Argentina: higher tariffs on capital goods, soft loans for industry and fiscal bonus
Argentine President Cristina Fernandez announced higher tariffs for capital goods and the extension until the end of the year of the “fiscal bonus” with the purpose of “sustaining current countercyclical policies” given the international economic crisis.
“Given circumstances--not in Argentina, rather in the world--it's imperative that we sustain our strongly countercyclical policies and accentuate them as in the case of the increase in import tariffs for capital goods” said Cristina Fernandez in a speech broadcast on national television Wednesday.
Starting in July, imported capital goods that compete against local producers will be subject to a 14% tariff. Imported capital goods that don't have a local substitute will face a 2% tariff.
The measure is aimed at neutralizing effects on domestic industry from “unfair competition” amid a slowdown in the global economy which is creating a massive supply of capital goods from out of the region countries and “where their economic activity level is dropping significantly”.
The ‘fiscal bonus’ which was up next July was extended until the end of the year “to sustain competitiveness in the sector particularly with those competitor countries with which we have no tariffs”.
As part of the deal companies that benefit from the tariffs will be required to keep their staff at December levels, invest in expanding production and offer goods at “internationally competitive” prices.
The president said the Industry Ministry will publish on its website a list of firms so the public can help the authorities make sure they are actually protecting jobs.
“We are demanding that the business sector respond by keeping jobs at the maximum levels of December, which is the seasonally highest [period] of employment” said CFK.
However in spite of Wednesday’s announcements, last May 22 Argentina’s questioned stats office Indec said that during April the import of capital goods had dropped 37%.
Cristina Fernandez indicated the government also plans to make cheap credit available for industry. Protective tariffs and the promise of low-interest loans are similar to the measures she implemented three years ago, when the 2008-09 global financial crisis. Back then subsidized loans to the automobile industry prevented large industrial firms from dumping workers.
The president, who won re-election with 54% of the vote last October, has touted Argentina's rapid economic growth and low unemployment as one of the main accomplishments of her administration. The economy almost doubled in size between 2003 and 2010, while unemployment stood at a multiyear low of 7.1% in the first quarter.
After expanding 8.9% in 2011, many economists predict little if any growth this year due to a sluggish Brazilian economy, years of double-digit inflation, and policy blunders.
The Argentine government has resorted to blocking imports and rationing the foreign currency Argentines can purchase to make sure enough dollars are on hand at the central bank to pay government creditors.
Those measures have sent a chill through the economy as factories face shortages of imported parts and the heavily ‘dollarized’ real estate market grinds to a halt for want of greenbacks.
In the same line of thinking, last month mining companies were informed they would be required to submit requests to the government 120 days before importing goods and set up an “import substitution” department to boost buying of locally made goods.
The mining companies operating in Argentina will have to submit quarterly estimates of their purchasing needs, which will be vetted by a special working group at the Mining Ministry.
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the angel speaks,
all will be well then.
Two questions:
What exactly is an “import substitution” department?
Is anyone taking bets on how long she can keep this up?
You have a command economy - congratulations
Essentially this is the opposite of a well run economy.
You've got to wonder who makes up these ridiculous policies for her? Did they go to school never mind study economics?
Most of the mines I have worked at use CAT Heavy Diesel Earthmoving equipment, Dump Trucks etc.
How many bottle tops would it take to repair one of these babies?
www.google.co.nz/imgres?q=cat+mining+equipment&hl=en&biw=959&bih=861&tbm=isch&tbnid=3rUYSX-iFDysYM:&imgrefurl=www.equipmentworld.com/cat-completes-bucyrus-acquisition/&docid=j9qJUijxdYFa-M&imgurl=http://www.equipmentworld.com/files/2011/07/Cat-7495-shovel-loading-795F-AC.jpg&w=1600&h=1200&ei=40jQT83SKcuhiQfmuIntCw&zoom=1&iact=hc&vpx=523&vpy=357&dur=8533&hovh=194&hovw=259&tx=54&ty=214&sig=108299463367059900894&page=2&tbnh=153&tbnw=196&start=16&ndsp=20&ved=1t:429,r:14,s:16,i:137
It is all imploding now. All of theses ridiculous, feeble and stop gap measures will make this hard landing even worse.
The provinces are out of pesos, CFK will be forced to print to pay the bills. It is the only “trick” that is left in the bag.
So what is next, devaluations and hyper inflation. The mass layoffs have already begun with Renault laying off 2000 workers, the rest of the car mfg will follow shortly. Arg may get their wish of lower imports except they will have even lower exports to make up the difference.
dumb dumb people
The outcome is that I don't spend more money on something that is ultimately worse. Multiply this throughout the population and remind yourselves that people generally don't spend money on cr@p, and you'll see that the economy just stops dead.
The only place I can think of where Import substitution may have worked is South Korea, but let's face it... their suicide rate is massive, and their music is dreadful.
Jun 07th, 2012 - 11:03 am
Amazing country Argentina, the peronists have been constantly destroying her for the last 70 years, and somehow she keeps struggling along.
The down time is bloody painfull and the up time is great, I guess Argentina is, like Kretina, bi-polar and there is no medication for a whole country!!!!
Then we can laugh ourselves sick.
NOTE: Where are all the “faithful” argie bloggers?
CFK has resorted to blocking imports and rationing the foreign currency Argentines can purchase to make sure enough dollars are in hand at the Central Bank to pay government creditors. Those measures have sent a chill through the economy as factories face shortages of imported parts and the heavily dollarized real estate market grinds to a halt for the want of greenbacks. Auto production also fell 24% during the year.
I have said many times that former president Carlos Menen ruined the economy of my country. Since then is difficult to find an economic plan.
The argentine leader like the US president Barack Obama are both BIPOLAR and their ability to present a good economic plan is very difficult. Both leaders need support. Not negative comments.
I believe all of you know the US has the highest BIPOLAR RATE IN 11 NATIONS. In 1980 20 millons US citizens took Prozac, the same medicine Diana Spencer took for years. In her case, the medicine failed because she did not receive SUPPORT.
In this diffcult economic times, the argentine leader is trying to do her best.
The UK is facing another recession but I DO NOT LAUGH..people are suffering hunger...
If any of you have a better economic plan for Argentina and the US, PLEASE STAND UP.
I did not say Carlos Menen “ruined the US economy”.
Carlos Menen ruined the economy of Argentina.
Bush ruined the US economy.The US deficit of 15 trillon dollars is increasing.. most of the US citizens are suffering unemployment, high food prices, ...CNN tells the truth.
#17 Sussie thats a good post, I agree with you about Menem and Bush but I'd warn you that Romney stands for the same disastrous neoliberalism that ruined the economies of both your couunties in the past
To which the standard reply from the clown Timmerman is “Its not our fault its the Malvinas”
Self deluded,history re-writing comedy show.
30% Inflation, peso collapsing, energy crisis, Loan defaulter,capital flight,Tick Tock stand back and enjoy the carnage.
@ 17 In these diffcult economic times, the Argentine leader will do anything to hide the truth about just how badly she has screwed you over.
@ 23 ....and not tired at all =) Chuckle, wasn't sure you “got” the reference :)
Have a look at this. en.mercopress.com/2012/06/07/new-zealanders-misinformed-about-malvinas-war-says-argentine-ambassador#comment132463 The buggers are all over the place :-)
www.StopFundingArgentina.org
Anyone reading this outside of Argentina sign THE FORM NOW.
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