The economic crisis in Brazil is already starting to generate extra concern for the Argentine industry, which, as if it did not have enough with its own problems, must now add those of its main trading partner. The Brazilian government anticipated yesterday that that country’s GDP would drop 4.7% this year, and alarms began to go off.
According to a survey carried out by El Cronista among different specialists, the export sector and, in particular, the automotive industry, will be the most complicated due to the crisis in Brazil, an economy that “gripped” the pandemic. The decrease in activity in the neighboring country will subtract 1.3% from Argentine production, according to the calculation of Enrique Mantilla, president of the Chamber of Exporters of the Argentine Republic (CERA), for whom for each point that Brazil falls, Argentina loses 0.28 activity points.
A severe fall in exports and a widespread crisis in the industry, with the continuity of the suspensions and their impact on employment, is the scenario that, for some, is looming in Argentina in response to the Brazilian shortages.
Marcelo Elizondo, head of the consultancy Development of International Business (DNI), explained: “Argentina will feel strong the blow. There are those who say that the fall in the GDP of Brazil will be greater than that expected by its government. The pandemic and confinement did not affect to all sectors in the same way, car sales plummeted but food consumption did not. “
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Diego Coatz, executive director of the Argentine Industrial Union (UIA), understands that the panorama is not the most interesting for the industry, although he prefers to “look more in the long term”. “What we must bet on is greater integration and it is possible. We have a very good dialogue with our peers in Brazil and we are on that path. We are not anticipating an invasion of their products,” he said.
In addition, the executive says that he does not believe that, given this negative outlook, Brazil is trying to close its commercial borders to protect its industry. “On the contrary, I see them more opening,” he said.
The impact that some specialists expect will be hard in the sectors that produce greater added value and more quantity of employment with better remunerations.
Total Argentine exports to Brazil touched close to $ 10.4 billion in 2019, representing 16% of our country’s external sales. 65% of the shipments were Industrial Origin Manufactures (MOI), so one out of every three MOI dollars exported went to Brazil. “These products are those that tend to enjoy a greater degree of differentiation and added value, so that their insertion in new markets tends to be slower and more complicated (there are no tariff preferences),” the Ecolatina consulting firm said in a recent report.
“Towards industrial exports, the branch of greatest weight is the automotive one. In 2019, its shipments totaled US $ 4,430 million, which means that almost 70% of the exports of this complex were destined for Brazil” they added.
Elizondo observed that Argentine exports to Brazil will be “comfortably” below US $ 10 billion in 2020 and that the industrial sectors will not have margin to relocate their sales. The case of raw material exporters will be different. The retraction in grain sales to Asia will not be as dramatic, since the demand for food will not decrease as much.
Going forward, the foreign trade specialist stated that it will be difficult for multinational companies to decide to invest in Argentina in the event that Brazil achieves a greater trade openness and focused on the devaluation of almost 50% of the real in just four months, along with the split Exchange rates in Argentina add problems to the competitiveness of Argentine products, which means that at the local level there will be jobs at risk or with poorer quality and no job creation.