Brazil is a political unknown, but not an economic one

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The Brazilian election is relevant to Argentina, but not (or not only) because of a political issue. Brazil is our main trading partner. On one hand We are competitors, but fundamentally we complement each other. There are many activities in which we are interdependent. If competition is good for improvement and innovation, complementarity is even better because manufacturers must hold each participant to a higher standard.

The trade balance with China is particularly negativeContrary to many assumptions. The balance for the 8th month of 2022 was negative by USD 7,589 million. We export for 4,149 million USD and import for 11,738 million USD. China is our main supplier and Brazil is our main customer, although we also have a negative balance of USD 2,824 million: we export USD 8,147 million and import USD 10,971 million. The numbers seem to be higher and more profitable than in China.

in other terms, 13.6% of our exports go to Brazil and only 6.9% to China. Surprisingly, the United States is a more important market for our products, accounting for 7.5% of total production.

We share a border with Brazil and the distance to European and Chinese ports is not much better than ours. Our agriculture and animal husbandry influence each other and, although we compete in some markets, we also supply them with agricultural machinery and biotechnology. Complementarity in the automotive industry is very large And there is a long similar list.

A few days ago, Ambassador Daniel Scioli presented a series of proposals for bilateral relations to Brazilian businessmen and presidential advisers in Brazil. This included mining, energy, agro-industrial sector development and even currency swaps.

While the currency swap may attract more attention, it is clear that it should not be the main goal – nor the obstacle – to further integrating the two economies.

Mercosur, and especially the relationship with Brazil, is far from the expectations it generated more than 30 years ago. Instead of creating more trade, it has had the effect of what is often called “trade diversion,” as countries prefer to trade with each other due to differences in tariffs and logistics costs rather than the price of the product itself. Lately we have had considerable evidence of wheat where Brazil traded with other countries despite this distinction.

Since its inception, the main objective of Mercosur has been to promote a common space that generates trade and investment opportunities through the competitive integration of national economies in the international market. This integration would have been much greater without political ups and downs. The potential of assembling a strong trading bloc has not been achieved and it is safe to say that this has hampered progress on other free trade agreements.

These agreements, as has been said many times, not only open up markets, but also encourage companies to achieve greater efficiency and adapt to the most demanding quality standards. Otherwise, asymmetric trade relations arise, where country A can export to B because it is of high quality, but the reverse is not always possible. From this point of view, both the Chamber and the certification institutions and governing bodies face a gigantic task.

It should be noted that Many of Argentina’s trade opportunities are limited in time. For example, the sale of electricity or gas – one of the elements of bilateral meetings – is limited by Brazil’s development potential. Technological advances and gigantic reserves of both countries can help to turn them into world centers, if only the myopia of internal market development is avoided.

Likewise, biotechnological advances that allow crops to be resistant to various events, such as pests, climate or phytosanitary products, temporarily limit new advances that are rapidly developing in other countries. Argentina’s biotechnology industry is very strong, but it is not the only one in the world, and it is rapidly losing its advantages due to difficulties in establishing intellectual property and obtaining the necessary investments.

Complementarity in other areas, such as the once-monumental Rio Colorado potash project at Malargue, Mendoza – developed by Vale do Rio Doce – was well known. However, it remained as an example of what should be avoided. Currently, the provincial government of Mendoza is trying to reactivate the project, but it is already a gigantic cost for all parties involved.

Brazil is a giant both geographically and with a population of over 210 million. It has a growing economy and over $300 billion in international reserves with more than reasonable monetary stability. This should not be forgotten, because its potential as a competitor is more often noted than as a close and complementary partner.

The Brazilian election is ahead of Brazilians, and of course it will affect the rest of Latin America. However, it should not matter, we will develop and nurture strong business relationships. This is one of the greatest benefits of trade, enabling peaceful and mutually beneficial relations between nations regardless of race, creed or political orientation.