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Monday, January 31, 2011

Foreign trade of Argentina

Argentine economy in the late 1990s was in an unstable condition and growth was hampered by rising debt and inflation. To counter this problem, the then government deployed measures in the form of increased Argentina trade and exports. However, inflation rates are still high and are an impediment to the country’s overall economic development.
Port call on Buenos Aires' southside wharf (La Boca), circa 1880. Financed mostly with
British capital, massive dock works touched off a foreign trade boom that
reshaped the previously isolated Argentine economy.,

Argentina’s trade surplus, as of May 2009, rose 139% from the 2008 levels to $2.48 billion due to a sharp drop in imports, in the wake of the economic meltdown. The overall exports dropped by 18% in May 2009 to $5.14 billion, while imports fell by 49% to $2.66 billion. The export slump was attributed to lower prices of grains and oilseeds. While the volume increased 6%, export prices fell by 13%. The imports plunged 39% in volume and 16% of value. Purchases of foreign made and capital goods shrank in May 2009. The trade surplus in the first five months of 2009 was $8.33 billion, up by 63% from $5.12 billion in the first five months of 2008.Argentina Trade: Exports and Imports

Argentina’s electricity exports were 2.628 billion kWh in 2007 and imports were 10.28 billion kWh in the same period. The oil exports accounted for 314,400 b/d in 2007 and imports accounted for 52,290 b/d. Argentina’s oil reserves were 2.616 billion b/d, according to the January estimates. The natural gas reserves of the nation stood at 441.7 billion cu m according to the January estimates. In 2008, the natural gas exports were 890 cu m and the natural gas imports were 1.3 billion cu m in the same period.

The overall exports in Argentina for 2009 were $58.87 billion in 2009, down from $70.02 billion in 2008. Argentina’s primary export commodities include soybeans, oil, petroleum, wheat, corn and automobiles. The nation’s main export partners are Brazil, China, the US, Chile and the Netherlands.

Argentina’s overall imports in 2009 were $37.61 billion, down from $54.56 billion in 2008. The nation’s primary import commodities include machinery, petroleum and natural gas, plastics and organic chemicals. Its main import partners are Brazil, China, Germany and the US.

Argentina is a leading exporter of agricultural products and is the world’s 3rd largest soy exporter. The manufacturing exports have been boosted by car exports to Brazil.

Modern history

Agriculturally productive and thinly populated, Argentina recorded trade surpluses for most of the period between 1900 and 1948, including a cumulative US$1 billion during World War I and US$1.7 billion during World War II. Record taxes on grain exports imposed by the administration of Pres. Juan Perón and an increasing need for costly fuel and machinery helped result in a nearly-unbroken string of trade deficits between 1949 and 1962, however.

Port call on Buenos Aires' southside wharf (La Boca), circa 1880. Financed mostly with British capital, massive dock works touched off a foreign trade boom that reshaped the previously isolated Argentine economy.
To address this, Perón himself and, most notably, the administration of Pres. Arturo Frondizi encouraged foreign (as well as local) investment in energy and industry. Drawn to an economy that, at the time, provided Latin America's highest standard of living, investors responded and the country's trade position remained modestly positive throughout the 1963-79 era, while demand also grew.
Policies of "free trade" and financial deregulation pursued by Argentina's last dictatorship led to a sudden, record deficit in 1980 and, by 1981, a mountain of bad debts and financial collapse. The climate of slack domestic demand that prevailed in Argentina throughout the 1980s resulted in a cumulative US$38 billion in surpluses from 1982 to 1991; this brought the economy little direct benefit, however, as much of this was deposited abroad during that era of interest payment burdens and financial instability.
In 1991, Economy Minister Domingo Cavallo created the Argentine Currency Board, pegging the monetary value of the Argentine peso to the United States dollar by law. The fixed exchange rate (1 peso to the dollar) allowed for a macroeconomic stabilization. Taking advantage of this low exchange rate, on the lower tariffs on imports and on the reappearance of credit after the free trade liberalization measures taken by President Carlos Menem's administration, Argentine firms and consumers tripled capital goods purchases from 1990 to 1994, while depressed auto sales rose by fivefold. The influx of imported machines and supplies helped the modernization of the country's industrial base; but it negatively impacted its trade balance, which accumulated US$22 billion in deficits from 1992 to 1999.
Relying on sizable foreign investment inflows to balance the current account, these did not suffice and the Argentine Central Bank was again forced to resort to borrowing to protect the peso's value against such pressure (mostly by floating bonds, then the most sought-after in the developing world). Recession helped lead to a US$1 billion surplus in 2000 and another US$6 billion in 2001; but it was too little, too late. Buffeted by generalized global instability, the international derivatives market massively shorted Argentine bonds in the second half of 2001 and on December 23, following a spate of unpopular crisis measures, the Argentine government declared a default on US$93 billion of its bonds, the largest sovereign debt default in history.

The effects of the 2001 crisis
Immediately after the collapse of the Argentine economy at the end of 2001 and the devaluation of the peso in 2002, imports fell over half and Argentina's trade surplus soared to over US$16 billion, providing for the first current account surplus since 1990. As recovery ensued and the exchange rate stabilized around 3 pesos/dollar, exports (mainly soy, cereals and other agricultural products, as well as machinery and fuels) grew steadily.
Imports began recovering sharply in 2003, as the purchasing power of companies and individuals increased and, despite this, from 2003 to 2008, the nation's trade balance recorded a cumulative US$77 billion in surpluses.

Argentina's exports and imports (FOB), in millions of USD, 1992-2004.
Commercial relationships

Mercosur, the customs union that includes Argentina, Brazil, Paraguay, and Uruguay, entered into force January 1, 1995. Chile and Bolivia joined the pact subsequently as associate members. Cooperation between Brazil and Argentina (historic competitors) is the key to Mercosur's integration process, which includes political and military elements in addition to a customs union. Brazil accounts for more than 70% of Mercosur GDP and Argentina about 27%. Intra-Mercosur trade rose dramatically from US$4 billion in 1991 to over US$23 billion in 1998. More than 90% of intra-Mercosur trade is duty-free, while the group's common external tariff (CET) applies to more than 85% of imported goods. Remaining goods will be phased into the CET by 2006.
Brazil's higher level of industrialization and production capacity, as well as other economic asymmetries, have been a source of tension with Argentina. In recent years, Argentina's recovering industrial sector has pressured the government to obtain restrictions (especially quotas) on Mercosur's free trade regulations, in order to protect their growth from what they see as disloyal competition from their larger partner to the north. Exports to Brazil helped lessen the impact of the 2001-02 crisis on the industrial sector, somewhat, though Argentina's intra-Mercosur trade yielded it a cumulative US$15 billion deficit from 2004 to 2008.

United States
The United States traditionally records a modest trade surplus with Argentina and the record for this figure was logged in 1998, when it reaped a nearly US$3.7 billion surplus; these have been much smaller, since then. Fresh Argentine beef was exported to the U.S. market in 1997 for the first time in over 60 years, and in 1999 its export quota of 20,000 tons was filled. However, beef exports to the U.S. were suspended in August 2000 when Argentine cattle near the border with Paraguay (whose authorities refuse to vaccinate cattle against highly contagious hoof and mouth disease) were discovered to have anti-bodies for the infection. The quota was reinstated in early 2002 and has since averaged 28,000 tons.

Intellectual property issues
Argentina adheres to most treaties and international agreements on intellectual property. It is a member of the World Intellectual Property Organization and signed the Uruguay Round agreements in December 1993, including measures related to intellectual property. However, extension of adequate patent protection to pharmaceuticals has been a highly contentious bilateral issue.
In May 1997, the U. S. suspended 50% of Argentina's GSP benefits because of its allegedly unsatisfactory pharmaceutical patent law. In May 1999, The U. S. Government initiated consultations under World Trade Organization procedures to address these inadequacies and expanded the consultations in May 2007

Exports and imports

Last available data on exports are from 2007. Such qualitative data on imports are not immediately available. INDEC provides import estimates according to final use.
Argentine exports are mainly of the agricultural type, mostly processed goods. In all, exports of agricultural origin make up 54% of the total. Soybean products (the beans themselves, feed, oils, etc.) account for 24.1% of total exports. Cereals (mostly wheat and maize) make up for 8.3%. Beef, for which Argentina is well-known, made up 3.3%.
Industrial manufactures, which twenty years ago were but 10% of exports, provided 31.1% of the total in 2007. Motor vehicles and parts constituted 9.6% of exports, chemicals and medicine, 5.3% and the siderurgical industry (mostly steel and aluminum), 5.1%.
Fuels and energy provided 12.2% of total exports. Petrochemical industries provide 7.2% of exports (mainly refined fuels). Petroleum and natural gas each accounted for 2.3%. Argentina's principal mineral export is copper, 2.7%.
Brazil has, since the 1991 creation of the Mercosur common market, been Argentina's largest trading partner, though Brazil usually runs a trade surplus with Argentina (US$4.2 billion in 2007, a record). Brazil took 18.8% of Argentina's exports and provided it with 32.8% of its imports in 2007. Formerly Argentina's largest trading partner, the European Union took 17.7% of exports and provided 16.6% of imports. The United States has enjoyed a trade surplus with Argentina for most of the last sixty years. In 2007, it took 8% of Argentine exports and provided 13.1% of imports, resulting in a US$1 billion surplus for the U.S.
Asian nations have also become significant trading partners with Argentina. Including the Middle East, they took 20.2% of exports and provided 19.6% of imports; China makes up about half of this. Because of the large trade surpluses Argentina has been running with Chile (mostly on account of growing fuel and energy needs), this neighboring nation has become very important to Argentine foreign trade; Argentina recorded a US$3.5 billion surplus with Chile in 2007, more than with any other trading partner.
In March 2006, after several unsuccessful attempts to contain rising beef prices in the internal market, the national government suspended all beef exports, with a few exceptions, for 180 days, a drastic measure intended to redirect up to 600,000 tonnes for internal consumption.
Argentina's merchandise imports and exports both reached historical highs in 2007. Imports grew 31% to US$44.7 billion and exports, 20%, to US$55.8 million. This resulted in a trade surplus of US$11.1 billion (the sixth straight year double-digit trade surpluses were recorded). The largest growth in exports was found in the agricultural raw materials sector (45%). Imports continued to be dominated by the need for industrial and information equipment, parts and supplies; together, they amounted to US$34 billion in 2007 (about three-fourths of the total). Motor vehicles and other consumer goods make up most of the rest.
A non-official source, Foreign Trade of Argentina, has compiled a list of principal definitive imported products for 2009, for 2008 and for 2007, as well as for export statistics, among which are the principal these are the main definitive exported products for 2009, for 2008 and for 2007.
Argentine foreign trade in 2007.
(million US$)
Trading partner Exports Imports Balance Trade by area Exports Imports Balance
Brazil 10486 14660 -4174 Mercosur 12470 15750 -3280
China 5360 5127 233 EU 9838 7445 2393
United States 4345 5352 -1007 Asia1 9588 7881 1707
Chile 4176 708 3468 ALADI2 7794 1707 6087
Spain 2059 813 1246 NAFTA 6126 6981 -855
Netherlands 1797 237 1560 Africa 3980 271 3709
Mexico 1434 1337 97 ASEAN 2126 1234 892
Italy 1387 1071 316 others 3858 3439 419
Germany 1221 2131 -910
Uruguay 1205 467 738
Venezuela 1176 24 1152
South Africa 999 131 868
others 20135 12649 7486 TOTAL 55780 44707 11073
1 (except ASEAN) 2 (except Mercosur and Mexico)

Argentine exports by province, 1st half 2008.
(million US$)
Province Exports Per capita
(annualized) % of economy
Buenos Aires 11792 1567 21
Santa Fe 7143 4405 52
Córdoba 4505 2698 42
Chubut 1019 4421 29
Mendoza 800 925 10
Entre Ríos 784 1249 22
Catamarca 739 3809 63
San Juan 577 1658 29
Santa Cruz 540 4779 16
Salta 534 873 21
Tucumán 529 717 18
Río Negro 412 1380 17
Neuquén 335 1223 5
Tierra del Fuego 297 4714 23
San Luis 280 1279 23
Misiones 211 391 10
Federal District 192 126 0
Santiago del Estero 178 411 14
Chaco 172 327 16
La Pampa 165 989 16
Jujuy 132 388 10
Corrientes 79 156 4
La Rioja 76 446 11
Formosa 18 67 2
Not classified by prov. 1962 n.a. n.a.
TOTAL 33472 1684 20


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