Brazil, Argentina Trade Tensions Cool Down

8 June 2011

Argentina and Brazil have agreed to "fast track" import licenses for cars, food, and appliances that have stocked up along their borders since February due to a contentious trade dispute between the two nations. The clash between the Mercosur partners originated with Argentina's cancellation of automatic licensing for imports in February 2011 (See Puentes, 25 February 2011).

Argentine Minister of Industry, Débora Giorgi, and her counterpart at the Brazilian Ministry of Trade, Fernando Pimentel, met on 2 June in Brasilia to settle the issue of expediting import licensing for certain detained goods. However, no solution was presented on how to solve disputes in the future, besides an agreement to meet bilaterally for trade discussions every 30 days.

Pimentel downplayed the severity of the trade tensions, insisted that "there was never a crisis or rupture in trade relations between Brazil and Argentina. He explained that "we have a very large flow of trade between the countries and this naturally generates noise from time to time."

The meeting culminated with the Ministers' announcement of their "willingness to facilitate the approval of import licenses and the release of products currently on the border."

Their joint statement also mentioned that the countries would meet the 60-day WTO limited for issuing non-automated import licenses, as long as Brazilian imports complied with phytosanitary regulations.

Farm equipment, footwear, tyres, olive oil, glass, and powdered milk were some of the 529 Brazilian products affected by the removal of automatic licensing that will now receive expedited issuance. Automobiles and auto parts from Argentina, which comprise over 50 percent of Brazilian car imports, will receive "fast track" licensing.

Last week's agreement guarantees that Argentine automobile imports will be reviewed within 10 days of their license application; Businessweek reports that, prior to this agreement, the process could take up to two months.

Argentina also agreed to make special considerations for Brazilian farm equipment. In the upcoming weeks Giorgi said Argentina will look at making similar arrangements for footwear, auto parts - such as batteries and brakes - textiles, dishes, appliances, and electronics.

Argentina hit hard by trade barriers

Giorgi said her Ministry suspects that Argentina's actions in the dispute only affected 20 percent of Brazilian exports to Argentina, in comparison with the much larger impact that Brazil's decisions had on Argentine exports. Argentina's trade deficit with its neighbour grew by 79 percent from January to May, according to the Wall Street Journal.

Argentine exports to Brazil dropped 13 percent in May, when Brazil instituted measures against automatic licensing for automobile imports. Adefa, Argentina's automakers association, called the Brazilian measure a major threat to investment and employment in the sector.

While the move is viewed by many as retaliation for Argentina's actions in February, Brazilian officials deny the claim.

"We would like to point out that we removed automatic licensing for all automobiles imported from around the world," said Pimentel. "We did not want problems with Argentina because half of our imported cars come from there. That is why we are committed to issuing expedited authorisation."

Despite the months of tension, trade between the two nations hit record highs in 2011. Last month alone, those totals reached nearly US$3.21 billion, according to the Brazilian Trade Ministry's estimates.

ICTSD reporting; "Argentina-Brazil agree to expedite import licenses," ASSOCIATED PRESS, 2 June 2011; "Brasil promete agilizar permisos para la exportación de vehículos," CLARÍN, 3 June 2011; "Desactivan el conflicto con Brasil y reabren las fronteras," LA NACIÓN, 3 June 2011; "Cars in Argentine-Brazil Border Backlog Slowly Clearing Today," MERCOPRESS, 6 June 2011; "2nd Update: Brazil, Argentina Talks Fail to Resolve Trade Dispute," WALL STREET JOURNAL, 2 June 2011.

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