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The trade agreement between Brazil and Argentina, which imposes limits on exports and imports, has again been respected by automakers in recent months, after the neighboring country had faced to a new economic crisis and started to demand fewer Brazilian cars. The new scenario facilitates negotiations for the renewal of the agreement, since the previous situation of excess, bothered the Argentine government.
Under the agreement in force between the two countries, Brazil may export a maximum of US $ 1.50 per US dollar of vehicles and auto parts imported from Argentina. However, in 2016, 2017 and the first half of this year, the Brazilian part has exceeded this limit. Indeed, as the Argentinian market broke records and demanded more cars, vehicle sales in Brazil were slowly recovering. During this period, trade relations exceeded US $ 2.
However, since May, Argentina has experienced a period of accelerating inflation and depreciation of the currency, which has led to the country's basic interest rate . more than double, at around 60% per year. The worst credit conditions slowed vehicle sales to the Argentine consumer, while the Brazilian market began to strengthen and rebalance the balance.
In the calculation of export and import volumes between May and November, for every US dollar imported from Argentina, Brazil exported 1.14 USD to that country. That is to say, the Brazilian part has become deficit in recent months, although it is historically surplus.
limits. The limit being respected again, discussions to renew the agreement will have one less obstacle. Before, during the franchise period, Argentina was troubled, and even warned the car makers responsible, asking for guarantees that, at the end of the period of the document, the applicable fines would be paid.
This attitude of the Argentine government contributed to the agreement renewal negotiations scheduled for 2018, even though the current contract does not expire until June 2020. However, discussions were interrupted after Jair's victory Bolsonaro to the presidency. . With the transition of the government, the negotiations have been suspended and, according to the representatives of car manufacturers, they should only resume in 2019.
For the moment, the proposal of Argentina is to extend the Agreement for another three years. The Brazilian government agrees, provided the limit of commercial relations is extended to at least US $ 1.70. The Argentine government is resisting the rise in the index because it does not want to increase the deficit of its accounts. In any case, free trade is no longer a possibility, an old desire of car manufacturers.
By 2019, there is no longer a risk that trade relations will be ignored again. Indeed, companies are banking on a decline in the Argentine market from 20% to 25% and a new year of expansion in Brazil from 10% to 13%. According to the National Association of Automobile Manufacturers (Anfavea), sales in Argentina are expected to start picking up only as of the second half of 2019, due to the agreement reached between that country and the International Monetary Fund (IMF).
Car manufacturers come first. The expected acceleration of GDP and the need for fleet renewal will allow vehicle sales to continue to increase next year. While 2018 will mean an increase of 15%, growth next year, according to the companies, should be between 8% and 13%. According to the National Association of Automobile Manufacturers (Anfavea), the economy is expected to grow 2.5% to 3% by 2019. "If we increase by 1.3% in 2018, we will close the year with high sales, and the wait is still a positive year (in 2019), "said Anfavea President Antonio Megale. Regarding fleet renewal, the manager recalls that "in 2012, the vehicle market had reached a record 3.8 million units. As most of the cars that circulate today date back to this time, Anfavea is betting on the "replacement request".
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