BRASILIA – Economist Lia Valls said that the resurgence of growth in Argentina and Brazil is unlikely in the short term, but the Latin American region has other options for growth.
The worsening trade balance with Argentina was the main reason for the drop in the positive balance of Brazilian foreign trade in the first four months of this year. According to the Getúlio Vargas Foundation (FGV), the accumulated balance of the Brazilian balance of payments with all countries in the first four months of this year was US$16.4 billion, or less than the cumulative US$18.2 billion in the same period last year.
With the failure of Maurício Macri’s liberal policy in Argentina and the difficulties faced by the Brazilian government, Latin America is looking for a solution to grow again.
Are the difficulties faced by the two largest economies in South America affecting neighboring countries?
According to economist Lia Valls, IBRE professor, Brazilian Institute of Economics, Getúlio Vargas Foundation, Latin America is very heterogeneous. Therefore, despite the importance of Brazil, the region can grow.
“Brazil, for other countries in the region, has an important but not a decisive role in trade. Mexico, for example, has much more to do with the United States.” Peru, Colombia and Chile, according to Valls, depend much more on China.
For Brazil and Argentina, their forecasts are not good. The resumption of growth in the two countries seems unlikely, at least as far as 2019 is concerned.
“Argentina is going through a series of problems, more serious than Brazil,” said the professor, citing high inflation, that the government of Brazil Buenos Aires can not contain, despite several measures adopted.
On the other hand, she cited the review of Brazilian growth for 2019, which should be lower than expected at the beginning of the year.
For her, yes, the problems in Argentina affect Brazil a lot, and vice versa.
“Argentina is the main Brazilian market for the sale of automobiles. Almost 80% of Brazil’s automobile exports go to Argentina,” she explained.
The fall in Brazilian trade to the country was 40%, and the Brazilian market has also not been doing very well. So the blow to the automotive sector was strong. And as the auto industry mobilizes a whole series of peripheral sectors, the problem reverberates on several levels and Brazil grows less overall.
And “Brazilian low growth reflects Argentine exports,” added Valls, closing the circle.
Sputnik’s interlocutor said there was no consensus on the reasons for the economic crisis in Argentina. Macri needed to adopt unpopular measures and, for some, implemented less, and for others, implemented too much. However, for Brazil, foreign trade is still not a problem on a macro scale, the economist said.
“We are going to have a surplus trade balance at the end of the year … trade has dropped, but the balance is certainly not the biggest problem restricting the growth of the Brazilian economy. There is a worsening, but we are still accumulating reserves and the balance must be a surplus This is not a threat in the Brazilian case,” he concluded.