 billion, and has reportedly gotten agreement from Chinese banking officials to increase the current $5 billion yuan currency swap to $9 billion. But consolidating an agreement with Brazil, Argentina’s number one trading partner, will be crucial, in addition to signing an array of programmatic agreements that have been under discussion for months. Today, President Lula told reporters at Itamaraty, the Foreign Ministry, “President Fernandez is coming to Brazil to talk about Argentina’s economic situation, so we must receive him and converse.”
Argentine Finance Minister Sergio Massa spent last weekend in marathon phone and zoom discussions with Brazilian Finance Minister Fernando Haddad and his executive secretary, Gabriel Galipolo. They were trying to pin down details as to how Brazil could offer credit lines to 210 Brazilian companies that export goods and services to Argentina to facilitate non-dollar trade.This is not necessarily a straightforward matter, however, as Galipolo indicated in an interview with TV GloboNews. “What we’re looking into,” he said, “is how to make this export credit possible, given the restrictions that exist today on Argentina’s balance of payments.”
No details have been released, as of this writing, on the results of today’s meeting, which was also attended by both nations’ finance ministers and their respective staffs, foreign ministers, Aloizio Mercadante, president of Brazil’s Economic and Social Development Bank (BNDES), and other top-level officials from both governments. According to Argentina’s Telam news agency, since the beginning of this year, there have been 10 formal meetings between Argentine and Brazilian officials to explore financing alternatives, in addition to another 18 meetings with BNDES representatives.
Galipolo also reported that under previous President Jair Bolsonaro, no financing was ever offered to Brazilian companies to allow them to export to Argentina. So, Argentina instead traded with China, and Brazil lost $6 billion it might have otherwise earned from bilateral trade.
