Businessmen worry for Brazil: trade on alert

They claim that if the crisis continues, it could impact the local economy due to commercial trade and because Lula will have to relegate the regional agenda. They demand for condemnation from "all sectors."

Businesses are still monitoring day-to-day politics in Brazil with “strong concern” after the attempted coup in the neighboring country –Argentina’s main trading partner. The main business unions in the country quickly spoke out condemning the attack on the institutions. 

Their fear is that the political crisis could mean Lula da Silva’s government will not be able to focus on its regional expansion agenda, which includes a common currency. But, in addition, the business community is looking at the 2023 Argentine elections through the mirror of a “convulsed” region, and fears governmental weakness.

In the last few hours, the main business chambers have spoken out. The Argentine Business Association (AEA), which brings together the owners of the country’s main companies, such as Mercado Libre and Techint, stated: “We wish to express our total rejection of the attempt to alter the institutional order in Brazil.” In another brief statement, the Argentine Industrial Union (UIA), headed by Daniel Funes de Rioja, “condemned the anti-democratic demonstrations” and called for “respect for the institutional order.”

The Argentine Chamber of Commerce (CAC), led by Mario Grinman, stated that the acts of violence “are a very serious attack against democratic institutions that not only affects Brazil but also the entire region.” In a statement, they also highlighted the local impact: “The recent violent events occur at a time when Brazil is our main trading partner, with expectations to grow.” 

In 2022, bilateral trade between Argentina and Brazil may have exceeded US$28 billion, the highest figure in the last 10 years according to CAC projections. According to the accumulated figures of the first 11 months –the latest official data– Argentine exports to Brazil were US$11.5 billion, an increase of 8.5%.

Companies have been closely following the events in Brazil since Sunday. “It looks concerning, without a doubt,” said Juan Cantarella, general manager of the Association of Argentine Component Factories (Afac). The importance of the neighboring country is key: “For the auto sector, Brazil is equally or even more important than the Argentine domestic market, because most of the production gets exported, and 70% goes to Brazil. We are closely monitoring due to the situation in terms of demand and trade, but also due to structural issues, the flow of foreign investment in the mid and long term is observing the regional framework, ” he added.

The automobile sector expected a moderate growth this year in Brazil. At the moment, no one can tell if the events may alter expectations and the future drive the Lula administration wanted to provide to Mercosur. Marcelo Elizondo, president of ICC Argentina (International Chamber of Commerce) described two scenarios: “If the crisis is quickly reorganized and they can restore the ability to govern with social peace, it could end up being just a resolved incident, and the forecasts will stay the same. 

“Otherwise, Brazil could enter a tension that will last over time –it’s still unknown whether the people who are protesting get the support of Bolsonarismo, which is the most important caucus in Congress. This could radicalize Brazil, so forecasts will have to be reviewed and it will make it impossible for Lula to implement his agenda, solve domestic problems and postpone his international plans.”

The business perspective also views the polarization of Brazil in an Argentine mirror, in the light of an election year. Elizondo frames the events in a “convulsed region”, in the context of what has recently happened in Peru and Bolivia. “Institutional legitimacy is weak and there is a lot of discontent, not just from small groups, but from massive movements,” he said. “The concern of business leaders is based on the fear of a worsening tension, which could contaminate the mood in Argentina,” he added.

Meanwhile, Román Queiroz, a leader of Faima and the UIA, analyzed the potential economic future: “If the crisis leads to a devaluation in Brazil, the costs of our consumables increase, and if their domestic market falls, it will also hinder exports”. He also connected it to local politics: he is concerned that “some” opposition leaders recently identified themselves with Jair Bolsonaro. “This is worrying because the extreme right has been using these methods to disrupt democracy,” he added.

Other Statements

The Business Convergence Forum also issued a statement rejecting the attempt to alter the institutional order in Brazil. “The validity of democracy in our countries, so laboriously achieved, demands compliance with its protocols: acceptance of election results, an orderly transfer of power from one president to another, and respect for institutions and the separation of powers established by the Constitution”. In addition, they called for attempts to “subvert the institutional order” to be condemned by “all sectors of society.”

Small and medium enterprise chambers also spoke out to condemn the events. For instance, the Confederation of Medium Enterprises (CAME), which “condemned the attempt to break democracy.” In a statement, they said that the images caused “anxiety and anguish” and called for “responsibility” from political leaders to “respect the institutional order.” CAME also said that both countries have a common destiny –due to the daily links between SMEs– and both expressed their solidarity and demanded a “more active Mercosur”.

Originally published in / Translated by Agustín Mango


All Right Reserved.  Buenos Aires Herald