MercoPress. South Atlantic News Agency

Brazil could restrict credit to Argentina in retaliation for trade barriers

Argentina managed a strong surplus in bilateral trade with Brazil

The Brazilian government is looking at restricting credit lines to Argentina in retaliation for its neighbor's efforts to stall local imports, reported on Friday the daily O Estado de S. Paulo.

Brazil's National Development Bank, BNDES, recently loaned the Argentine government 700 million US dollars linked to the purchase of Embraer jets by Aerolineas Argentinas But Brazil may press its new harder line at a meeting of presidents of the Mercosur trade zone in late July.

Brazilian Finance Ministry officials say Argentina is using blocking tactics, such as the slow issuance of import licenses, to stem the flow of Brazilian goods, according to the report, citing unnamed sources.

Argentina began tightening import restrictions late last year after the Brazilian real fell sharply relative to the US dollar while the peso remained relatively stable. The shift made imports from Brazil, Argentina's top trade partner, relatively cheaper and threatened a flood of imports, according to Argentine officials.

In October, Argentina's Customs Director Silvina Tirabassi announced that 120 additional products would be added to a list of goods carrying a reference price fixed by the government. These prices are used by the government to designate goods that will suffer sanctions when they enter the country at a cheaper price than the reference price. When this occurs, the government alleges dumping on the part of the exporting country.

The list is mostly made up of textiles, shoes, domestic appliances, farm machinery and linens.

As a result of the measures and a slowdown in Argentina's economy, imports from Brazil plunged 44.5% on the year during the first half of 2009, totaling 4.9 billion US dollars. The greatest decreases were seen in passenger vehicles, car parts, cellular phones, laminates, footwear and tires. Exports from Argentina to Brazil fell 20.1% during the same period.

Argentina's import barriers have caused the country's trade surplus to soar, despite a sharp drop in total trade volume. Argentina's trade surplus for the first six months of 2009 was 9.86 billion US dollars, up 85% from 5.33 billion in the same period of 2008, announced President Cristina Fernandez de Kirchner on Thursday.

“This didn't happen by accident, there was a strong intervention by the state in terms of policies to defend Argentine workers and Argentine companies” Mrs. Kirchner said during her speech to celebrate Argentina's Declaration of Independence.