Brazil had a $5.8 billion surplus with Argentina in 2011

Brazil targets Argentina with trade licenses

Trade disputes between the two members of the Mercosur trade group are relatively frequent, and the latest confrontation will raise fears of growing protectionism in South America and put the countries' trade, worth $39.6 billion in 2011, at risk.

In February, Argentina expanded import licenses and reviews for all imports. In April, average daily exports from Brazil dropped 27 percent compared to a year earlier.

The dispute is becoming the biggest crisis to face Mercosur, the customs union and trade group comprising Brazil, Argentina Uruguay and Paraguay, since it was founded 21 years ago.

Under Mercosur accords, nearly all trade is supposed to pass freely between member countries.

Argentina, which has also told local companies import licenses may be denied if they don't "balance" them with equivalent exports, says it is facing a destabilizing flood of imports.

Imports and capital flows have undermined President Cristina Fernandez's efforts to expand government control of the Argentine economy.

Brazil had a $5.8 billion surplus with Argentina in 2011, or an average excess of exports over imports of $484 million a month. The Argentine measures have helped cut that by a third to $328 million a month in the first three months of 2012.

The latest Brazilian decision will end automatic import licensing for about 10 perishable products, including some cheeses, the government official said.

The Brazilian official said the measures would not affect the supply of food in Brazil, even though Argentina is one of its main suppliers of wheat.

While the Brazil licensing change applies to all countries, the source said, neighboring Argentina is a major producer of the targeted imports. Inspectors have up to 60 days to consider license applications, raising the risk that cargoes will be left to rot at the border before winning permission to enter.

When Brazil's cancellation of automatic licensing for car imports in May 2011 is included, about 70 percent of Argentine exports to Brazil now require a license that can take up to 60 days to receive, the Brazilian government official said.

Sources:
Reuters