For decades, the United States and Argentina disputed continental leadership, leveraged by the non-complementarity of their respective productions. Time shelved that competition as Washington’s power became hegemonic on a global scale and Argentina began a long and gradual decline.
An exchange SOS. The double financial aid that the Government obtained this year had the support of the Trump administration: the lifeline that the IMF (with influence from the United States) granted in April, when it provided the room for maneuver to make the stocks more flexible and released exchange pressure and then, the explicit support of the North American government through the Treasury with the currency swap for up to US$20,000 million and interventions in the Argentine exchange market, sufficient to calm the waters in the short term.
The proof that the economic program was not sustainable, even before the acceleration of the deterioration of expectations, was that the suggestion received by its “sponsor” and also what they understood their own voters expected, that of a window of time in which the Government must carry out the necessary reforms to recalibrate a sustainable economic plan. Thus he listed changes in the institutional framework in fiscal, labor and pension matters; which will also lead to the search for an indicator such as balance in the exchange market. And here appears the other wild card in this new political alliance with the great northern country: a new trade agreement.
For the United States it is not the first nor will it be the last. Since Donald Trump’s policy decided to shuffle and give again in matters of foreign trade (and its corresponding global balance of power) and then negotiate a new customs agreement with each one. It has already done so with 20 countries and everything indicates that Argentina will be the next to sign it, in addition to what is being cooked with the other regional power, Brazil.
Between the lines. Although what was announced by the Secretary of State and the Argentine Foreign Ministry was the framework agreement on investments and trade, the debate on the convenience of greater commercial opening with the largest economy in the world was not delayed. It is logical: in recent decades the Argentine economy has been generating a protection device for local production that has isolated it from the greater flow of exchange that occurred during the last post-war period: The volume of foreign trade does not exceed 20% of GDP, a very low index for a country the size of Argentina.
For the economist BTG Pactual and professor of the Di Tella University Andrés Borenstein, Since the implementation is going to take a while and we don’t know the fine print, it won’t change our lives in the short term. “These types of agreements are not zero-sum games, if they are done well, they are “win-win” for those who sign them,” He maintains without failing to mention that, as in any negotiation, there are interests of both parties that must be combined and it would be naive to get what he wants without giving up anything in exchange.
The passage of time changed the productive profile of both economies. The North American agroindustrial complex is the one that sees its Argentine counterpart as a serious threat because it made a technological leap perhaps to overcome the fiscal and exchange burden and with other rules of the game it could displace it from several markets. But the novelty is the business opportunity offered by the mining and energy sector, which requires a formidable injection of capital, impossible to face in a domestic market or a State that hardly has the capacity for fiscal maneuver. In this regard, Marcelo Elizondoowner of the consultancy ID and president of the Argentine chapter of the International Chamber of Commercepoints out that This agreement is part of a set of agreements, such as the SWAP, an unwritten pact by which the United States intervened in the exchange markets to stabilize or the possible pact to obtain US$20 billion in financing from private banks with support from the Treasury. “In this framework, Argentina is receiving many benefits from the United States and there is much to be defined, but it is an Argentine promise to improve the conditions of access for North American products in some areas (automotive, pharmaceutical, services, especially linked to technology) and on the part of the United States, a commitment to improve the entry of Argentine natural resources, especially in those in which there is no supply there.he explains.
Although there are no further explanations about what items they would be, there are reciprocal promises of uniformity, of standards, of updating of non-tariff regulations, which are reciprocal and will be common, certifications admitted from one country to the other, common standards, all of which is not tariff, but it is important. “With this framework, I believe that North American investment in Argentina is encouraged and with the United States being the largest foreign investor in the world (US$10 billion invested by North American companies abroad), there is a great opportunity for capital flows in minerals, energy and infrastructure, which arises from all this rapprochement.”projects. It also suggests that it would be advisable to take advantage of the fact that the United States is the largest importer in the world, generating technology and products of world-class quality that could be complemented with the delayed agreement with the European Union.
another horizon. The economist Sergio Rodríguez Glowinskidirector of Ingeco and stockbroker in the United States, lists the consequences that an agreement that goes in this direction would have for the Argentine economy: 1) tariff reduction and regulatory simplification will improve the competitiveness of sectors with immediate export capacity (agriculture, mining, energy and some industrial sectors). 2) Greater imported competition will force local companies to invest in technology, processes and human capital. Also, those industries that fail to compete will tend to reduce and/or disappear and relocate to sectors where Argentina is competitive internationally. 3) The agreement reinforces the transition towards an open economyless oriented to the domestic market and more dependent on expos. If sustained, it could become a turning point similar to what other countries in the region experienced when they adopted broader trade schemes (such as Chile, which has consumer prices similar to those of the United States). 4) Benefited sectors: lithium and copper mining; agribusiness (especially meat and by-products); Manufacturing sectors such as machinery, pharmaceuticals or chemicals could obtain more competitive prices by lowering tariffs on US products 5) Damaged sectors: protected industries with low international competitiveness (textiles, footwear, household appliances, auto parts), historically dependent on high and non-competitive tariffs at the international level; and manufacturing of capital goods (similar to the previous case). Finally, the entry of cheaper American machinery could displace national production, especially in segments where there is already a large technological gap.
For Rodríguez Glowinski, the increase in North American investment will depend entirely on political continuity and macro stability, which reduces the perception of legal risk, a relevant factor for Argentina, through clauses on intellectual property, regulatory predictability, competition and international standards. “The positive thing about these changes is that they are a positive shock for all industries, enabling greater investments in all sectors”he concludes. The goal is clear, the path to get there and the difficulties to achieve it, too.
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