The Argentine and Brazilian Governments executed a Memorandum of Understanding regarding the Financing of Bilateral Trade.

On March 28, 2014 the Government of the Federative Republic of Brazil and the Government of the Republic of Argentina executed a Memorandum regarding the financing of the bilateral trade Brazil-Argentina (the “Memorandum”).

The Memorandum is signed by Mauro Borges, the Minister of Development, Industry and Commerce of the Federative Republic of Brazil, and by Axel Kicillof, Minister of Economy and Public Finance of Argentina.

The objectives of the Memorandum are described in Section I and are the following:

  1. promote bilateral trade between Brazil and Argentina by making the process run more smoothly and the improving  trust between commercial and financial operators;
  2. facilitate the financing of the bilateral trade between Brazil and Argentina;
  3. guarantee the commercial flow and their payment flow, regarding bilateral commercial transactions.

To implement the Memorandum each party will appoint a Cooperation Authority, which shall maintain a fluid and frequent contact in order to implement and evaluate the mechanisms provided there, as well to develop alternative initiatives to promote the financing and guarantee the fulfillment of the opened commercial flow, under the terms of the Memorandum. In addition, the Cooperation Authorities are responsible for developing the contacts that are necessary to implement between public and private sectors (according to Section II).

The parties will promote the financing of the reciprocal trade flows. In particular, regarding the imports financed directly by the exporter or through financial agents, in periods equal or greater than 90 (ninety) days, as well as the transactions that are made through the System of Payment in Local Currency – SML (created in 2007 and in force since 2008) the terms of Section III of the Memorandum will be applied.

The foreign trade players may inform the Cooperation Authority of its country regarding the difficulties found with respect to the financing and the execution of the commercial flows covered by the Memorandum. The objective is that the Cooperation Authorities are able to resolve the difficulties in order to decrease any uncertainty related with the execution of the Memorandum (according Section IV).

The Memorandum provides for the confidentiality of the information related with the monitoring (Section V), the predictability of the bilateral trade (Section VI) and the diversification of the financing and payment instruments of the bilateral trade (Section VII).

Regarding the predictability of bilateral trade it is important to mention that the parties commit to guarantee the fluency of bilateral trade flow as a whole. The particularity is that it specifically provides that it must be “free of restrictions that cannot be justified under the protection of Section 50 of the Treaty of Montevideo 1980” (ALADI).

This means that they may only apply restrictions in the following cases: a) protection of public morality; b) execution  laws and security regulations; c) regulation of the imports or exports of weapons, ammunitions and other war material and, under exceptional circumstances, of all other military items; d) protection of life and health of the persons, animals and plants; e) imports and exports of metallic gold and silver; f) protection of the national patrimony of artistic, historic or archeological value; and g) exports, use and consumption of nuclear material, radioactive products or any other usable material in the development or exploitation of nuclear energy.  

The Memorandum entered into force on March 28, 2014 and will not affect the validity of other agreements and contracts already concluded nor the rights and obligations, either present or future, relating to agreements or international treaties. The Memorandum will not create any onerous commitments by the parties.