Brazil lost in 2021 the historical crown of exports bound for Argentina. After a technical draw in 2020, China surpassed Brazilian sales to Argentines by more than $1 billion last year. The Asian country’s achievement is unprecedented, records from the Argentine government since 2002 show.
China had already been ahead of Brazil by a few months in the last two years. In the full year 2020, China “won” by a difference of under $10 million, which left the Asian country and Brazil with an equal 20.4 percent share of Argentina’s $42.4 billion in total imports. Last year, the Chinese lead became clear.
With a total of $13.5 billion shipped last year to Argentina, the Chinese have accelerated exports and will hold just over a fifth – 21.4% – of Argentina’s foreign purchases in 2021, compared with 14.3% in 2011. Brazil increased its shipments to the neighboring country last year, but not at the same pace. With shipments of $12.4 billion, or 19.6% of Argentina’s import share in 2021, Brazil has lost ground in the last decade. In 2011, the country held 30% of the foreign purchases of the Mercosur partner. The data are from Indec, Argentina’s official statistics agency.
The Chinese have come to stay in first place in the ranking of suppliers to Argentina, experts say. “We must get used to this reality. We took Argentina’s market for granted,” said José Augusto de Castro, head of the Brazilian Foreign Trade Association (AEB). “And China will maintain its effort to gain markets, whether they are close or geographically distant.”
Last year, the sale of Chinese goods to Argentina rose 56.3%. The pace was much faster than Argentina’s total imports average growth of 49.2%. Brazilian exports to the neighboring country grew 43.3%. Among the main products exported by China to Argentina last year were vaccines, certainly driven by Covid-19. The records show, however, that the Asian country’s advance is not cyclical. It is a growing trend over more than a decade.
Well before overtaking Brazil, China took from the United States, in 2010, the position of second largest supplier to Argentina. That year, Argentina imported $6.1 billion from the U.S. and $7.7 billion from China. Brazil still led the pack, with $18 billion imported by the neighbor. In the following year, Brazilian exports to Argentina peaked at $22.2 billion, more than double the $10.6 billion sold by the Chinese.
In the following decade, however, this situation gradually changed. Following Argentina’s economic roller-coaster ride since then, both Brazilian and Chinese shipments to the country of Diego Maradona – and Alfredo Di Stéfano and Lionel Messi – saw ups and downs. But in each recovery of the Argentine economy, the Asian country’s appetite was greater and Argentina absorbed products made in China at a faster pace than those of Brazilian origin. The difference in shipments became smaller and smaller, until the technical draw in 2020, when the Chinese sold $8.66 billion in goods to Argentina, while Brazilians exported $7.6 million less. Last year, with a new and more vigorous start from China, Brazil lagged behind.
Considering broader factors, Brazil may have been even more favored last year than China in exports to Argentina, Mr. Castro said. That’s because most Brazilian goods imported by Argentina are transported by roads, so they felt less the logistical supply shocks that hit ships and containers needed for the goods to cross the sea from Asia. Moreover, Mr. Castro said, Brazilian shipments were also favored by the high prices of iron ore, one of the five Brazilian items most exported to Argentina last year.
Welber Barral, a consultant and a partner at BMJ, highlights that due to the relatively low exports from Argentina to China, their bilateral trade resulted in a deficit of $7.4 billion for Argentina in 2021. With Brazil, which typically imports higher values, the negative balance was much smaller, at $665 million. “The trade deficit is important at this moment for Argentina, given the more complicated scenario of their external sector,” he said. Even so, Argentina has not stopped buying more Chinese products.
“Some people said that the Common External Tariff would create a protection for intra-bloc trade, but this was not enough,” Mr. Barral said, referring to the set of tariffs charged when a country in the Southern Common Market (Mercosur) imports products from non-members. Brazil’s official figures also show that the trade relations with the bloc’s partner have lost steam. In 2010, the neighboring country accounted for 9.2% of total Brazilian exports. In 2018, the share fell to 6.4% and has not recovered further. Last year it was 4.2%.
The strengthening of the China-Argentina trade relations is not an outlier, said the economist Livio Ribeiro, a researcher at Fundação Getulio Vargas’s Brazilian Institute of Economics (FGV/Ibre) and partner at BRCG Consulting. “China has been advancing in the provision of industrial goods to Latin America as a whole since the mid-2000s, and in the last decade products made in China have invaded the region,” he said. This simply shows that China is more competitive, according to him. “It is hard to see a scenario in which the space it occupies does not increase. Right now, I can’t imagine something that would lead to a stagnation of Chinese expansion” in the region.
And it’s not just about China’s advance taking space from Brazil in the region’s markets, Mr. Barral said. In last year’s data, the former Brazilian foreign trade secretary said, other Asian countries such as Indonesia, Thailand and Korea increased their exports to Argentina at a rate above the average. These values are smaller, but form a representative set and show that the recovery of Brazilian shipments with the recovery of the economy expected for the region will face competition from Asia as a whole and not only from China. According to Indec data, the import of Thai products by Argentina totaled $1.6 billion in 2021, up 54% year over year. Imports of Korean products totaled $648.3 million, up 77.4% year over year.
As for the products, more than half of what China exported to Argentina last year were capital goods plus parts and pieces. The Asian country is furthest ahead in this category. Brazil still exports more intermediate goods and vehicles to Argentina, something that is based, experts indicate, on the integration of the two countries in the Mercosur.
Of the $13.5 billion that the Argentines bought last year from China, $4.3 billion were capital goods and $2.7 billion were parts and pieces for this category of use. Brazil exported, respectively, $1.6 billion and $2.4 billion, considering a total of $12.4 billion in exports to the Mercosur partner.
“Brazil is losing ground in machinery and equipment. This means that Argentina may even remain as the largest importer of industrialized products from Brazil, but in an increasingly less representative way. Even as Argentina is recovering in capital goods purchases, there hasn’t been a greater absorption of Brazilian products,” Mr. Barral said.
According to data from Argentina’s Indec, imports of capital goods in 2021 rose 38.1% year over year on average. The purchase of products in this category from China went well beyond, with an increase of 56.4%. Imports from Brazil in this category rose 17.6%. Mr. Barral believes that, in addition to competitiveness issues, the lack of financing lines that encourage exports of machinery and equipment to the neighboring country affects Brazilian performance.
Source: Valor international