Brazil hopes for diplomatic solution to Argentina's debt crisis

The Minister of Development, Industry and Foreign Trade, Mauro Borges, said Tuesday (July 1st) that he is waiting for a diplomatic solution for Argentina's debts, but ruled out any possibility of providing financial aid to the South American neighbor, saying that it is not up for discussion on either side.

On June 26, Argentina made a $1 billion deposit designed to pay creditors who have accepted to restructure the liability. However, US Judge Thomas Griesa ordered refunding the money on grounds that Argentina must pay hedge funds, known as “vultures”, which claim the full amount of bonds. According to Borges, Brazil's government is working to help Argentina, and the Organization of American States (OAS) will meet to discuss the issue.

“We are very confident that we can reach a diplomatic solution to this issue. [Otherwise] it would set a very serious precedent in negotiating practices as it involves renegotiating the debt of a sovereign country. Hopefully we will not set a precedent for other countries that can afford a debt restructuring,” he said.

Argentina's crisis has led to a decrease in bilateral trade. Last year, it amounted to $524 million between January and May. In the same period this year, it stood at $385 million. According to Daniel Godinho, Secretary of Foreign Trade, Argentina has been slowing down purchasing from all its trading partners in this period.

Talking about a car trade agreement the two countries entered into on July 1st, Borges said that “under the agreed terms, there will be no administrative restrictions on the trade flow. It [the deal] was instrumental in ensuring the standard flow of bilateral trade,” he said.

However, the minister admitted that the current economic scenario should foretell lower growth for Argentina, which will likely be felt in the trade with other countries. Still, there are no prospects of opening a new credit line to fund bilateral trade, as was once suggested during the discussion on the automobile deal. “We are not using a new [credit] line at this time,” he said.

Translated by Mayra Borges