beyondbrics

Argentina’s plan to stop supermarkets from importing food that can be produced at home is playing with fire.

The largely gourmet foodstuffs affected by the order – issued verbally to supermarkets last week by Guillermo Moreno, the internal trade secretary – only make up at most 3 per cent of supermarket sales. But the protectionist move could spark damaging reprisals, especially from neighbour and key trade partner, Brazil.

Mariano Claverí, foreign trade economist at Abeceb, a consultancy, says total Argentine imports of the types of food that would fall under the ban represented about $180m in the first quarter of this year. That’s only 1.6 per cent of all imports, but crucially, 45 per cent of that total represents imports from Brazil. In contrast, Argentine food exports to Brazil in the same period were worth $190m. “So if this measure is applied, Argentina has a lot more to lose than to gain,” Mr Claverí says.

Brazil hasn’t yet issued any formal indication it could take tit-for-tat measures, but it has retaliated in the past to protectionist measures by Argentina. The powerful Federation of Industry of the State of São Paulo says it is very concerned and said the measure was already hurting Brazilian interests.

The original reason for the ban was supposed to be that the weak euro would trigger a flood of food imports, harming Argentine producers’ ability to compete. But Copal, a federation of Argentine food producers, says the government should stick to the rules to avoid reprisals. EU trade and economy representatives from embassies in Argentina meet tomorrow and the ban will be on the agenda.

Mr Claverí says the real motivation may a sharp jump in imports in the first quarter compared with the same period last year, reducing Argentina’s trade surplus sharply. Total imports rose 52 per cent in dollar terms in March compared with March 2009, and 33 per cent in the first quarter. The food ban, he argues, would be a way of striking back without limiting imports of capital goods that could hurt the economy. But given that the the usually high-priced, luxury goods in question don’t account for a high proportion of supermarket sales, it’s hard to see the real rationale. For now, it looks like another incomprehensible battle Argentina could easily have avoided.

Related reading:
Argentina moves to protect food production, FT