MercoPress. South Atlantic News Agency

Brazil trapped by Argentina and Venezuela economic mismanagements

Cristina and Dilma, smiles and politeness, but that is not what happened behind doors

Brazil’s main financial newspaper Valor Economico revealed that the recent summit between Presidents Cristina Fernandez and Dilma Rousseff from Argentina and Brazil was far from polite and enlightening, rather the contrary with “strong disagreements in the fields of trade and investment” shaking the foundations of Mercosur.

Under the heading of “Brazil and the neighbours’ crises, just next door” columnist Sergio Leo exposed the growing concern and disenchantment in the cabinet of President Rousseff with the economic situation of Argentina and Venezuela, Mercosur partners.

“Ideology sympathy was strong, geopolitical proximity also but what sends the shivers down the backs of President Rousseff and her advisors and inspires the recent good-will gestures towards Argentina and Venezuela is the economic deterioration of the two countries with which Brazil has its largest trade surpluses in Latinamerica”, writes Leo.

After a reference to the serious situation in Venezuela, the Brazilian columnist points out that “in Argentina politics and economy are not less worrying as shown by the parallel (‘blue’) dollar speculation outbreak two weeks ago, addressed with market interventions from the Central bank and the informal actions of the powerful Domestic Commerce Secretary Guillermo Moreno”.

The article then refers to the summit between Dilma Rousseff and Cristina Fernandez in Buenos Aires last month. “At the end of April, Dilma and Cristina held a very, very strong discussion, according to Brazilian and Argentine sources, because of the disagreements on trade and investment”.

Leo adds that even when after the meeting “both ladies made an effort with smiles and politeness” the meeting “left pending without resolution relevant issues for Brazil such as the elimination of Argentine Customs informal barriers, but also for Argentina, which is pressing for a loan from the Economic and Social Development bank of Brazil, for infrastructure works, such as railways and two hydroelectric dams”.

Dilma arrived to the meeting in Argentina with claims from the Brazilian mining company Vale that finally suspended a major potash development investment project in Mendoza (six billion dollars) because of the constant barriers and obstacles imposed by the Argentine and provincial governments.

The final decision of the meeting, according to Leo, was to leave those unresolved issues in the hands of their respective officials, while the coordination for a next bilateral at presidential level was left pending.

Regarding Venezuela, the columnist Leo says there is no positive climate for Brazilian investors since many Brazilian corporations have cancelled their operations and projects in the country.

“As the Brazilian authorities cautioned the Venezuelans, (President Nicolas) Maduro will need a less troublesome political climate, (as he is already implementing) to at least begin to attempt a reduction of the non functionalities of the Venezuelan economy” says Leo and recalls the meeting of Dilma with Chavez successor, during his first official round of Mercosur member countries visit.

“Forced to revert some of the decisions that made Chavez popular, to avoid a recession of the economy, Maduro is appealing to rhetoric in an effort to minimize the impact on his not so popular public image. In Brasilia however there was satisfaction with the slight change in the tone of Maduro’s speeches, still full of triumphalism rhetoric and conspiration theories, but now also with calls for a conciliation including with business people and the business community”.

In one of the final paragraphs columnist Leo concludes, “Brazil can’t remain as a mere spectator of the neighbours’ crises but must not act impulsively, motivated by the simplistic agendas suggested by incumbents and opposition. Dialogue with the leaders of the neighbouring countries is essential to extract practical and positive consequences. So far only expectations have been extracted, insufficient to distance pessimism”.