Macri Summit – Bolsonaro: elections, trade and investments

When next Thursday the President of Brazil, Jair Bolsonaro, arrives in Buenos Aires, and meets Mauricio Macri, an unavoidable but uncomfortable photo will be given.

Inevitable because it is essential that a country like Argentina has fluid relations with its main trading partner and the main destination of national exports.

And very important in a context where the local car industry is affected by the crisis and where Brazil, as a buyer and manufacturer of vehicles, can be an opportunity to increase sales but also a competitor to attract future investments .

But it is also an uncomfortable photo for Macri who, during the election campaign, receives the full support of Bolsonaro. By the way, such interference by a foreign president in an election process has rarely been.

Bolsonaro has already made eight references to the elections in Argentina during various public speeches. And in any case, had hard words to Cristina Fernandez, who came to call "Dilma Kirchner" and who warned that the country would become Venezuela in case of victory in elections.

As has been said, it is not common for an agent of such a relevant nation to take advantage of this manner. Y This can be uncomfortable as long as Bolsonaro is an extremely controversial character.

Since he was in campaign, the current president of Brazil has not saved the misogynistic concepts. He also did not avoid making homophobic comments and, furthermore, he has always shown himself as an agent in favor of the hard hand.

Under the vision of Raúl Ochoa, who was part of the think tank in the last G20, "Politically Macri the photo with Bolsonaro adds very little. He can even subtract you, according to the very definitions of the Brazilian president, who has stated that he expects that a center-right government will remain in power, referring to the management of Cambiemos. "

"This type of statements does not suit the electorate, because the speech of Bolsonaro, when he speaks of right, left or communism, is several decades behind," adds the expert.

For the moment, social organizations and even trade unions have called a day of resistance to contradict the visit of the Brazilian president. It will take place Thursday afternoon in Plaza de Mayo.

This climate occurs in a context in which most pollsters give Change below the Citizen Unit formula in the first round, while polls are spread over the possibilities of the current leadership to override a potential ballot. .

"That's certain, there are many people who do not like the figure of Bolsonaro. A good part of the public opinion here does not want it and the Argentine press, in general, does not support it either.", asks the consultant Center Group.

"He is accused of being a misogynist and many other things, but we finally see that, from the institutional point of view, a photo is positive between the two leaders, because they are two countries so close and maintain a strategic relationship ", they add.

A visit with several orders

But beyond the discomfort generated by his silhouette and the possibility that he makes statements of great sound on the Argentine territory at a time as delicate as the pre-election election, another element of the game will be the following: information is added for nothing less: than the Bolsonaro team comes up with touching topics that are quite critical for macrismo.

"There is a lot of hope, because the reduction of the common external tariff is already agreed between all Mercosur countries." This was agreed and Macri is also in agreement, but the government is not not able to say it openly because it would imply a lesser protection of the industry. " This is a point that, even after the elections, can not be made public, "said the Group Center.

ECA is this kind of "protective grid" of tariffs which, with some differences between member countries, seeks to standardize the taxes to be paid for products that come out of the bloc, in order to give certainty to industries and flows of products. investment operating within Mercosur.

Macrismo is in favor of a reduction, but it is more focused on the reduction of inputs and raw materials to complement industrial processes. However, In government, the "shock" that Bolsonaro intends is to propose an agenda to modernize the bloc.

"There is an idea in Mercosur to make a deep reduction in tariffs, the average for the block is 11% and Brazil wants to take at least half of it: 5.5%." Even if it is possible, the idea is: it's a huge reduction, but because they understand in the neighboring country that it's a measure that contributes to the globalization of their economy, "Elizondo said.

"Brazil wants to establish strategic links with the world, it is a change of vision, it does not claim to be the largest in the region, it wants to sit on a footing of equality with the great powers, "he added.

In practice, tariffs for some 10,000 products are under revision and Bolsonaro aims to bring ECA back to the same level as Chile or Mexico.

But what is Cambiemos' position on this issue? According to Elizondo, "ideologically, they favor the reduction of these tariffs, but in the middle of the campaign, they will try to reverse the situation and make no reference. any mention of tariffs can generate the automatic reaction of the UIA and various industrial sectors, in a context where the question of unemployment is under debate ".

"In addition, this would imply a lower collection for imports and it's a luxury that can not be offered this year, so the government simply aspires to not let the program go away and continue as it is." 39 it is after the elections. ", Adds the expert.

In this context, the agreement between Mercosur and the European Union will also occupy an important place at the Buenos Aires summit. However, Brazilian officials made it clear that it was a priority to reduce tariffs before negotiating an agreement with other blocks.

It is for this reason that the strategy that Macrismo will use expects a lot: will the decision to work on a brutal lowering of the CET be formalized, with the risk of an industrial attack? It's a thin red line: to communicate something like this, in a crisis context, could generate that even a positive measure – such as reducing tariffs on inputs that are not produced in the country – will become a kind of boomerang.

In parallel, the agenda will also have a space to communicate good news: according to information published in the Brazilian media, three agreements should be concluded: one with which dialogues on the construction of dams in the river Uruguay will be taken over and two more on energy integration. and bioenergy.

An economy with a lot of questions

Projections on the GDP of the neighboring country are less and less encouraging. And that already has an impact on the numbers.

As revealed this week the Brazilian Institute of Geography and Statistics, the economy of this country has contracted by 0.2% in the first quarter of the year.

This is worrying, this is the first fall after the release of the 2015 and 2016 recession.

In addition, the survey of expectations issued weekly by the Central Bank of this country also reflects the greatest pessimism: the latest report included the thirteenth consecutive adjustment, with an estimate of GDP growth of only 1.23 %.

Even the Minister of Economy, Paulo Guedes, acknowledged that the expansion would be much smaller than expected: in January, the Bolsonaro administration had anticipated a 2.5% increase and the projection official now speaks of a much warmer expansion, 1.5%.

Now This first-quarter slump is prompting more badysts to question whether Brazil is entering a path of worrying economic depression.

And this has an impact on national exports: to this destination, terminals have sent nearly 46,200 cars, about 8,000 less than between January and April 2018.

But declines in sales to this destination are widespread: metallurgical industries (-22%), plastic products (-18%), chemicals (-11.5%) and machinery and appliances (-2%) are also items that are affected.

"There are several reasons for the sluggishness of the Brazilian economy: the drop in export prices and the problems of advancing the ambitious pension reform, which is leading to tax reform and which investors are waiting to take. decisions, "Elizondo said. .

"The problem is that Bolsonaro costs him dearly, that political negotiation is very difficult for him, that there are even differences within his own government, which is why, in Brazil, a very ambitious program has has been proposed, but is subject to the viability of the political project, "he adds.

From center group emphasize that "the less Brazil develops, the more businesses that will bet on this country as a lifeline will be affected, starting with"

"In reality, expectations were better for this year, but until reforms are made, investment plans will continue to be withdrawn," they concluded.

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