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China replaced Argentina as Brazil's second largest trading partner
martes 4 de Enero de 2011

Argentina's trade deficit with Brazil totalled $4.09B in 2010

By Jorge G. Herrera

Argentina had a $730 million trade deficit with Brazil in December. The overall trade deficit reached $4.097 billion dollars in 2010, surging 173 percent year-on-year.

In spite of the exchange rate, the trade imbalance can be attributed to the import boom experienced by Argentina. Brazilian exports soared 45 percent to $18.52 billion; whereas Argentina's exports going to the neighbouring country surged 28 percent to $14.42 billion. The favourable exchange rate and Brazil's high-growth rates aren't triggering Argentina's exports anymore, since the neighbouring country posted significant growth and its imports surged nearly 42 percent year-on-year. This would prove that Argentina's export patterns are not compatible with the Brazilian import demand. Even though the Argentine peso remains competitive against Brazil's real, the trade deficit with Brazil is unlikely to reverse its increasing tendency.

In addition, Argentina is no longer Brazil's second largest trading partner, since it has been replaced by China. Argentina and Germany compete for the third position.

Brazilian exports to Argentina rose from 8.4 percent to 9.2 percent; whereas Argentina's participation in the domestic Brazilian market dropped from 8.8 percent to 7.9 percent.

It is important to mention the increasing dependence of the car-making industry over the bilateral trade. Although Brazil's exports are more industrial-oriented than Argentina's, the export pattern carried out by both countries is focused on cars and auto-parts, representing over 35 percent of the total bilateral trade.  

Wheat, formerly the main Argentine product exported to Brazil, currently represents 6 percent of the total exports. Different categories of cars are the four best-selling products.

The current Brazilian situation is not very different, but the neighboring country also exports iron ore and mobile phones to Argentina among its best-selling products.

Cars and auto-parts, wheat, plastic products, machinery and equipment were the main Argentine goods exported to Brazil in 2010. Meanwhile, Argentina imported iron ore, cars and auto-parts, machinery and equipments, electronic devices, plastic products and iron and steel products.

Reports show that both Brazil and Argentina have been able to overcome the global financial crisis by strengthening the productive integration. We managed to increase our exports and cut the trade deficit by $250 million dollars compared to 2008, according to Argentina's Industry Minister Débora Giorgi.

Meanwhile, newly appointed Brazilian Trade and Industry Minister Fernando Pimentel told reporters that the government expects Brazilian exports to increase 13 percent. According to Brazil's Foreign Trade Secretary Welber Barral, emerging markets will continue boosting external sales while Europe and the United States recover from the financial crisis.

The Dilma Rousseff administration faces up to improve the Brazilian currency competitiveness, which appreciated over 100 percent during Lula's government. As a result, Brazil is expected to implement tax exemption measures that aim to boost shoes and textile exports. This scenario could trigger a new bilateral dispute in the current quota trading scheme.

Translated by Jimena Gibert