Brazil will finance imports made by Argentina for one year

Banco do Brasil will finance exports by issuing letters of credit to offer the guarantee that in trade relations there will be two countries, Argentina on one side and Brazil on the other, guaranteeing reciprocal credits.”

Fernando Haddad, Minister of Economy of Brazil

Argentina and Brazil announced a bilateral trade financing mechanism to ensure the flow between the two countries, with credits to import from the neighboring country that can expedite orders in the Argentine Republic Import System (SIRA).

It was the Argentine and Brazilian Economy Ministers, Sergio Massa and Fernando Haddad, who detailed the implementation of this 366-day import financing line between Banco de la Nación Argentina and Banco do Brasil. Massa admitted that this will generate an increase in the volume of exports from Brazil to Argentina.

Haddad explained that Brazil sees Argentina as a partner with its strengths, but the lack of foreign currency is one of its weaknesses. In this regard, he explained that this weakness means that Argentina has to manage foreign exchange and cut imports from Brazil, particularly manufactured goods. For this reason, he explained the Brazilian interest in the implementation of this reciprocal guarantee mechanism that will allow Brazil to continue selling to Argentina on a term basis.

The news generated mixed reactions in the industry, between those who hope that the measure will expedite the entry of inputs into the SIRA and the firms that turned on the yellow lights at the risk of an “invasion” of Brazilian products.

Massa stressed that “local companies will be able to increase the rate of supply in the value chains” at the same time decompresses -by extending to more than a year, 366 days- “the weight of imports on the reserves of the Central Bank (BCRA) “.

“It is something that is beginning to be used more and more worldwide, as in Saudi Arabia for oil trade, it is not using the dollar as an exchange currency and bilateral trade. What I would look for is an improvement on what was implemented in 2008 “, explained the director of Abeceb, Gustavo Perego.

“Letters of credit would apply and local currencies would be used for merchandise purchases on one side and on the other. Also services, which is a novelty,” explained the economist. The measure seeks to “invigorate bilateral trade much more, which is very important for chains such as the automotive industry, which today is highly integrated into Mercosur and has a significant bottleneck due to the lack of dollars,” explained Perego. Argentina and Brazil reached a bilateral trade of 40,000 million dollars in 2010 and it fell back to half of that.

Among those who triggered the alerts, is the Argentine Chamber of the Optical and Related Industry, which considered that the import financing line between Banco Nación and Banco do Brasil “could cause the entry of finished products that affect the local industry.” .