Argentinian president on first official visit to Brazil

Argentinian President Mauricio Macri is coming to Brasília for a state visit this Tuesday (Feb. 7)—the first since his inauguration 14 months ago. The purpose of his visit is to strengthen the country's relationship with Brazil, its main partner in the region, as the two countries seek to lift trade barriers and set a foot in other, non-MERCOSUR markets. It also comes amid the United States' protectionist threats under Donald Trump.

“The meeting between Presidents Mauricio Macri and Michel Temer opens up new possibilities, as the two countries, for the first time in a long time, are on similar grounds when it comes to monetary policy, foreign exchange, and trade policy,” economist Dante Sica from ABECEB consultancy told Agência Brasil.

He pointed out that although the two countries are the main partners within MERCOSUR (a regional bloc also composed of Paraguay, Uruguay and Venezuela), the trade exchanges in 2016 ($22.5 billion) was the lowest in ten years. “In the past two decades, the MERCOSUR's agenda has become rather repetitive, and Brazilian and Argentinian interests were often conflicting, with each country trying to manage its own crisis,” Sica went on.

Despite political uncertainties in Brazil as the country is shaken by a massive corruption scandal, diplomats from both countries agree that the dialogue between the two governments has been “flowing” better than in the recent past, and there is a willingness on both sides to “listen to” suggestions to overcome problems. “There is some common ground as both Brazil and Argentina have adopted flexible currency policies, have set inflation targets, and advocate negotiations to integrate MERCOSUR with other markets,” the economist said.

Bilateral agenda

One of the topics on the meeting agenda is the adoption of common technical regulations (including sanitary and phytosanitary standards) to reactivate the economic bloc and facilitate negotiations with other markets including the European Union.

The meetings between the delegations of the two countries will also discuss bilateral issues, including Argentina's $4.3 billion trade deficit that has been a major concern for the Argentinian president. Macri, a businessman, was elected to be Argentinian president on promises of reducing inflation (which reached 40% in 2016) and poverty (which afflicts one third of Argentinian population) and attract new investment. But his first year of government has coincided with Brazil's recession, and now with the election of Donald Trump, who vowed to revise the US's trade integration deals. This year, enjoying 45% approval ratings and a legislative election ahead, the Argentinian president faces the challenge of gaining a a majority in the Chamber of Deputies and the Senate.

Brazil, for one, wants to add sugar to the list of goods and commodities in the customs union—a proposal Argentina has resisted for the past 20 years, and could now be revised. Argentina maintains a sugar production in the northern part of the country, and had been shutting its market to the Brazilian product claiming producers in the neighboring country received government incentives.

Another concern for Brazil is a new Argentinian law that encourages the auto industry to buy auto parts produced domestically. Carmakers in Argentina whose products have at least 30% national contents will enjoy tax reduction benefits, and Brazil wants its auto parts to be considered “national” across the border.

The relations with Brazil are critical for Macri, as 40% of his country's industrial exports have Brazil as their destination market. Moreover, Brazil maintains $12 billion investments in Argentina. Both Macri and Temer are betting on a revival of economic growth in the two countries and the end of the recession.

Translated by Mayra Borges