beyondbrics

Argentina has run into trouble before with trade tactics that often seem like knee-jerk reactions to events rather than a coherent policies.

The result is a growing reputation for protectionism, which is earning it few friends and making many enemies.

A couple of months ago, it upset its biggest trade partner, Brazil, with restrictions on Brazilian exports to which Brasilia responded by limiting car imports from Argentina with the result that 40,000 Argentine vehicles are still blocked at customs, according to Miguel Ponce of the Argentine Chamber of Importers.

Now, the government is planning to extend to importers of almost all finished goods a 1:1 policy already in place in the car, agricultural machinery, shoe and toy sectors, whereby imports must now be matched dollar for dollar by exports.

As has become customary, Argentina has enacted the measures without committing them to paper, something Ponce says underlines their discretionary, arbitrary nature.

In fact, it’s protectionism by any other name – and Argentina already has a problem with this, says Claudio Loser, the former IMF head for the Western hemisphere.

He noted in a recent paper that Global Trade Alert, an independent international monitoring agency, named Argentina the world’s most protectionist emerging economy, and ranked it second worldwide after Russia.

“It has introduced about 110 restrictive measures since 2009 affecting 174 countries, more than any other individual country,” Loser said. “These trade restrictions have occurred while Argentina has received import duty exemption through the (US) Generalised System of Preferences (GSP).”

The GSP grants preferential US tariff treatment to certain imports from designated developing countries, and Loser says Argentina “has received concessions of more than $140m from the US since 2005, the highest in per capita terms in the region benefiting from the US GSP”.

He says Argentina has abused the privilege; that its failure to compensate all bondholders for its 2001 default on nearly $100bn constitutes a seizure of US property in violation of the GSP statute; and that Argentina levied an average applied tariff rate of 16.2 per cent as of 2009 compared to the US’s 3.5 per cent.

On the website of the Chamber of Importers, there is a picture of its officials sitting down, on July 1 with all the government officials who are responsible for trade policy, including Débora Giorgi, the industry minister,  Amado Boudou, the economy minister, and Guillermo Moreno, the internal  trade secretary.

Moreno’s job has been to seek to control prices (and latterly to sponsor cut-price food offers dubbed “for everyone”, which have had mixed success, the latest of which was launched this week offering cheap pork and cheese.).

No mention was made at that meeting by the government of extending the 1:1 import-export rules and the Chamber was alerted to it this week by one of its members, Ponce says. And anyway, it’s all very well demanding an upsurge in exports. “The government also applies restrictions on some exports,” notes Ponce (wheat is one of the farm exports most affected by government intervention, and corn exports are periodically halted).

While it’s a legitimate aim for a government seeking to boost Argentine industry and jobs,  to want cars made in the country to have a higher proportion of Argentine-made components, the real way to achieve this is through investment.

But Argentina is failing to attract investors and ad hoc restrictions are likely only to convince investors to give a wide berth and set up shop in Brazil instead, Ponce says.

The industry ministry makes no mention of the extended 1:1 policy on its website and it is impossible to ask Giorgi anything about it since she refuses to give interviews. Instead, the ministry trumpets the 9 per cent growth of Argentina’s industrial sector in the first five months, a rate among the highest in Latin America and just shy of Chile’s 10.6 per cent, while that of Brazil grew by 1.8 per cent.

Nationalism, it seems, is now a central trade doctrine as well as political policy. As the ministry says:

The increase in national production and the rise in investment in capital goods guarantee sustainable growth over time. Manufacturing sectors benefit from policies that guarantee no macroeconomic volatility, the defence of the domestic market, protection from unfair competition and which defend the sovereignty of national businesses.

The government’s intentions could hardly be clearer.

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Argentina to import S Korea cars for peanuts