AEB: Argentina’s Economic Woes Impact Bilateral Trade with Brazil

José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), gave a stark outlook on the future of trade relations between Brazil and Argentina. He remarked, “If Argentina recovers from its severe economic crisis, there is no guarantee it will turn to Brazil. It could look to China, the United States, or Europe. Despite being Argentina’s closest neighbor, Brazil may not receive the attention we think it deserves.”

De Castro’s assessment is grounded in recent trade figures, which paint a concerning picture. Brazilian exports to Argentina, which grew by 8.9% to $16.612 billion in 2023, fell by 29.9% in the first four months of 2024, totaling $3.908 billion. Meanwhile, Argentine exports, which had decreased by 8.4% to $11.998 billion in 2023, saw a slight recovery of 2.9% in the same period this year, reaching $3.948 billion.

The decline in Brazilian exports has negatively impacted the trade flow, which is the sum of exports and imports. Last year, the trade flow saw a modest increase of 0.9%, but in the first four months of this year, it fell by 16.5%, totaling $7.856 billion. This downturn also shifted the trade balance. In 2023, Brazil enjoyed a surplus of $4.715 billion in bilateral trade with Argentina. However, from January to April 2024, Argentina recorded a surplus of $40.3 million.

The chart below delves into the maritime container trade between Argentina and Brazil (exports and imports) between Jan 2021 and Mar 2024. The data was derived from DataLiner.

Container Trade Brazil-Argentina | Jan 2021 – Mar 2024 | TEUs

Source: DataLiner (click here to request a demo)

“Argentina is experiencing a challenging phase,” de Castro noted. He advised Brazilian businesses with operations in Argentina to hold out for at least six months, describing the current period as the country’s worst. “Argentina needs capital, but no one will invest knowing it faces numerous issues. The country has traditionally relied on bumper harvests of soybeans and corn. With such harvests, it might address its economic woes and attract productive capital to create jobs and new products. Right now, Argentina is in a state of austerity, cutting everything possible.”

De Castro compared Argentina’s situation to Brazil’s experience in 2000, when a surge in commodity prices and production generated a significant trade surplus, enabling Brazil to pay off its external debt. He believes Argentina will need similar luck with its agricultural output to stabilize its economy. “Argentina will need super harvests to pay its external debt and reduce its reliance on international financing. It’s a challenging scenario,” he concluded.

Source: Comex do Brasil

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