Plummeting trade with Argentina ripples on Rio Grande do Sul economy

Both exports and imports from Rio Grande do Sul to Argentina continue to plummet. In the year-to-date total of the first two months of the year compared to a year prior, shipments from Rio Grande do Sul to the neighboring country dropped by 17.2%, to US$ 122 million. That amount accounts for one-fifth of what was sold to China. The foremost factor behind the sharp drop was sales of machinery and equipment for agriculture and livestock (US$ 12 million, -81.3%).

According to federal government data, detailed by the Federation of Industries of Rio Grande do Sul (Fiergs), imports fell even further, with a decline of 21.3%, to US$ 317 million. Crude petroleum oils and passenger automobiles drove down the reduction.

The crisis in Argentina has led to a very negative outcome in both exports (-8.3%) and imports (-28.4%) for Rio Grande do Sul. The country is the third main destination for products from Brazil’s southernmost state, trailing only China and the United States, which bought more than in January and February of last year. It’s also the second main source of imports, surpassed only by the United States, from where the people of Rio Grande do Sul are buying more.

It wasn’t expected that Argentina’s serious problems would be solved overnight by President Javier Milei or any other elected leader, but those who decide to do business with the neighboring country are hesitant. There are still exports from last year that have not been paid for, as dollars were withheld by the government to prevent further peso devaluation. Movements involving the summer crop, especially soybeans, will begin soon, warns the president of the Brazilian Association of International Transporters (ABTI), Francisco Cardoso.

“From April and May onward, there are harvests, new exports, new exchanges, maybe another US$ 10 billion or $15 billion will come in. The government really needs to convey confidence in reducing the fiscal deficit, which is the anchor of the solution to the problems. This conveys confidence to those who have money to lend and invest in the country,” he explained.

The new government has indeed achieved two consecutive monthly fiscal surpluses now in 2024, which occurred for the first time in over a decade. However, annual inflation remains in the triple digits, and the poverty rate in Argentina has reached 57%. The social impact of price hikes is significant, warns Brazil’s ambassador to Argentina, Julio Bitelli.

“The expectation is that inflation will slow down, but the situation is complex. Salaries don’t keep up, and the levels of poverty are quite worrying. Obviously, the concern about the economy is legitimate given the country’s situation, but the social impact is very serious,” he says.

Source: Gaucha ZH

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