Argentina angry at neighbour

When Jorge da Silva proudly waved his protest banner in the air he was articulating discontent currently felt by many Argentines. Camped outside the capital's splendid congress building, the unemployed factory worker was resolute that his country's economic woes could be blamed fairly and squarely on neighbouring Brazil.

Argentina is having a bad time of it at the moment. The International Monetary Fund is demanding public-spending cuts of around $938 million (€983 million) and more stringent economic management from the recently elected President Fernando de la Rua.

As always, it is people like Mr da Silva who are feeling the brunt of the hard times. As the 34-year-old laid down his banner, he explained why the new "Buy Argentine, boycott Brazil" campaign could answer at least some of Argentina's fiscal problems.

"Brazilians are deliberately taking advantage of us," he said. "My factory closed down because they offered the bosses cheap labour and lots of perks to move away from Argentina.

"And I'm not the only victim of the Brazilians. We've got to keep our distance from those money-grabbers."

A sense of distrust, and even dislike, between the Mercosur trade bloc's two dominant members is nothing new. But, of late, anti-Brazilian feeling on the streets of Argentina has escalated higher than in recent years.

Since Brazil's currency collapse 17 months ago and the consequential devaluation of the real, Argentina's neighbour has been becoming increasingly attractive to companies.

Numerous international and Argentine businesses have either relocated to Brazil or are currently toying with the idea. Respectable multinationals like Philips Electronics and Goodyear Tyre and Rubber Company have closed down their Argentine operations altogether and opted for low-cost Brazil.

So deep is the anti-Brazilian feeling running in all sections of Argentine society, that in a recent TV appearance, Buenos Aires state governor, Mr Carlos Ruckauf, said: "The Brazilians are like bad neighbours that come into our house to steal our furniture."

One of the reasons why Brazil is so attractive is that its recent currency crisis has reduced overall business costs, including wages, to around 30 per cent less than that of Argentina.

Argentine economists admit their country has become a more expensive place for businesses, since the government pegged the peso to the dollar in 1991.

Prof Roberto Lavagna, a former minister of industry and foreign trade, said: "It is true that trade in Brazil is currently more competitive than in Argentina.

"Some companies have been attracted by the lower business costs of that country, but Argentina is still a long way from haemorrhaging businesses in favour of Brazil."

Prof Lavagna says that another reason why Brazil is proving more economically attractive is because some Brazilian state governors are offering incentive deals to companies. Aggressive marketing, including free land and tax breaks, are making it hard for some firms to resist.

"A number of states are offering financial incentives," said Prof Lavagna. "But this is the work of individuals and not a policy of the Brazilian government."

Despite those at the top trying not to flaunt Brazil's current economic attractiveness - for fear of destabilising the political relationship between the two countries - a recent poll in the Argentine newspaper Clarin confirmed that old suspicions were more rampant than ever. Readers responding to the survey cited Brazil as Argentina's most serious economic problem, with many believing that the recent job exodus across the border was prolonging their country's recession.

Prof David Fleischer, professor of politics in Brazil's capital city, Brasilia, said: "The relationship between the two countries is very strained right now and the diplomats are desperately trying to smooth the waters over. But these things go up and down, and a few years ago Argentina was the more economically attractive of the two and reaped all the benefits that the status bought them."

According to the Union Industrial Argentina, a lobby group for national industries, 250,000 jobs have directly and indirectly been swallowed by Brazil.

However, Prof Lavagna believes that such figures currently amount to little more than scare stories. "It's in these organisations' interests to make things sound worse than they actually are," he said.