Argentina’s Economy Minister and ruling presidential candidate, Sergio Massa, will be received this Monday (28) in Brasilia by President Lula himself, who will announce financing for Brazilian exports to Argentina, guaranteed in Chinese yuans. The credit is crucial if Argentine industry is not to grind to a halt in the final stretch of the election campaign.
RFI
Economy Minister and Peronist presidential candidate Sergio Massa traveled to Brasilia on Sunday evening. On Monday, he will try to capitalize on aid from the Lula government for his election campaign.
The aim is for Argentina to become a member of the BRICS and, in this way, the BNDES to finance the construction of the Argentine pipeline that will take gas to Brazil. Another goal is for the government to offer a line of credit for Brazilian exports to Argentina, which are crucial if the neighboring economy is to keep going, despite the shortage of dollars at the Argentine Central Bank.
“Sergio Massa needs the economy not to collapse in this final stretch because his candidacy depends on his management. Candidate Massa depends on Minister Massa. Lula’s help allows him to achieve this goal and also, in practice, to look like a president with international projection,” political analyst Sergio Berensztein told RFI.
In a meeting with Brazilian Foreign Minister Mauro Vieira, Sergio Massa will thank Brazil for its management of Argentina’s bid to become a member of the bloc made up of Brazil, Russia, India, China and South Africa (BRICS).
The progress of the gas pipeline financing and Banco do Brasil’s new credit line for Brazilian exporters will be discussed with Finance Minister Fernando Haddad. The three issues will be announced by President Lula alongside Sergio Massa after a meeting at 5.30pm in the Planalto Palace.
For the meeting with President Lula, the Argentine delegation was to be led by Argentine President Alberto Fernández, currently a former acting president with powers transferred to Sergio Massa, the head of the government.
Brazilian political mirror in Argentina
The photo with Lula is what Massa is looking for in the midst of an electoral campaign during which, until the October 22 elections, the minister-candidate intends to polarize with the ultra-liberal candidate, Javier Milei, an ally of Bolsonaro.
“Lula may be a leader who generates consensus and sympathy in the governing electorate, but in the rest of the electorate he has no impact and could even backfire. This Lula III, in the eyes of the West, is different from the one many expected. He has questioned the role of the United States in the war in Ukraine and has moved closer to China,” Berensztein points out.
Unlike Lula and in line with Bolsonaro’s 2018 campaign, the libertarian Milei has already warned that his foreign policy will consist of “total alignment with the United States and Israel”, to the point of even transferring the Argentine Embassy in Tel Aviv to Jerusalem.
Milei also rejects Argentina’s entry into the BRICS because “it doesn’t make deals with communists”, including President Lula himself, which is why he also wants to break with Mercosur.
Massa intends to draw this parallel by siding with Lula, in an implicit warning to the Argentine electorate about how this extremist disruptive discourse ends.
“If we break with Mercosur and China, the first thing we should know is that we are going to break with our two most important markets,” warned Sergio Massa on Thursday (24) in front of 150 businesspeople gathered by the Council of the Americas in Buenos Aires.
The center-right candidate, Patricia Bullrich, has Brazil as her main ally, but she also rejects Argentina’s entry into BRICS because the bloc has a majority of countries under authoritarian rule, because it has the invading Russia under Vladimir Putin and, above all, because of the entry of Iran, accused by the Argentine Supreme Court of being the mastermind of two terrorist attacks in Buenos Aires in 1992 and 1994.
Brazilian credit guaranteed in Chinese currency
The most urgent point of the trip is the possibility of Brazil continuing to export to Argentina without the Argentine Central Bank, with negative reserves, having to disburse dollars. Several sectors of the Argentine economy are beginning to grind to a halt due to the lack of imported components needed for the final product in Argentina. This is the case of the Argentine automotive industry, which depends on Brazilian auto parts to finish cars.
“Sergio Massa wants to alleviate the effect of the lack of dollars on Argentina’s economic activity because there are many sectors, especially the automotive sector, which have limited their imports, putting a strong brake on the economy,” says Berensztein.
The Brazilian government is going to open a credit line of up to 700 million reais through the Export Financing Program (Proex) for Brazilian exporters selling to Argentina. The credit will be guaranteed by yuan from a swap credit line between Argentina and China, available from the Argentine Central Bank. The credit is a loan from China for Argentina to buy Chinese products.
The funds will be converted from yuans to reais through Banco do Brasil, which will hold custody of the amount of the operations and execute the guarantee in the event of default by the Argentine importer.
Currently, Argentine importers have a debt of more than US$20 billion with foreign exporters without the Argentine Central Bank releasing this money due to an absolute lack of dollars. Around 210 Brazilian exporting companies have had delays of more than 180 days in receiving payments.
For President Lula, the financial creativity of this credit is in line with his goal of replacing the dollar in commercial transactions between third countries, opting instead for local currencies. For China, it’s another step towards the internationalization of its currency.
“It’s a procedure to further alleviate the use of reserves at a time when we have to take care of them,” said Sergio Massa, days ago when Finance Minister Fernando Haddad anticipated the Brazilian proposal.
Brazil’s interest in the Argentine market
Last Wednesday (23), at a press conference in Johannesburg on the sidelines of the BRICS meeting, Haddad revealed that he had proposed a line of credit to Argentina guaranteed in Chinese yuan.
Although Argentina is the third largest buyer of Brazilian production, behind China and the United States, the Argentine market is the main market for industrialized Brazilian exports, which generate the most jobs in Brazil.
In recent times, precisely because it doesn’t have an instrument like China, Brazil has lost part of the Argentine market to Chinese products. The shortage of dollars at the Argentine Central Bank has been a barrier to products imported into Argentina, with the exception of Chinese products, financed by this credit from China to Argentina.
On May 2, President Alberto Fernández traveled with Sergio Massa to Brasilia with the aim of obtaining a line of credit from the BNDES, but given the lack of a guarantee, the Argentine president returned empty-handed.
On July 4, during the Mercosur Summit in Puerto Iguazú, Lula and Massa agreed to meet in Brasilia when a mechanism to finance Brazilian exports to Argentina would be set up.
Argentine gas pipeline to Brazil
The Argentine minister-candidate also included on the meeting’s agenda BNDES financing for Brazilian exports of goods and services for a gas pipeline from the Patagonian reserve of Vaca Muerta, the second largest shale gas deposit and the fourth largest unconventional oil deposit in the world, to southern Brazil. Argentinian gas is enough for Brazil to replace Bolivian gas, whose reserves are falling every year.
The BNDES will finance the steel pipes for the pipeline. These pipes are produced in Brazil by the Argentine company Techint.
The pipeline is also a way for Sergio Massa to capitalize on concrete advances in a campaign that is rowing against the tide of an economy in agony, with inflation expected to exceed 12% in August and to end the year at over 150%.