Next destination: export – Infobae

An interested observer could imagine Argentina today as a train that is preparing to set off on a long journey that, with good coordination of its growth machines, will be able to climb some slopes until returning to a path of sustainable development. One of its first destinations, given its status as a developing country and, especially due to its history of recurring economic failures, will be to reach a new level of exports, giving continuity to its growth over time.

These exports will provide the necessary foreign exchange for investments and debt repayments, in addition to mobilizing economic resources that today operate below their potential and with low productivity. To do this, in the first part of the journey, it will be necessary to recover macroeconomic stability and incentives for these operations.

A second part of the journey will require private and public investments, opening to international trade and improving access to traditional and new markets. It will take some time, but it will allow us to reach an ultimate destination with diversification of products and services and a sustained growth rate.

The path described, which – without a doubt – represents a challenge for the country, has already been followed by many nations in Latin America. An example of the distance to travel is provided by the indicator of the value exported per inhabitant. In first place is Guyana, with more than USD 14,000. This small Caribbean country is a special case due to the discovery of oil in 2015, which made it the fastest growing country in the world for several years.

But if we focus on the rest of the countries in the region, we can see that Argentina, along with Brazil (both closed economies with high tariffs relative to the world), show exports per capita below the regional average.

Cases such as those of Chile, Costa Rica, Panama or Uruguay exemplify the important space that our country could gain with a due effort at economic regulation given its agricultural, mining and conventional and non-conventional energy resources.

In the case of Mexico, its economic proximity to the United States and the effects of the rearrangement of industrial value chains (nearshoring) have once again boosted their manufacturing exports.

Argentina and Brazil could also manage to significantly improve their industrial export performance if they were willing to review their strategy of international insertion through a lower tariff in Mercosur and an active policy of preferential trade agreements, as has been the case of the Alliance of the Pacific (Chile, Colombia, Mexico and Peru).

The announcements by the authorities in office since December 10, 2023 have created expectations about the adoption of a model open to trade. This new scenario of objectives, however, must still go through, as mentioned, the adjustment phase of macroeconomic variables.

This phase will result, in the case of the external sector, in the normalization of payment for imports, the reduction of taxes on exports and, as a very important step, in the elimination of the exchange rate and the adaptation of the real exchange rate to a remunerative level for external sales, reducing the anti-export bias of the economy through tax reduction, for example.

This normalization has, for now, acquired a clockwork format in which bonds are used to regularize payments for imports or for the remittance of profits from international companies located in our market, immediate payments for imports of selected goods are authorized for its income as an inflation control and a nominal exchange rate is maintained growing at a rate below the inflation rate (crawling peg).

This situation has continued during the first four months, after raising the exchange rate 118%, from $366.45 to $800 per dollar) and increasing the cost of importing by applying a higher rate of the PAIS Tax, inherited from the previous administration.

At the moment, consequently, it is very difficult to anticipate when the decision will be made to eliminate exchange control in its version of “exchange stocks” with multiple rates. None of the conditions that would favor this step are linked to the recomposition of the reserves available in the Central Bank.

In that sense, despite the only partial recovery of incentives to export, the performance of foreign trade in the first quarter of the year accompanied this objective of foreign currency accumulation.

The accumulated data for the first quarter maintain an important change in behavior with respect to the previous two years. From December to the present, the trade balance has been positive and growing.

Exports increased 9% in the quarter and imports decreased 24.2% compared to the same period in 2023, reflecting the decisions of foreign trade actors, while international prices were characterized by their downward trend. general decline.

The red area in the preceding graph reflects that the balance tends to decrease, showing the change in trend since the loss of export momentum at the end of 2021 as the beneficial effect of very favorable terms of trade for the country was exhausted.

The external balance of services is traditionally in deficit due to transportation costs and the result of international tourism. But in the new scenario, that balance could also improve. Both in terms of tourism and technological and business exports (knowledge-based services), the country has already shown signs of having interesting growth potential.

While the trajectory of our imaginary train advances along the path of stabilization, some instruments that will be essential for the promotion of the actions of the private sector producing tradable goods and services are also being launched and improved.

On the export side, the Foreign Ministry, headed by the economist Diana Mondino, had already announced in February a National Plan for the Promotion of Exports and Investments 2024 by which it is expected to activate a series of already existing instruments, such as support for small and medium-sized exporting companies, greater participation in international fairs, the detection of trade barriers in third countries and their negotiation, the development of the country brand, export financing, etc.

There have also been developments in Mercosur with the signing, at the end of 2023, of the free trade agreement with Singapore and the new round of negotiations with the EFTA (Iceland, Liechtenstein, Norway and Switzerland) in April 2024, contrasting with the stagnation of the progress of the agreement with the European Union (EU), which is facing an adverse climate due to the historical reservations of the European agricultural sector in the face of possible competition from Latin American countries. This reservation is today exacerbated by the higher costs imposed on the European producer by environmental provisions in the EU (European Green Deal, for example).

In the immediate future, it will be useful to monitor the construction of a pro-export business climate that, in the medium term, should translate into an increase in Argentina’s international insertion through a greater volume of trade.

Today the country represents only 0.3% of international trade and the average of its exports and imports is around 12% of GDP in current dollars.

Again, both indicators are very low compared to the countries in our region. Let’s hope that in this new opportunity, the train reaches its destination.

The authors are Economists from FIEL. This note was published in Economic Indicators 663 of FIEL