Brazil & Southern Cone - March 2009 (ISSN 1741-4431)

On 17 February Argentina's trade and foreign ministers went to Brasilia to meet their local counterparts in an effort to resolve recent bilateral trade difficulties. Trade between the two main Mercosur partners has fallen victim to the global economic crisis, prompting calls for protectionist measures by businesses on both sides. The latest spat is a fresh 'stress test' of the Mercosur integration mechanisms, which typically require political intervention at the highest level to kick them into touch. Argentina, however, gave no sign following the meeting that it was willing to suspend recently imposed import barriers.

The global downturn is leading to a rise in protectionist sentiment, amid a collapse in export demand and efforts by local producers to shore up their position in domestic markets.  According to preliminary estimates, Argentine exports to Brazil fell 46.1% year-on-year in January, while its imports from there fell 50.8% year-on-year. Argentina typically runs a trade deficit with Brazil: in 2008 it amounted to US$4.34bn, up 8.4% annually.

Brazil's President Lula da Silva, who has been very critical of creeping global protectionism, is anxious to prevent any trade rows on his doorstep. In late January, Brazil was controversially forced to backtrack on proposed new import licenses (affecting 60% of total imports) after only 48 hours. The government blamed a technical error, saying it was an efficiency measure gone wrong.

However, Argentina went ahead in early February with new reference values on 800 import products, including textiles and other designated “sensitive" goods, in what it said was an anti-dumping measure. It also imposed new import license requirements on some Brazilian imports. Brazilian manufacturers reacted furiously to the measures, with the São Paulo Industry Confederation (Fiesp) calling for countervailing measures, accusing Argentina of engaging in unfair competition.

• Amorim - In January, Brazil's minister for external affairs (and Lula's chief representative in global trade talks and multilateral forums), Celso Amorim, warned against beggar-thy-neighbour policies within the region, saying that Brazil would try to persuade Ecuador to reverse its recent decision to impose both tariff and non-tariff barriers on a range of designated “non-essential" imports. He said the move went against the free trade agreement between the Andean Community and Mercosur.