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In Argentina, Cloudy Trade Policies Hamstring Importers
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By TAOS TURNER
BUENOS AIRES—Argentina's government is now using import substitution policies to turn the South American nation into one of the world's most protectionist countries.
The import substitution policy essentially encourages the replacement of imported products by locally made wares, and so promoting the development of local industries and reducing the country's import bill. President Cristina Kirchner advocates the policies to create and protect local jobs. That has led to periodic import bans on French cheese, iPhones, Apple computers, BMW cars and even Barbie dolls. The government recently delayed one million books in customs to coerce publishers to print them locally, sources say.
Argentina often blocks or delays imports to boost its trade surplus and force foreign companies to make their goods here. Last month, the European Union complained that Argentina was limiting imports for around 600 products, according to a report by the World Trade Organization. Argentine trade officials declined to comment for this article.
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Agence France-Presse/Getty Images
Argentina's reelected President Cristina Fernandez de Kirchner.
Following an import ban on its BlackBerry smartphones, Research In Motion Ltd., said in July it would partner with Brightstar Corp. to assemble its handsets in Argentina's remote Tierra del Fuego Province. RIM declined to be interviewed and Apple Inc. didn't reply to requests for comment.
Many governments imposed trade barriers after the 2008-09 financial crisis wreaked havoc on global trade balances. But Argentina stands out because of the scope, depth and unofficial nature of its nontariff trade barriers.
Argentina often resorts to what Simon Evenett, an economics professor at the University of St. Gallen in Switzerland, and his colleague Richard Baldwin call "murky protectionism." Such barriers are verbal edicts—or threats, some executives say—made over the phone or in person by Commerce Secretary Guillermo Moreno and other government officials to importers. Executives often abide, fearing the government would otherwise use the tax collection agency, lawsuits or some other means to persecute them or their companies.
"No country implemented more protectionist measures in the third quarter of 2011 than Argentina," said Mr. Evenett.
Argentina erected 25 protectionist regulations, almost double that of China. Russia enacted seven, India six and Brazil two, said Mr. Evenett, who tracks such measures at Global Trade Alert. "Since November 2008 Argentina has taken 123 protectionist measures which have harmed at least 175 of its trading partners," he said. "Nearly a third of all product categories that Argentina imports are covered by some type of protectionist measure."
Argentina's trade violations would likely be much higher if all unwritten measures were counted, Mr. Evenett said.
"Moreno calls and tells you exactly what you can import and what you can't," said an executive at the local subsidiary of a major international firm. "The government leaves no paper trail. It's all done verbally so nobody can formally complain about it. It's like working with the mafia."
Moreno couldn't be reached for comment.
Earlier this month, Kirchner gave him even more power over trade by formally placing both import and export policies under his purview.
To some extent the policies are working.
Investors are plunking down $400 million in new manufacturing projects in the southern province of Tierra del Fuego, according to the Industry Ministry. The area's electronics industry now employs 12,000 people, compared with 2,000 three years ago.
The production of cell phones and other goods in the area has allowed Argentina to substitute imports totaling about $3 billion, says the ministry.
Around 94% of the LCD TVs sold in Argentina are produced in the province, up from 50% in 2003. Production in the province has also risen for air conditioners, computer monitors and microwaves, among other items.
Ms. Kirchner aims to replace 45% of today's imports with locally made goods by the year 2020.
In practice, the policy means Argentina's trade partners increasingly stand to lose out on the country's market of nearly 42 million people.
Frequently, foreign officials cannot even get meetings with Argentine officials to discuss their grievances. "The problem isn't that Argentina delays imports," said a Peruvian Embassy official, who has a difficult explaining the problems to Peruvian exporters. "The problem is that the delays are unpredictable. You never know how long they'll last."
Trade experts and former WTO officials say the lack of written evidence dims prospects of winning a case and deters formal complaints against Argentina at the WTO's dispute settlement body.
"Companies aren't complaining about this out loud because the economy is booming and they're still making money," said a foreign trade official. Still, "Argentina is violating WTO rules more than any country that I can think of."
Executives and diplomats asked to comment anonymously given the sensitive nature of the subject and fear of government reprisals.
While some trade policies have led to foreign investment in manufacturing, others are even more unusual. Earlier this year, importers of Porsche and BMW AG cars agreed to export wine, olive oil and even rice in exchange for authorization to bring vehicles into Argentina.
Neither company responded to requests for comment.
Ms. Kirchner plans to expand the policies.
In October, she won a landslide reelection, as voters rewarded her for years of economic prosperity, falling unemployment and political stability.
She recently launched a plan to boost local book production. "It's embarrassing that 78% of the books we read in Argentina are imported," she said.
Article
Stock Quotes
Comments (12)
MORE IN BUSINESS »
Save
↓ More
smaller
Larger
By TAOS TURNER
BUENOS AIRES—Argentina's government is now using import substitution policies to turn the South American nation into one of the world's most protectionist countries.
The import substitution policy essentially encourages the replacement of imported products by locally made wares, and so promoting the development of local industries and reducing the country's import bill. President Cristina Kirchner advocates the policies to create and protect local jobs. That has led to periodic import bans on French cheese, iPhones, Apple computers, BMW cars and even Barbie dolls. The government recently delayed one million books in customs to coerce publishers to print them locally, sources say.
Argentina often blocks or delays imports to boost its trade surplus and force foreign companies to make their goods here. Last month, the European Union complained that Argentina was limiting imports for around 600 products, according to a report by the World Trade Organization. Argentine trade officials declined to comment for this article.
Enlarge Image
Agence France-Presse/Getty Images
Argentina's reelected President Cristina Fernandez de Kirchner.
Following an import ban on its BlackBerry smartphones, Research In Motion Ltd., said in July it would partner with Brightstar Corp. to assemble its handsets in Argentina's remote Tierra del Fuego Province. RIM declined to be interviewed and Apple Inc. didn't reply to requests for comment.
Many governments imposed trade barriers after the 2008-09 financial crisis wreaked havoc on global trade balances. But Argentina stands out because of the scope, depth and unofficial nature of its nontariff trade barriers.
Argentina often resorts to what Simon Evenett, an economics professor at the University of St. Gallen in Switzerland, and his colleague Richard Baldwin call "murky protectionism." Such barriers are verbal edicts—or threats, some executives say—made over the phone or in person by Commerce Secretary Guillermo Moreno and other government officials to importers. Executives often abide, fearing the government would otherwise use the tax collection agency, lawsuits or some other means to persecute them or their companies.
"No country implemented more protectionist measures in the third quarter of 2011 than Argentina," said Mr. Evenett.
Argentina erected 25 protectionist regulations, almost double that of China. Russia enacted seven, India six and Brazil two, said Mr. Evenett, who tracks such measures at Global Trade Alert. "Since November 2008 Argentina has taken 123 protectionist measures which have harmed at least 175 of its trading partners," he said. "Nearly a third of all product categories that Argentina imports are covered by some type of protectionist measure."
Argentina's trade violations would likely be much higher if all unwritten measures were counted, Mr. Evenett said.
"Moreno calls and tells you exactly what you can import and what you can't," said an executive at the local subsidiary of a major international firm. "The government leaves no paper trail. It's all done verbally so nobody can formally complain about it. It's like working with the mafia."
Moreno couldn't be reached for comment.
Earlier this month, Kirchner gave him even more power over trade by formally placing both import and export policies under his purview.
To some extent the policies are working.
Investors are plunking down $400 million in new manufacturing projects in the southern province of Tierra del Fuego, according to the Industry Ministry. The area's electronics industry now employs 12,000 people, compared with 2,000 three years ago.
The production of cell phones and other goods in the area has allowed Argentina to substitute imports totaling about $3 billion, says the ministry.
Around 94% of the LCD TVs sold in Argentina are produced in the province, up from 50% in 2003. Production in the province has also risen for air conditioners, computer monitors and microwaves, among other items.
Ms. Kirchner aims to replace 45% of today's imports with locally made goods by the year 2020.
In practice, the policy means Argentina's trade partners increasingly stand to lose out on the country's market of nearly 42 million people.
Frequently, foreign officials cannot even get meetings with Argentine officials to discuss their grievances. "The problem isn't that Argentina delays imports," said a Peruvian Embassy official, who has a difficult explaining the problems to Peruvian exporters. "The problem is that the delays are unpredictable. You never know how long they'll last."
Trade experts and former WTO officials say the lack of written evidence dims prospects of winning a case and deters formal complaints against Argentina at the WTO's dispute settlement body.
"Companies aren't complaining about this out loud because the economy is booming and they're still making money," said a foreign trade official. Still, "Argentina is violating WTO rules more than any country that I can think of."
Executives and diplomats asked to comment anonymously given the sensitive nature of the subject and fear of government reprisals.
While some trade policies have led to foreign investment in manufacturing, others are even more unusual. Earlier this year, importers of Porsche and BMW AG cars agreed to export wine, olive oil and even rice in exchange for authorization to bring vehicles into Argentina.
Neither company responded to requests for comment.
Ms. Kirchner plans to expand the policies.
In October, she won a landslide reelection, as voters rewarded her for years of economic prosperity, falling unemployment and political stability.
She recently launched a plan to boost local book production. "It's embarrassing that 78% of the books we read in Argentina are imported," she said.
Edited by Indy, 31 December 2011 - 01:18:56.
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