BUENOS AIRES: No matter who wins the runoff on November 22, non-tariff barriers to trade and widespread import controls are likely to continue well into 2016.
The current lack of hard currency in the country will make it practically impossible for the next administration to open up the economy to a degree that would be significant enough to boost the flow of imports, economists and sector experts largely agree.
With the shortfall in cash limiting the government’s options, these barriers are likely remain in place. That is the case even though the World Trade Organization (WTO) has given Argentina until the end of this year to do away with controversial import permits — commonly known as DJAI — that it claims violates international trade rules.
While the government has agreed to comply, the ruling only applies to the DJAI themselves so a new administration could sidestep the WTO resolution by creating similar instruments, experts told the Herald.
The United States, the European Union and Japan were the main drivers against Argentina at the WTO, while Argentina in turn complained about protectionist measures by the US and the EU against the country’s agricultural exports.
“We’ll witness a transition next year. None of the presidential hopefuls are thinking of completely opening up the economy to more imports due to the low level of foreign-currency reserves at the Central Bank,” Diego Pérez Santiesteban, head of the Importers Chamber (CIRA), told the Herald. “The WTO rejected the DJAI but there are other instruments that could be implemented.”
Argentina’s trade surplus narrowed 87 percent in September, on the year, to US$65 million, less than the daily demand of the dollar-for-savings scheme this month. The programme that allows salaried workers who make more than two minimum wages to buy a percentage of their monthly income in dollars is one of the key reasons behind the scarcity of dollars.
Central Bank foreign-currency reserves are at a nine-year low, beginning the week at US$26.701 billion. That number is expected to continue declining as the Central Bank is likely to continue its high daily sales of dollars to avoid a larger devaluation.
In an effort to decrease the demand for dollars before the presidential runoff, the monetary authority has already implemented several measures, such as increasing the interest rates on short-term Treasury notes, which led to higher rates for fixed-term deposits, slashing by half the daily number of dollars companies can transfer abroad without authorization and slapping new limits on the amount of hard-currency assets insurers can hold in their portfolios.
“There might be more flexibility next year but the next administration will need to find a new instrument that both complies with the WTO rules and allows for a control on imports,” foreign trade specialist Mauricio Claverí at Abeceb consultancy told the Herald. “Opening up the economy to a larger number of imports would lead to an even wider trade deficit and no one believes that’s the right path to take.”
Whether or not the next administration makes imports more flexible will also depend on the exchange rate and how much the next government devalues the currency, Lorenzo Sigaut Gravina, chief economist of Ecolatina agency and trade specialist, said.
“It’s impossible to open up the economy to more imports without a steeper devaluation and fewer foreign currency restrictions. The DJAI could simply transform into another instrument,” the economist told the Herald. “The next administration could implement a more appropriate instrument that allows it to continue restricting imports.”
Importers’ debt
While the government has reduced the delays in DJAI import authorizations, a long-term demand from importers, new disputes and barriers have emerged over the past few years that will put pressure on the next administration.
The Central Bank owes importers about US$8.1 billion for imports that had already been approved but didn’t get the greenlight for the currency purchases needed to complete those transactions, according to the latest report by CIRA, which was released in July. The figure has grown significantly since then, Santiesteban said.
Instead of cutting back on imports due to a shortage of dollars, the Central Bank approves them but then postpones currency purchases or divides them in installments, experts told the Herald. Last year ended with a debt of US$5 billion, a figure that will likely double this year.
But solving the issue right away is an almost-impossible task, no matter who wins the presidential runoff.
“None of the two candidates can solve this immediately. But they can make sure dollars flow and try to think of a strategy on how to pay the debt,” Santiesteban said. “As the lack of dollars worsened, the debt has been increasing.”
Deficit or surplus?
Whether the country has a trade deficit or surplus, largely depends on whom you ask. The INDEC statistics bureau publishes two separate reports that show different results.
One, which is free to access but uses a limited sample, says Argentina saw a US$1.5 billion surplus in the first nine months of the year, while the paid report that accounts for all foreign trade transactions registered at Customs claims the country actually has accumulated a US$1.7 billion deficit so far this year.
“It’s hard to know what the actual trade figures are. We believe the country is now at a trade equilibrium but on the verge of a deficit,” Claveri said.
Differences between the two reports aren’t new and can be observed since 2013, when one report said the country had registered a US$8 billion surplus and the other, a US$3 billion surplus. The same was witnessed last year, when one claimed there was a US$6.6 billion surplus and the other, a US$2.1 billion surplus.
Whether the country ends the year on a deficit or a surplus, Argentina is set to face a similar year on trade in 2016 as the country’s exports are likely to remain on the wane due to the recession in Brazil, which is the country’s main trade partner, experts said. The country’s exports accumulated 23 months with negative figures, having dropped 16 percent so far this year.
“It will be a similar year, not much worse than this one. Brazil is set to continue declining until 2017, while there won’t be many changes in the prices of commodities. The only thing that could change the variables a bit is what happens at the domestic level,” Sigaut Gravina said.
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