Since colonial times, Argentina has had commercial relations with Brazil, energized by geographic proximity and common boarders. With the crisis of the 1930s, the relationship strengthened, reaching very important values during World War II. At this same time, both countries were going through an industrialization model through import substitution (ISI), becoming the two most industrialized countries in South America.
In 1991, with the formation of MERCOSUR, Brazil began to position itself as Argentina's main trading partner, both in imports and exports, always remaining ahead of China and the United States. In 2011, Brazil was the destination for 24% of national exports, for an amount of US$17,317 million (FOB amount), tripling shipments to China (US$6,033 million) and quadrupling to the United States (US$4,248 million).
The ease of logistics and the benefits granted by MERCOSUR allow Argentina to export products to Brazil that it cannot locate in other parts of the world, such as industrial products, especially from the automotive industry. In fact, 59% of the exports made to this country in the first half of 2023 correspond to industrial manufacturing (MOI), of which 67% is land transported material.
In this period, Argentina exported to Brazil more than US$5,720 million (FOB Amount). 15.2% of this total refers to agricultural manufacturing (MOA), 13.7% to primary products and 11.7% to fuels and energy.
In the last three decades of commercial exchange, Argentina registered a positive balance (more exports than imports) with respect to Brazil only in 11 years since Brazilian imports are usually key products for the Argentine productive scheme.
To reverse this trend or reduce the trade deficit, "Argentina would have to start developing active export policies, with more realistic terms of trade (for example, the exchange rate) and less withholdings on exports to be more competitive", reflects Arnaldo Hasenclever, Director of the International Business Centre of Grant Thornton Argentina.
“At the same time, there should be special programs that allow small and medium-sized companies to develop so that they are able to cover export markets. Many States have actively supported national companies so that they are in a position to supply international markets. Examples of this are certain Eastern countries, which have achieved this objective with the automotive sector and other technological industries”, Hasenclever concludes.
The import of Brazilian goods during the first half of 2023 was US$ 9,573 million (CIF Amount), of which 51.1% are intermediate goods, 20% parts and accessories for capital goods, 8.9% capital goods, 8.7% passenger motor vehicles, 7.2% consumer goods and 4.1% fuel and lubricants.
“Brazil is a large soybean producer, the second in the world, so it is not surprising that it exports in large quantities. While Argentina is also a strong producer and domestic consumption of the product is close to 15%, so the remaining 85% is marketed. This is why it sets off warning signs to see that US$1,443 million of soybeans have been imported”, says Julia Adano, Lead Tax Partner and Agribusiness spokesperson at Grant Thornton Argentina.
“This is the result of the severe drought that affected the 22-23 season, added to the frosts that were experienced in February and further compromised soybean and corn crops. The yield of the harvest was 45% lower than expected at the beginning of the season and it is expected that the fine harvest 23-24 will also be compromised, so it is likely we will continue importing the cereal", Adano points out.
Julia adds “However, in the coming years, if the weather conditions are not as difficult as those of 2022/23, the Argentine crop could recover its usual yield. On a commercial level, it is also important that prices are competitive; since 2022 meant a record of low soybean prices and this also had an impact on the negative result of national exports”.
In 2001, British economist and former head of Goldman Sachs Bank, Jim O'Neill, coined the term "BRIC" to describe fast-growing economies that would collectively dominate the world economy by 2050: Brazil, Russia, India, and China; adding South Africa in 2010. Currently, the group contributes 31.5% of the world GDP, against 30.7% for the G7 (Germany, Canada, the United States, France, Italy, Japan and the United Kingdom).
Since 1999, Brazil has had an inflation targeting policy to clear up uncertainties in the capital market and provide more security to the Central Bank. For 2023 it is set at 3.25%, with a tolerance of ± 1.5%.
In pursuit of maintaining trade relations with the largest economy in South America, the Argentine Embassy in Brazil, with the support of the Argentine Agency for Investment and International Trade (AAICI), designed a logistics cost reduction program in Brazil with the aim of supporting Argentine companies that seek to export to this country, through the reduction of export logistics costs.
Thanks to this program, exports of Argentine origin have reduced rates in international transport, customs clearance, certificates and other import and storage procedures.
Sergio Verón, Lead Partner of Business Process Solutions and the representative of Grant Thornton Argentina in the Argentine-Brazilian Chamber of Commerce, Industry and Services (CAMBRAS), tells us "This type of regulation, which alleviates the costs of commercial activities between both countries are always very positive. They promote the expansion of markets for national SMEs and mid-market companies. In particular, this type of incentive continues to position Brazil as the most attractive destination market for an Argentine company to increase its volume of exports or start their expansion plan in markets outside the country".
"Business decisions where the objective is to expand the volume of exports to a market as large as Brazil -says Verón- will surely have an impact on the expansion of the employment market and the income of foreign currency. On the other hand, close relations between both countries also promote the increase in commercial activities of Brazilian companies in Argentina, favoring the outsourcing of services and the beginning of start-ups".
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