2023-05-03 04:05:44
© Reuters. Argentine President Alberto Fernández 03/29/2023 REUTERS/Jonathan Ernst/File Photo
(Corrections in the 9th paragraph to “inflation above 100% in the accumulated 12 months”, instead of “inflation above 100% per month”)
By Lisandra Paraguassu and Bernardo Caram
BRASILIA (Reuters) – Amid the deterioration of the Argentine economy, the country’s president, Alberto Fernández, arrived in Brasilia this Tuesday to try to close the agreement that would allow the country to have credit to buy from Brazilian companies, with the devaluation of the peso at the heart of the matter.
The model, in which Brazil finances companies and receives guarantees from Argentina with international liquidity to avoid losses, has already been designed. It was agreed in January, before President Luiz Inácio Lula da Silva’s trip to Buenos Aires.
What needs to be detailed, according to a source, and what Fernández came to discuss, is the convertibility of the peso with the real in these operations, since Argentina today has very little access to dollars to pay for its negotiations.
In an interview with journalists this Tuesday, the Minister of Finance, Fernando Haddad, said that technical teams worked over the weekend to present a proposal to Lula for a credit mechanism.
“What we want is not to lose export space to Argentina. There are more than 200 Brazilian companies that not only are not exporting, but many are not receiving, their value is retained in Argentina due to the lack of foreign exchange”, said Haddad.
The neighboring country is Brazil’s third largest trading partner, behind China and the US.
According to private analysts consulted by Reuters in Argentina, at the beginning of March Argentina had only 4.4 billion dollars, which practically prevents the payment of imports in the American currency.
The intention of both countries is that payments be made in reais and pesos. However, the melting of the Argentine currency – and the various quotations used by the government, which operates with a general official quotation and several quotations for different situations, all lower than the blue, used by the population – makes the implementation of the proposal difficult.
In a scenario of inflation above 100% in the accumulated in 12 months, Argentina saw the peso sink in 2023. In the span of one month, the blue dollar rose about 21% against the peso, considering this Tuesday’s prices. Year-to-date, the blue dollar rose 37%.
“That’s what they (the Argentines) are here to do, discuss this convertibility,” said a diplomatic source.
One of the intentions of the agreement between Brazil and Argentina was to give Argentine businessmen a longer period of time to pay for their imports. One of the diagnoses was that, by having to offer deadlines of up to 30 days due to warranty issues, Brazil lost out on several exports to the Chinese, capable of offering longer terms.
However, the difficulties with the devaluation of the peso increase the possibility of exchange losses for Brazil. The Ministry of Finance is working on a model to minimize these risks.
The model designed so far foresees the opening of credit from Brazilian banks to Argentine importers and the use of the export guarantee fund (FGE) by the Brazilian government to guarantee the payment of loans. One idea is to reactivate the BNDES credit lines abroad.
In this operation, as explained at the time by a source from the economic team, the bank pays the Brazilian exporter directly, with a guarantee from the National Treasury, while Brazil receives from Argentina the same amount, deposited in New York, of securities with international liquidity.
Collateral could be, for example, Chinese bonds, gas purchase contracts, . Guarantees with international liquidity that allow Brazil, in the event of non-payment by the Argentine importer, to access them to compensate.
In the conversation with journalists this Tuesday, Haddad said that the offer of guarantees by Argentina is still under discussion. “The way to provide this guarantee is being studied.”
(Additional reporting by Fabrício de Castro.)
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