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ECONOMY | 23-01-2023 21:42

Brazil to finance Argentine importers in bid to boost trade ties

Loans to Argentine companies will be given by public and private banks in Brazil and covered by guarantees from both governments.

Brazil and Argentina unveiled plans to boost commercial ties through a programme to finance Argentine importers and a long-shot idea of a common currency to replace the dollar in bilateral trade.

The plans were announced Monday during a trip by President Luiz Inácio Lula da Silva to Buenos Aires, where he met with his counterpart Alberto Fernandez before a summit of Latin American leaders scheduled for the following day.  

“Brazil not only can, but needs to help all of its partners within the economic possibilities of our country,” Lula told journalists after the meeting, adding that his government will also help finance the construction of a gas pipeline in Argentina. 

Loans to Argentine companies will be given by public and private banks in Brazil and covered by guarantees from both governments, according to a memorandum of understanding signed by Fernando Haddad and Sergio Massa, the economy chiefs for Brazil and Argentina, respectively. Argentine companies will also have to provide liquid assets, such as commodities contracts, as collateral before the money is released. 

Brazil lost to China the position of Argentina’s top trading partner in 2019 as the Asian nation implemented the same kind of export financing now being discussed by the South American nations. In 2022, Brazil had a trade surplus of US$2.2 billion with its southern neighbour.

The amount of financing to be offered by Brazil hasn’t been defined yet, a person familiar with the matter said, and will depend on demand by Argentine companies and their ability to offer collateral.

Another plan to boost bilateral trading is the creation of a common unit of exchange to avoid the dollar — an idea Lula and his counterpart Alberto Fernández have described as a “common currency” and which both countries have tried and failed to implement for decades.

“If it were up to me, we would always have foreign trade in the currencies of other countries so that we don’t have to depend on the dollar,” he said. “Why not try to create a common currency between the two countries or within BRICS countries?”

Such a currency would be in addition to the Brazilian real and the Argentine peso, Haddad later told journalists, explaining that there are no plans to integrate monetary and fiscal policies through the adoption of a single currency between the two countries.

by Martha Beck &

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