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Argentina tougher on Brazil if not reopen auto parts market.

President Cristina Fernández de Kirchner (Argentina) and Dilma Rousseff (President of Brazil), with leaders of "Mothers of Plaza de Mayo" in Buenos Aires. Credit Photo Reuters

The argentinian government controls many aspects of the countrys life and any dispute with this country can get uggly. This was the uruguayan experience while Argentina did no recognize the right of the small country to have a pulp paper factory. Suddenly, argentinian activists made a blockade of the bridges between the two countries. Argentina´s former President, the late Dr. Kirchner gave harsh nationalist speeches about his country´s rights and even the case was drafted in The Hague. It took years to solve the trade dispute between the two countries. Btw, during the quarrel , Dr. Kirchner´s wife got elected as the new President.

2011 is also an elections year in Argentina, and the trade dispute versus Brazil has many similar elements to the uruguayan case. Probably Mrs. Fernandez de Kirchner wants to be reelected and she needs some external enemy to demonstrate her passion for the argentinian cause. The dispute could have been between Argentina and the United States, when argentinian authorities confiscated an american plane in Ezeiza Airport, buy in a clever move the United States did not make a case out of this.

So, they needed another external enemy to rise the “national” cause.

The opportunity opened by Brazil is perfect for the argentine government. Brazil has a trade surplus with Argentina and now Brazilia is putting barriers to the import of autoparts from Argentina. Perfect occasion for Mrs. Fernandez de Kirchner!

Recently discovered in Rosario, Cristina´s 2011 electoral campaign bus. Photo Credit to Gentileza ON24

Mrs. President Rousseff does not take into account the political aspects of this dispute. .. She thinks this dispute can be resolved by Itamaratí or by the Minister of Industry. This is not longer a trade dispute but a political one.  No rational dialogue between Industry Ministers will solve this. To rapidly solve this without major political harm to President Rousseff,  Brazil should reopen its import of autoparts during 2011 and wait for a better opportunity, at least until next year when the political situation in Argentina is more clear. Then, yes, the trade dispute can remain being a rational commercial discussion. But not in 2011.

But well..

Argentine Minister for Industry, Debora Giorgi will meet in coming hours with Brazilian Ambassador, Enio Cordeiro, to schedule a series of meetings to address trade disputes between the two neighbouring countries and main Mercosur associates. Among points to be addressed is the Brazilian decision to impose non automatic import licences on Argentine goods but particularly manufactured automobiles.  Argentine government sources said the outcome of the meeting will be the arrangement for a summit of industry secretaries from both countries which should take place in the next few days. Then, another gathering of Giorgi and her Brazilian counterpart, Fernando Pimentel, should take place. Giorgi had several telephone conversations with Pimentel but negotiations to re-open the market to Argentine automobiles and auto parts have not advanced. Pimentel reiterated Brazilian openness to a “constructive dialogue”, but would not yield to Argentina’s demand that before formal talks begin, the non automatic licences system for Argentine cars and auto parts must be lifted. Poor Mr. Pimentel, he is entering into a hopeless situation!

Trade between Brazil and Argentina totalled about $32.5 billion last year, with Brazil running a $3.38 billion surplus with its neighbor. Though both sides have pledged to seek a neutral trade balance, Brazil enjoyed a surplus to the tune of $729 million during the first quarter of 2011.About 80% of Argentina’s vehicle exports and 65% of auto parts exports go to Brazil, with about $7 billion worth of goods in play, local economic researchers Abeceb.com said in a report.

According to Abeceb.com, almost 24% of the goods imported from Brazil, calculated by value, face import barriers from Argentina.