Fernández and Lula talked trade fine print in Brasilia meeting

Lula is seeking to drum up international support for his neighbor, but acknowledged Fernández was going home “without any money”

Alberto Fernández and Lula

In a meeting of more than three hours at the Alvorada Palace presidential residence in Brasilia, President Alberto Fernández and his Brazilian counterpart Luiz Inácio Lula da Silva analyzed the alternatives for providing financial assistance to Argentina while it faces reserve scarcity. A proposed system of credits will seek to provide longer-term financing to Brazilian exporting companies.

It was a high-level political and economic summit: after the bilateral meeting between both presidents at the Brazilian presidential residence, Economy Minister Sergio Massa and his peer Fernando Haddad were present. The Argentine delegation was also represented by the Argentine ambassador in Brazil Daniel Scioli, Chancellor Santiago Cafiero, and Chief of Staff Agustín Rossi.

The Brazilian delegation was represented by Deputy Economy Minister Gabriel Galípolo, Foreign Affairs Minister Mauro Vieira, and Lula’s special advisor on international affairs, Celso Amorim. 

The most pressing topic on the agenda was trade and mechanisms to expand and expedite it, although they also discussed science, energy, defense and security issues.

After the meeting, at a joint press conference, Lula da Silva described the meeting as “long and difficult”. Although he repeatedly mentioned his “commitment to help Argentina”, he admitted that Alberto Fernández was leaving the country “without any money”. 

Lula revealed that he is looking for support for Argentina locally, among businessmen and Congress, but also in Mercosur, in the BRICS (the group of economies including Brazil, Russia, India, China and South Africa), and even with Chinese President Xi Jinping. He will seek to adapt the BRICS bank’s regulations to obtain financing for Argentina.

Fernández outlined Brazil’s planned support during the conference, stating that “They will be credits for Brazilian companies to continue exporting to Argentina, and the necessary guarantees must be defined to favor these credits”. However, he concluded: “We still have the technical work to do”. Ministers Massa and Haddad are to follow up on the work next week.


There are two possibilities on the table. In late April, Scioli managed to extend use of the local currency system, whereby the Central Bank of Brazil facilitated bilateral trade in pesos and reais, in order to authorize more financial institutions, such as exchange houses, to operate in the system. However, business chamber sources told the Herald’s sister title, Ámbito, that the system is operational but used little in practice.

Economy Ministry sources said that a credit system will be established with the SIRA import authorization system, but in reais. Business groups have their eyes trained on announcements about financing. Brazilian sources expect an endeavor to give credits to over 200 Brazilian companies so that they can export to Argentina. It would be a compensatory mechanism in reais and pesos, to avoid using the dollar. What remains to be defined are the terms of compensation. In January, Haddad and Massa told the businessmen that they were looking for 366 days, that is, more than a year, to function as a “bridge” until the drought is over and the Néstor Kirchner gas pipeline has become operational. The financing of imports will be for this year, according to Massa.

Sources also add that a “system of guarantees on Argentina’s future flows of incremental exports” will be sought. From Brazil, the economic team explained that it will be a “scheme like the one announced with China”. However, the difference is that there, the swap is used to import directly with yuan. Brazil’s case is different due to the autonomy of the Central Bank, so other banks will be sought to finance Brazilian companies, such as the BRICS bank, chaired by Brazil’s former president, Dilma Rousseff.

Massa’s and Haddad’s economic teams will be in charge of finalizing implementation. Lula’s Economy Minister will travel to Argentina next week. It is expected that Brazilian exporters and Argentine importers will be summoned to the FIESP meeting in Sao Paulo to make progress.

Trade deficit

Embassy sources in Brazil said that this will take the pressure off the trade situation, since Argentina will not have to have reserves to import more than US$ 1 billion per month. In spite of the “political affinity” between Fernández and Lula da Silva, the Brazilian Finance Ministry emphasizes that the measure benefits large Brazilian industries, which in recent years have lost ground to China in their exports for some US$6 billion.

In addition, the relief to Argentina relies on its delicate international reserve situation during the historic drought. Although trade between Argentina and Brazil is growing, this is due to a strong increase in imports. In the first four months of 2023, Argentina accumulated a negative trade balance of US$1.8 billion, according to sources from the Argentine Chamber of Commerce (CAC). Exports grew 7% year-on-year in the accumulated January-April period, while imports from Brazil rose 26% in the same period, due to the purchase of soybeans and vehicles. In April alone, Argentina’s trade balance showed a deficit of US$776 million.

Originally published in Ámbito.com


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