42% of Argentina’s Exports to Brazil Depend on a Trade Regime Expiring in 2029, with Negotiations Set to Take Place Without Ambassadors – Trade News | 30/10/2

Trade relations between Argentina and Brazil face growing uncertainty following Luiz Inácio Lula da Silva’s reelection and the deterioration of diplomatic ties between the two countries, which have remained without ambassadors since August 2026. According to a report by the International Strategy Institute of the Argentine Chamber of Exporters (IEI-CERA), the automotive sector accounts for 42% of Argentine exports to Brazil and operates under Economic Complementation Agreement No. 14 (ACE 14) and its Common Automotive Policy (PAC), whose current framework will expire on December 31, 2029, while the 46th Additional Protocol will enter into force on January 1, 2027. These negotiations will take place during Lula’s new administration, against a backdrop of declining Argentine participation in the Brazilian market, which fell from 13% of Brazil’s total imports in 1997 to 5% in 2025, while China’s share increased from 2% to 25%. Despite this loss of market share, Brazil remains Argentina’s largest export destination, accounting for 12.7% of total exports, and its second-largest source of imports, representing 21.4%. Between January and September 2026, Argentina exported US$9.789 billion to Brazil, up 4.5% year-on-year, and imported US$12.005 billion, down 17%, resulting in a bilateral trade deficit of US$2.216 billion. Industrial manufactures account for approximately two-thirds of Argentine exports to Brazil, led by the automotive sector, followed by chemicals and plastics (9%) and the wheat value chain (8%). Looking ahead, CERA expects Lula may seek to preserve Mercosur as a customs union, maintain the common external tariff and challenge individual trade agreements pursued by Argentina. Meanwhile, U.S. trade restrictions on Brazilian products, including tariffs of 37.5%, and Brazil’s industrial financing programs, comprising 66 billion reais in credit and an additional 300 billion reais in subsidized loans, could encourage greater volumes of Brazilian industrial production to enter the Argentine market. This scenario presents challenges for Argentina’s domestic industry and for the renegotiation of an automotive trade framework that accounts for a substantial share of bilateral trade. Link to Article