Brazil expects the fastest growth in five years: why the Argentinean hope

For the Argentine industry, the only good news is heard in Portuguese. In a local context characterized by high interest rates and a decline

The consumption

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Economic growth in Brazil is an engine that is expected to increase demand and boost Argentine exports in 2019. Vehicles, chemicals, plastics and food are some of the elements that are ready to take advantage of the quality of l & # 39; air.

The largest regional power seems to have left its worst historical recession. According to the latest data from the Central Bank of Brazil, economic activity grew by 1.86% in November and is expected to grow 2.5% to 3% in 2019, its best performance since 2014.

The data is particularly relevant for Argentina.

Brazil

It is the main trading partner of the country. In 2018, it received 37% of total exports of manufactured goods of local industrial origin, accounting for 7631 million US dollars according to INDEC data.

It is expected that the new exchange rate, the stronger Brazilian demand and the customs preference currently offered by Mercosur will continue.

"From the macroeconomic point of view, every 1% of Brazil's growth yields 0.25% to Argentina, and expectations are now good in terms of investments in construction and agriculture" said Daniel Herrero, president of Toyota Argentina. who has his pickup Hilux, manufactured in Zárate, as a flagship product.

"Last year we finished with a historic record of exports and we already have Brazilian orders at least 10% higher than those of 2018," enthuses the executive. and adds that after exporting 50,000 units last year, he plans to surpbad 56,000 this year.

The official figures meet the expectations of the sector. According to

Indec

Two out of every three industrial products exported to Brazil come from the vehicle sector ($ 5028 million), with an annual increase of 35.6%. Another outstanding element in manufactured products from the chemicals and plastics sector, with a 17% stake.

"Brazil and Argentina were counter-cyclical markets, and after the collapse of the sector, the local market had record sales, and since then this trend has been reversed," said Rodrigo Pérez Graziano, Director of External Relations. for Latin America PSA group (Peugeot and Citroën), in reference to the collapse of the Brazilian market, which went from 3.6 million units in 2012 to 1.9 million in 2016.

"Although it is far from reaching the historic maximum, it has closed 2018 above 2.5 million and could increase by 15% this year, which will have a phenomenal impact on the local industry, which could make the most of the Brazilian demand .. disabled by the negative impact of the fall of the domestic market, "adds the executive.

Food and beverages, especially mill products (flour, bread), dairy products and vegetables, legumes and fruits, are another industrial sector that is seeking to develop. According to estimates by Copal, the factory that groups the main companies in the sector, Brazil is the second largest export destination for the food and beverages sector and 7% of the industry is allocated to it.

"Integration with Brazil is not a mere political fact, but a necessity from the macroeconomic point of view, because there are complementarities between the productive systems and, in many areas, the lack of cooperation. vertical integration, "said Daniel Funes of Rioja, vice president of the UIA and owner of Copal.

Brazilian growth, notes Funes de Rioja, can mitigate the collapse of the domestic market. According to Scentia data, mbad consumption fell by 1.5% in 2018 and has been falling for three consecutive years.

"We are currently working with up to 60% of installed capacity and anything that drives demand is important because it makes available resources more efficient and allows for some cost reduction." In any case, the export horizon requires predictability so that extend in time, "says the businessman.

Doubts for the regional bloc

Uncertainty over the future of Mercosur is the other side of Brazil's economic recovery. Jair Bolsonaro's intention to relax the bloc's rules and open up to bilateral free trade agreements could have a negative impact on Argentine exports, now with tax privilege against foreign competition.

"The discussion has begun and is on the right track, it is necessary to negotiate together the future of Mercosur," said Herrero about the recent meeting between Macri and Bolsonaro in Brasilia. "There are many things to review, but the dependence of one country vis-à-vis the other is not threatened, similar problems of competitiveness and, if the we are ready to open to the markets, we can do it in an orderly way, understand what we are going to specialize in and how we are going to be competitive to export, and in what activities we will not be, "he adds. -he.

According to Funes, economic integration is the key to trading. "We need to make Mercosur more agile, in the case of foodstuffs, to seek the compatibility of technical standards by examining not only intra-zone but also foreign trade".