Argentine Chamber of Commerce says decline is mostly due to drop in Brazil’s economy
The plunge in foreign trade with Brazil is mainly due to the decline of the neighbour’s economy rather than the devaluation of its currency, the Argentine Chamber of Commerce (CAC) said yesterday in a report.
Trade between the two biggest Mercosur economies has fallen by 16.3 percent in the first eight months of 2015, with fewer sales to Brazil that was also accompanied by fewer imports.
While the fall in exports is reater than that of imports, the drop in commerce cannot be attributed to Brazil’s devaluation of the real, even if some are worried that it might make Argentine products vying for that market less competitive.
The CAC said yesterday that “the main cause of reduced bilateral exchange is the decline in Brazil’s economy,” backing its words with data correlating Argentina’s exports in the last twelve years and Brazil’s economic performance.
“Analyzing the evolution of commerce in the last years it can be deduced that bilateral exchange rate competitiveness is not the most influential factor, and that flows are instead essentially determined by the levels of economic output,” CAC argued.
The group’s statistics showed that exports to Brazil also fell in 2009, while the global financial crisis affected the neighbouring giant’s Gross Domestic Product (GDP).
Since 2014, both exports and Brazil’s economy have been falling again, even though the correlation is not as tight as it was in 2009, with sales abroad falling at a higher pace than Brazil’s output.
CAC’s report was based on statistics coming from the Indec statistics bureau, the Economy Ministry and Brazil’s Central Bank.
Exports suffer more
The decline in Argentine exports explains most of the drop in commerce between both countries since 2014.
Only 4.9 of the 16.3 percentage points lost in commerce since January were explained by reduced imports, with the remaining 11.4 points caused by a drop in sales to Brazil.
The latest figures available from last month show an even more marked contrast: while Argentine exports plunged 23.5 percent in August, on the year, imports from Brazil were comparatively stable, gaining 0.9 percent when measured in dollars.
This is explained by the fact that the Argentine economy has been growing while Brazil’s hasn’t, CAC said.
“Brazil’s economy contracted by 2.1 percent in the first semester, with both consumption and investment going down, while the Argentine economy grew by 2.2 percent in the same period. This disparity in the evolution of both countries could explain the differences in flows between the two countries in the first eight months of the year,” CAC said.
Although the exchange rates of neighbouring countries’ currencies are a concern for the country’s competitiveness too, other analysts have also argued in the past that, from Argentina’s point of view, a devaluation in Brazil is not the most important factor to determine the future of bilateral trade with its neighbour.
“Historically, the flow of bilateral trade has mostly been dominated by the evolution of demand and the level of activity level more than by the exchange rate,” Roberto Bouzas, an expert on Brazil-Argentina relations who teaches at San Andrés University, told the Herald earlier this year.
The real has depreciated more than 30 percent this year, making it the worst performer among 152 currencies according to data tracked by Reuters, raising worries among Argentine businessmen and specialists as the country’s peso remains much more stable.
But that hasn’t been the only problem Brazil has faced, as its economy is also expected to be in recession until at least 2016, while the state’s finances are also suffering despite austerity measures aimed at fixing its deficit, which have made consumption and employment plunge.
“When Brazil expands, it demands more Argentine products,” CAC said yesterday.
The usual September 26 celebrations for the commerce employee day were moved from Saturday to today, CAC said.
That might cause some shops to be closed today, although CAC said most retail outlets should not be affected.
Date: September 28, 2015