Currency crisis in Argentina harms Brazilian exports

Nov, 13, 2023 Posted by Gabriel Malheiros

Week 202342

The currency crisis in Argentina has exacerbated the export challenges faced by the Brazilian industry. Due to the drought in the neighboring country, soybeans have emerged as the primary exported product, surpassing automobiles for the first time.

Considering current market values, the Brazilian Foreign Trade Association estimates that the country may have foregone sales of approximately R$ 6 billion by September.

Association President José Augusto de Castro bases this projection on the historical export data to Argentina: “Until September, we exported $14.9 billion to Argentina. However, in 2017, we exported $17 billion, even during a crisis. In recent years, crises have been abundant. If we go back further, pre-2000, exports reached $20 billion. Today, it is estimated that around 40% less would be exported to Argentina if it weren’t for the crisis.”

In 2023, for the first time in history, Argentina ceased to be Brazil’s primary buyer of vehicles, being overtaken by Mexico. Exports to the neighboring country dropped by 17% for the year and 36% in October.

Please check below Brazil’s containerized exports to Argentina in the period from January 2019 to Sep 2023. The data was collected by Datamar’s Business Intelligence Team.

Container Exports to Argentina | Jan 2019 – Sep 2023 | TEU

Source: DataLiner (click here to request a demo)

The currency crisis in Argentina prompted the sector to revise the export decline projection for this year from 2.9% to 12.7%.

Marcio Lima Leite, President of Anfavea, representing automakers, adds that Brazil still faces competition with China, with Argentina using the yuan for transactions: “Due to a limitation of dollars for Brazilian export payments, this further hinders our exports. This is not the case when working in the Chinese currency, where there is an agreement and greater ease of payments.”

At the request of La Nación newspaper, Argentine consultancy Abeceb estimated the country’s debt from unpaid imports at $43 billion, nearly double the amount at the end of 2021. The decline in foreign reserves caused footwear exports to fall by 37% in September compared to the same month the previous year.

Executive President of Abicalçados, Haroldo Ferreira, states that some companies opted out of exporting to avoid waiting for the Argentine government to release dollars for import operations within a six-month timeframe: “Companies exporting there have known their distributors for many years, so this happens. The challenge for our industry is financing exports for up to 180 days. It’s a company’s choice. Hence, some companies stopped exporting to Argentina. Others, with long-standing relationships and distributors in this excellent consumer market, continue financing these 180 days.”

Currency challenges add to the anticipation of the second round of the presidential election scheduled for November 19. While anarcho-capitalist Javier Milei advocates for ditching Mercosur, current Finance Minister Sergio Massa represents the continuity of the current economic policy.

Source: CBN

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