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Can the EU dissuade Latin America from expanding exports to Russia?

August 12, 2014, 17:06 UTC+3 Alexandrova Lyudmila

MOSCOW, August 12./ITAR-TASS/. Latin America welcomed the chance to expand agricultural exports to Russia as the latter introduced an embargo on foods from the EU, US, Norway and Australia. However, the EU does not want the region to take its place on the market and plans to talk Latin America out of the idea. And the EU has economic levers to do it, say experts.

The EU plans negotiations with Brazil and Chile, said the UK daily Financial Times as Brussels is concerned about how enthusiastic some Latin American producers were about Russia’s import ban.

Immediately after the ban was introduced last week, chief of the Russian veterinary watchdog Rosselkhoznadzor Sergei Dankvert met with ambassadors and representatives of Brazil, Argentina, Chile and Ecuador to discuss possible food import expansion.

Russia had compiled a list of priority food importers, said Russian Minister of Agriculture Nikolay Fyodorov. In particular, Commonwealth of Independent States (CIS) nations would be key fruit and vegetable suppliers. Latin America was another promising market, with Chile, Argentina, Paraguay, Ecuador and Peru most likely exporters, he added.

According to Brazil's Ministry of Agriculture, Rosselkhoznadzor has already admitted 89 Brazilian producers of foods of animal origin, a “record-breaking” decision in the history of Brazil’s export to Russia. The country’s producers would surely satisfy Russian demand for chicken, said president of the Brazilian Animal Protein Association (ABPA) Francisko Turra. Brazil is expected to export 150,000 tonnes of chicken a year in addition to the 60,000 tonnes supplied now.

Russian restaurateurs previously succeeded in replacing imported foods with analogues from Latin America. In March, Rosselkhoznadzor barred Australian exporters from supplying frozen and chilled beef, doubling prices for high-quality beef. It took restaurateurs and premium retail networks a month to reduce them to the previous level by substituting Australian supplies with beef from Uruguay and Paraguay.

Russian experts polled by ITAR-TASS differ over EU chances of persuading Latin America.

Though the EU had resources to pressure countries keen to trade with Russia, they would hardly yield and likely increase supplies, said senior research fellow at the Centre of Political Studies at the Russian Academy of Sciences Institute of Latin America Emil Dabagyan.

“Surely, they will have to maneouvre since they have broad trade contacts with the EU and maybe they will have to make some concessions but they will not miss the chance,” the expert said. This was particularly urgent for Argentina, hovering on the brink of default, Dabagyan added.

Europeans had levers to exert pressure on Latin America, said director of the Centre for International Trade Research at the Russian Presidential Academy of National Economy and Public Administration Alexander Knobel. For instance, they could find a plausible excuse to ban food imports from these countries.

“They might not voice the idea directly placing the emphasis on political reasons and calling for ‘punishing Moscow’ but the main reasoning behind this will be economic interests: They do not want to lose ground on the international agricultural market,” the expert said.

EU priority was to retain positions on the agricultural market, and it hoped Russia would lift or loosen sanctions, said professor at the Higher School of Economics Department for Applied Macroeconomics Igor Nikolaev. Anti-Russian rhetoric took a backseat here, he said.

The EU had tangible mechanisms to impact Latin America, the expert added.

“Suffice it to compare the share of various countries in, say, Brazil’s exports,” Nikolaev said. In 2012, Russia accounted for just 1.3% of Brazil’s total exports against 20.6 and 11% of the EU and the US “In this respect, the EU is much more significant for Brazil than Russia, so Brazil cannot easily ignore what Europe has to say,” he added.

Venezuela and Nicaragua could afford to be least attentive to the EU recommendations, he said, but at the same time they had fewer export opportunities. Even Argentina would seek to remain on good terms with the EU and US as it can hope for IMF aid in the future.

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