Argentina, at its worst as a supplier to Brazil: what is the risk for Córdoba

“We never sold so little to Brazil, in relation to everything it buys, as in this first four-month period. Probably one of the most ‘successful’ cases of commercial ‘disintegration’ in a customs union. There is not enough common external tariff for all our clumsiness. “

So, clear and forceful in less than 300 characters On twitterIt was the economist Juan Manuel Garzón, a researcher at the Ieral-Fundación Mediterránea, to describe one of the many photos that are part of a sad movie for Argentine exporters: the one that shows the chronic lack of competitiveness in the country.

The “photo” that Garzón took corresponds to the last 25 years and shows the continued deterioration of Argentina as a supplier to its main trading partner.

In 1998, when the national auto industry was in one of its best moments in history, 14 percent of Brazilian imports were from Argentina.

This rate has been decreasing almost without brake over the years to the present, which shows that only five percent of Brazil’s purchases are from local companies.

This constitutes a focus of concern for Córdoba. According to data compiled by the ProCórdoba Agency, last year Brazil was the main destination for local foreign trade: it accounted for 15 percent of the total. That is, almost one out of every six dollars billed.

But in the case of manufactures of industrial origin, the South American giant is almost an exclusive customer and that is why a drop in its purchases is a warning light: 74 percent of sales, that is, three out of four go there .

Unprotected

For Garzón, this panorama has a condiment that aggravates it: Argentina has lost participation in Brazil despite having the advantage of tariff protection offered by being part of Mercosur.

“When an Argentine product goes to Brazil, it does not pay a tariff. One Chinese, on the other hand, pays 35 percent. This has given us an advantage, but also an enormous dependence on that country in export matters, ”analyzes Garzón.

The problem is that the continuous deterioration of Argentine competitiveness meant that, even with this differential in favor, our exports could take advantage of its advantage of geographic proximity.

“The commercial partner that grew the most in Brazil is China, which is far away and has no tariff protection. As you continue to deteriorate your competitiveness, that 35 percent tariff no longer protects you. But other countries in the region, such as Chile or Uruguay, although they have a lower share in imports from Brazil, have remained stable over time, not like Argentina, which shows an endless decline, “adds the researcher.

And he completes: “The problem is that we are an unpredictable supplier in terms of prices or policies, which can block exports. That makes importers look to other countries. ”

Taxes and dollar

The president of the Córdoba Foreign Chamber of Commerce (Cacec), Marcelo Olmedo, agrees. “It is one more photo of the slump that exports showed between 2011 and 2015. Later we had a slight rebound in recent years, but Argentina was never competitive again,” he remarks.

The main problem, according to Olmedo, is the tax pressure. “It is the only country in the world that withholds taxes on its exports,” he complains.

On the other hand, it also considers that the bureaucratic burden and the constant change in the rules of the game influence whether or not to export.

“In Argentina, only primary products and manufactures of agricultural origin are competitive. In what are the industries, with this scheme they can only compete when there are tariff advantages, as in Mercosur ”, remarks Olmedo.

From his point of view, it is a problem that, “if not corrected, will make it very difficult to get ahead” of the recession.

In addition, he considers that it is a wrong strategy taking into account the difficulties that the country suffers from the lack of dollars, which could be generated with a greater flow of foreign trade.