MercoPress. South Atlantic News Agency

Argentina and Brazil want corporations to reinvest and not send profits overseas

Paulo Skaf president of the Sao Paulo federation of industries

President Cristina Fernandez hopes to convince Brazil to join Argentina in its campaign against the multinational corporations in an effort to balance trade balances in the midst of the global crisis spurred by the Euro crisis, China’s slow reaction and the US economy which still has to recover from the full impact of the 2008/09 recession.

Paulo Skaf president of the powerful Sao Paulo Federation of Industries, FIESP and Brazil’s Foreign Trade secretary Tatiana Prazeres have been in Buenos Aires following the implementation by Argentina of the latest imports’ restriction measures which became effective February first and Mercosur trade partners consider ‘protectionist’.

Nevertheless the Brazilian private sector and government representatives were given red carpet treatment with access to all Argentine ministers. These include Economy minister Hernan Lorenzini, Industry minister Debora Giorgi and Domestic Trade secretary Guillermo Moreno and Foreign Trade secretary Beatriz Paglieri, the bureaucrats responsible for deciding on the new imports’ sworn statements.

And according to the Buenos Aires media an incident at an auto-parts manufacturer in the province of Buenos Aires helped to bring together the two positions. In effect Giorgi and Skaf were shocked when the manufacturer of auto-parts revealed that they were in condition to export all their production to Brazil; however the matrix in France had ordered that the supplier of those parts to Brazil should be a plant in Boulogne-Billancourt.

Last year the Argentine government redoubled formal and informal controls over multinational corporations so that they reinvest in Argentina and don’t remit profits overseas. In the same line of thinking President Cristina Fernandez recently accused the oil companies of taking advantage of incentives, sending profits overseas and not investing enough in exploration and warned that the time “of playing wise-guys” was over.

Minister Giorgi and Brazil’s Skaf agreed that Argentina and Brazil must impede multinational corporations from trying to improve their country-origin balance sheets with “the profits from their Mercosur affiliates”.

Last year Argentina’s trade surp-lus was down 11% to just over ten billion dollars, which is insufficient for a country with limited access to voluntary money markets. Argentina’s trade deficit with Brazil soared 42% and reached 5.8 billion dollars last year which decided the government to the new set of imports restrictions.

Brazil has said it is willing to contemplate Argentina’s position and help balance trade, but they are also under pressure from China’s bilateral trade surplus.