Argentina demands Brazilian help to finance exports with currency swap

Mar, 15, 2023 Posted by Gabriel Malheiros

Week 202314

At the end of January, on his first international trip to Buenos Aires, President Luiz Inácio Lula da Silva said he was “back to make good deals with Argentina.” It seems that the pledge was taken literally by the government of President Alberto Fernández, who sent a mission to Brasilia last week demanding help from Brazil to sponsor Argentine exports to the Brazilian market.

Faced with a dramatic shortage of dollars in the country and a presidential election that should happen in October, the Casa Rosada hopes to obtain Brazilian assistance to ensure, in the words of an Argentine source, that the country be able to achieve a three-year streak of GDP growth in 2023.

In the first two months of the year, Brazilian exports to Argentina rose by almost 20% compared to the same period last year. This tendency is cause of concern among the Argentine envoys who arrived in Brasília to say that the country doesn’t have enough dollars to maintain that pace. Conversely, Brazil is concerned about the upsurge of complaints from its exporters to enter the neighboring market.

And how could Brazil help its neighbor? That’s the big question. The Fernández government’s plan A is a swap scheme (exchange of currencies) between central banks, similar to what Argentina has with China — a country that, given the financing benefits it offers to exporters, faces fewer restrictions on sending its products to Argentina.

$20 billion in 2020 with China

The swap with China was completed in 2020 with US$ 20 billion. In broad terms, the mechanism calls for central banks to make a deposit in their respective currencies, which funds each side’s exports. As a result, exporters receive payments in their own currencies instantly.

Source: O Globo

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