Brazil to discuss export credit line with Argentina as Lula and Fernández meet

Brazil’s President Luiz Inácio Lula da Silva will meet his Argentinian counterpart, Alberto Fernández, in Brasília this Tuesday afternoon to discuss bilateral trade. The in-person meeting follows a phone call between the two heads of state last week, during which they discussed the Unasur regional organization, the region’s “fraternal relations,” and deepening trade ties.

The meeting comes as the finance ministry’s executive secretary, Gabriel Galípolo, said on Monday that Brazil is considering helping its crisis-stricken southern neighbor with a credit line to stimulate exports.

“It would be financing for Brazilian companies that sell to Argentina, which are these companies that import services and goods from Brazil. What we’re looking into is how to make this export credit possible given the restrictions that exist today on Argentina’s balance of payments,” Mr. Galípolo told TV channel GloboNews.

With triple-digit inflation, the peso in freefall, and dwindling international reserves, Argentina faces a dire economic scenario and a very real threat of devaluation. A punishing drought has exacerbated economic hardship, battering the agricultural sector, an important source of exports and foreign currency.

The idea is for Brazil and Argentina to bypass the US dollar for trade — with Brazilian exporters selling their goods in pesos and then converting them into reais. Mr. Galípolo acknowledged that the peso’s convertibility is a challenge and suggested that Brazil’s national development bank BNDES would have a role to play. According to Mr. Galípolo, the absence of such mechanisms to finance trade has led Brazil to lose USD 6 billion worth of trade with Argentina to China in the last five years.

During Lula’s visit to Argentina back in January, the two countries had mooted creating a joint trading currency. President Lula also raised the possibility of ditching the US dollar for trade among the BRICS countries while in China last month.

Beyond President Lula’s interest in reducing dependence on the US dollar, he maintains personal friendly ties with Mr. Fernández, a fellow leftist, and seems well-disposed to help his Argentinian counterpart as general elections loom in October. Deeply unpopular and at the helm of a divided Peronist coalition, Mr. Fernández last month confirmed he would not be seeking a second term.

While in Brazil, President Fernández will be accompanied by a large ministerial delegation which will include Foreign Minister Santiago Cafiero and Economy Minister Sergio Massa, among others.

Mr. Massa, a possible presidential contender for Argentina’s ruling Frente de Todos coalition, is due to meet with his Brazilian counterpart, Finance Minister Fernando Haddad, and representatives from Brazil’s business sector.  

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