Brazil has virtually frozen political and economic relations with Argentina following serious discrepancies that were confirmed during the recent summit of presidents Cristina Fernandez with Dilma Rousseff who cut short the originally scheduled two-day visit to Buenos Aires.
The bilateral conflict exposes billions of dollars of investments from Brazil, which also happens to be Argentina’s main trade partner, since the government of Cristina Fernandez has not complied with any of the understandings reached in previous meetings referred mainly to limitations, restrictions and other obstacles implemented by the Argentines.
But this time also, according to Argentine and Brazilian diplomatic sources quoted in the Buenos Aires media, there were serious questionings towards Cristina Fernandez latest political decisions ‘on the path of the late Venezuelan leader Hugo Chavez’, the main of which, judicial reform and the advance on the media.
Apparently Dilma Rousseff brought along messages of concern both from the United Nations (later this week made public) and from the US government.
Brazilian Foreign minister Antonio Patriota held very private meetings with the main representatives from Argentina’s manufacturers’ organization, (Argentine Industrial Union), involved in the bilateral trade to inform them of the seriousness of the current situation.
“Formally the presidential meeting was cordial, but there were no advances in the agenda and the officials below Cristina Fernandez did not address any of the pending issues”, Patriota told the Argentine manufacturers.
“The Brazilian government tolerance is over” UIA outgoing president Ignacio De Mendiguren reported to his peers at an urgent meeting.
This was clearly confirmed when President Rousseff, “did not spend the night in Buenos Aires as was scheduled and left immediately back to Brasilia”.
However Rousseff was not entirely negative and before leaving stated that the two countries must rebuild “the spirit of Cardales”, a summit promoted by De Mendiguren when a similar situation was forecasted but was finally averted as the two sides sat down to seriously negotiate.
To please the Brazilian leader Cristina presented for the talks her whole cabinet with the exception of Domestic trade minister Guillermo Moreno, who with the support of government openly bullies and threatens corporations and business people.
Earlier in the year in a meeting in Brazil to address auto industry complementation issues Moreno tried the same primary tactics but was stopped immediately. The head of Brazil’s National Industry Confederation is alleged to have sternly said: “these methods were not even used under Stalin or the Soviet Union; we will not tolerate them”.
However Cristina Fernandez last November has personally promised Dilma that the controversy with the Vale potassium development, a 6 billion dollars investment, would have an economic and not a political solution, including a positive result for the fiscal incentives promised.
None of this happened and Vale has left Argentina after sustaining death threats to their top staff, and paying for redundancies, plus hopes of recovering the 3 billion invested by some potential more audacious corporation.
Brazil’s main disappointments with Argentina include the surge of authorized imports from China, 8%, while Brazilian imports were frozen down 17% in the same period.
The lack of an agreement on the auto-parts controversy: Argentina insists in a surplus in the bilateral relation in this item, to which Brazil was willing to listen. But contrary to promises there have been no Argentine proposals but rather suggestions for an extension of the current questioned regime.
The lack of understanding for the Vale potassium project, as originally has been promised.
The manipulation of the tender process to build two huge dams in Santa Cruz which left out Brazilian corporations and were handed to two businessmen very closely linked to the Kirchner family.
The macroeconomic policy implemented by Argentina and the handling of the foreign exchange issue, which limits Brazilian investments. In the case of Vale the corporation was not prepared to bring US dollars at 5.20 Pesos and face local costs influenced by 24% inflation and a 9.80 Pesos dollar.
Apparently in 2012 the volume of Brazilian investments in Argentina was down seven billion dollars because of these problems and the overall uncertainty of the situation in South America’s second largest economy.