A central aspect of the government’s announcements is related to the elimination of import barriers. The Argentine has been there for years an extremely closed market due to obstructive regulations: this year we are the country with the lowest import/GDP ratio in the entire continent (less than 15% of GDP).
This severely impacts production capacity because 15% of imports are made up of capital goods (production machinery); 22% of parts and pieces for such capital goods; 38% input for production and 21% energy (critical component of the economy). Without imports there is no production. Because, moreover, Restricting imports discourages investment and weakens exports: The OECD says Argentina and Saudi Arabia are the two countries with the lowest import content in their exports, and this reduces foreign supply attributes.
The various liberating decisions (such as the suppression of the SIRA regime and the prohibition through a legal rule for the authorities to quantitatively limit external purchases) will make the commercial process something dependent only on the commercial actors themselves. Although it should be noted that some costs have not been eliminated (the PAIS tax remains in force and the tariffs, which are the responsibility of Mercosur, are not reduced). And given the inherited vulnerabilities, the obligation to use Central Bank dollars (which continues to set the price of the currency) to make payments is maintained, on which a calendar of access to foreign currency for the payment of new imports. .
Everything suggests that Argentina will have to import more (if it did so at levels similar to the Latin American average, it would have to do so at least 50% more than today). And that reducing export barriers will allow us to obtain the dollars needed for thisin a virtuous circle, which one can hope that the sum of the integral validity of everything announced will allow a normalized operation of foreign trade for the second half of 2024.
Even if the exchange rate were freed and fiscal costs maintained in the face of the emergency were eliminated, one could expect imports to reach levels typical of an economy like ours.Fears that increased imports could hit local companies are unfounded: All the countries in the region import much more than Argentina and do not suffer from it.
What makes local businesses vulnerable are macroeconomic inconsistencies or regulatory rigidities (as happened in the late 1990s, when imports in relation to gross product were lower than in the early 2000s, despite the fact that in that period they did more damage to Due to local vulnerabilities, imports are necessary. In the world they are equivalent to 30% of the planetary product. Because the global production chain requires interaction.
Without imports there will be no recoveryThe recent massive presentation of proposals and decisions by the government of President Javier Milei changes the public references for the entire society. And, within it, strongly, in the economy. And, also in economic matters, in the actors linked to international business (in trade, investments and cross-border finance).
On the international affairs front, the first announcement of Minister Luis Caputo’s adjustment plan made progress in changing a fundamental reference: the exchange rate (still fixed, but closer to the market price). Also the creation of an instrument for the payment of commercial debt that importers had been forced to refinance – during the previous government administration – and – in turn – a calendar of access to dollars for the payment of imports to be processed in a timely manner.
Then, once the deregulation DNU was known, it was learned that, given its validity, the government authority “will not be able to establish export or import bans or quotas for economic reasons or foundations”. And, advancing operational liberalization, the Customs Code is also amended by incorporating a permit so that people can manage the shipment and destination of goods and carry out foreign trade operations without the need to register in any register.
The elimination of the SIRA regime (very obstructive to imports) and the creation of a new SEDI (for statistical purposes) decongests the necessary import flows. For its part, the omnibus bill provides some specific rules that influence international affairs, such as international liberalization in energy matters. At the same time, there are other essential and highly impactful ones such as those related to international investments. Beyond the fact that there are still several other announcements (which for the sake of text are not listed, but coincide with liberal ideology) , a different level of analysis Two further aspects are added.
On the one hand there are decisions that impact externally from an internal point of view, such as the purposes of privatization, the reforms (to achieve simplification) of the freight transport regime, greater flexibility in company law (which will allow the filing of foreign companies ), among others. And, on the other hand, the general spirit must be considered: We are witnessing the transition from an interventionist and regulationist philosophy to a regime that creates a liberal regulatory framework which favors the autonomous action of economic actors and which gives contracts the status of new great generators of law.
The above can be complemented with demonstrations and initiated international political processes, which have a great impact on the foreign economic agenda. The known announcements do not contain references to Mercosur, a bloc that maintains high external tariffs and lacks meaningful trade agreements with third parties. A new ideology began to take shape in measures, projects, announcements and actions. The vortex has surprised, but the orientation seems aimed at eliminating the causes that have made Argentina the country with the worst performance in the region during the 21st century.
Source: Clarin
