Brazil's healthy economic rebound and growing middle-class are stoking demand for Argentina's four-wheel drive vehicles, Malbec wine and olive oil, helping Latin America's No. 3 economy roar back after a sharp slowdown last year.
"Argentina has a unique opportunity (since) Brazil is an emerging market that is wide open to new tastes," said Francisco Pannocchia from the Cuarto Surco winery in Mendoza, which plans to start exporting to Brazil in the coming weeks.
Argentine exports to Brazil rose 45.8 percent in the first quarter of the year from the same period in 2009, led by vehicle sales, which accounted for 27 percent of the total, according to data compiled by the Argentine Chamber of Commerce's Economics Department.
Overall, Argentina's top trading partner accounted for more than 21 percent of total export income during the first five months of this year, Buenos Aires-based consulting firm IES said this week in a briefing note.
"Brazil is an incredibly dynamic force for us," said Milagros Gismondi, chief economist at the Orlando J. Ferreres and Associates consultancy in Buenos Aires. "The best strategy is to take advantage of the current Brazilian boom because competing would be very difficult."
Competing with the giant emerging market next door has proven tricky for Argentina's generally less efficient industry, which President Cristina Fernandez has used to justify curbs on some Brazilian imports.
DEFICIT WIDENS
Such restrictions strained the neighbors' trade ties at the height of the 2007-09 global slowdown, but they did temporarily help Argentina to bolster its trade surplus -- a pillar of Fernandez's economic policy.
However, Argentina's rapid recovery is stoking consumer appetite for Brazilian-made goods and imports from Brazil are rising even faster -- leaping 54.5 percent in the first quarter.
Argentina's deficit with Brazil widened 150.7 percent between January and March of this year from the same period last year, due to soaring imports. Many of the imports from Brazil are car parts needed by Argentine manufacturers.
Instead of trying to compete or risk retaliatory trade measures, Gismondi said Argentina would do better to differentiate itself with top-quality wines and luxury foods to target Brazil's growing high-end sector.
"Brazil is in a different league," she said, lamenting the persistent political uncertainty that hinders long-term investment to boost output capacity.
"Brazil is at the center of the international stage while we still can't properly develop our industry," Gismondi added.
The streets of downtown Buenos Aires are packed with Brazilian tourists carrying shopping bags and the average visitor from Brazil spends almost twice as much per day as the average European tourist, government data shows.
"Brazilians spend more on food than other clients do," said Luciano Greco, a waiter at an upmarket shopping mall in Buenos Aires that is popular with Brazilian tourists. "And on other things too, judging by their handbags." (Reuters)
