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The devaluation of the real affects competitiveness of Argentine exports

The devaluation of the Brazilian real (Monday closed at 2.56 per dollar) has raised concerns in Argentina about the impact it could have in the local economy. 

In this sense, Infocampo consulted several economic analysts to find out what could happen if the Brazilian currency continues to depreciate.

"A few months ago, when Brazil held the World Cup, the real was at 2.00 to the dollar, now it's depreciated and it is between 2.50 and 2.60 with an increasing trend," said financial analyst Claudio Zuchovicki.

"What has happened in recent months is that the currencies of emerging countries declined significantly," said Zuchovicki, adding that, "this affects Argentina because we export a lot to Brazil and lose competitiveness."

"Part of the decline in Argentine exports is due to the real's devaluation as it doesn't allow us to have access to credit and macroeconomic issues that hinder the economy," said the specialist.

Brazil accounts for about 85% of Argentine exports of cars and is the main buyer of onions, green olives, peas, garlic, raisins, pears, beans, cheese and other Argentine products.

ArgaƱaraz Nadin, director of the Argentine Institute of Fiscal Analysis (IARAF), stated that, "in this new scenario, Argentine companies wanting to place products in the Brazilian market will register a sharp decline in profitability."

"Brazil is the most important regional trading partner for Argentina and any action taken there can have negative effects that hamper our competitiveness and deepen the exchange rate appreciation," said ArgaƱaraz.

Meanwhile, economic consultant Salvador Di Stefano warned that, "a devaluation of the real of this magnitude will force the Argentine government to devalue its currency by at least 15%, this would imply the official dollar would be around 9.80."

"It's an issue that no one is addressing, Brazil is a time bomb. They don't have a fiscal surplus, they depend on external financing and investment and a very divided presidential election just ended," said Di Stefano.

"Furthermore, they still haven't defined who the next Minister of Finance will be. There are many questions for an economy the size of Brazil. The fact is that if they devalue their currency, Argentina will have no option but to do the same," said the consultant.

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