A Look at the Week’s Global Economic Events

We take a look at an interesting macroeconomic development that investors can take note of.

Argentina and Brazil attempt to strengthen deteriorating trade between both nations

Newswire Reuters recently reported that the Presidents of Argentina and Brazil had signed a deal last Friday that tries to guarantee that importers will have access to adequate amounts of US dollars to pay for exports.

The Argentinean peso has declined in value sharply in recent times – for instance, it has faced a 19% drop against the US dollar from 1 Jan 2014 to 29 March 2014 – which has led to a shortage of dollars for importers, and ultimately, lower trade between both Brazil and Argentina. According to ratings agency Moody’s, Argentina’s reserves has fallen down to US$27.5 billion from its peak of US$52.7 billion in 2011.

The shortfall of American dollars in Argentina has also resulted in lower exports from Brazil, such that the latter nation recorded its lowest trade surplus in a decade in 2013.

Reuters quoted Brazilian Trade Minister Mauro Borges as saying that the deal is “the first step to unlock trade between both countries” and that both governments “will guarantee the liquidity of trade operations between both countries.”

Since 2011, Singapore has been increasing its bilateral trade with Latin America with companies such as Boustead Singapore Limited (SGX: F9D) and Wilmar International (SGX: F34) successfully operating in Argentina, marking Singapore as the largest Asian trading partner with Latin American states.

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