Brazil and Argentina negotiate $600 million export agreement
The governments of Brazil and Argentina have unveiled that the Development Bank of Latin America and the Caribbean (CAF) is currently evaluating a new mechanism to secure Brazilian exports destined for its neighboring country.
This subject was discussed during the visit of Argentina's Economy Minister, Sergio Massa, to Brasília, where he had meetings with Brazil's Finance Minister, Fernando Haddad, and President Luiz Inácio Lula da Silva on Monday (August 28).
Due to a scarcity of U.S. dollars, Argentina has been facing challenges in buying Brazilian-manufactured goods, particularly in the automotive parts sector, which serves as a crucial component in the production of vehicles subsequently exported to the Brazilian market itself.
Argentina's Finance Minister said in a statement to journalists at the Planalto presidential palace: "With the backing and assurance provided by the Latin American Development Bank, known as CAF, we are instituting a $600 million financing instrument to facilitate Brazilian exports to Argentina. This also has a ripple effect on the financing of Argentine exports to Brazil. For every $600 million worth of imports Argentina procures from Brazil, $600 million reciprocate from Argentina to Brazil, primarily in the automotive sector, due to the seamless integration and synergy between our respective automotive industries."
As a result, Finance Minister Haddad's earlier proposal for Argentina to settle its imports from Brazil in China's currency, the yuan, is currently on hold. Additionally, the sum guaranteed in this proposal was a modest BRL 140 million, significantly lower than the pact currently under scrutiny by CAF.
The Latin American Development Bank is slated to deliver its final decision in September. Haddad further expounded, "Banco do Brasil will underwrite the exports of Brazilian enterprises, with CAF stepping in as a counter-guarantor for Banco do Brasil. There is even a possibility that we may not need to tap into the Brazilian export guarantee fund, which is held by the National Treasury, in conjunction with the Export Financing and Guarantee Program, Proex."
Facilitating cargo transportation
Sergio Massa also conveyed to the press that Brazil and Argentina are resuming their bilateral maritime transportation agreement. The transportation of goods between ports in both countries is expected to be preferably conducted via vessels registered in one of the two nations, ensuring market reserves to invigorate the merchant navies of both countries. This accord was temporarily suspended in 2021, under the previous Brazilian administration.
In another significant development, Sergio Massa announced the renewal of the agreement between Santo Tomé (Argentina) and São Borja (Brazil), two cities that share an international bridge which serves as the primary gateway for land-based trade between the two countries.
