MercoPress. South Atlantic News Agency

Argentine plan to boost consumption and exports

Argentine President Cristina Fernandez de Kirchner unveiled Thursday a new set of measures to boost the economy including credits for the auto sector and consumption as well as a reduction in export duties on wheat and corn.

"We are going to promote production, investment, labor, employment and consumption" said Mrs. Kirchner on announcing a total package worth the equivalent of 3.85 billion US dollars. A billion USD will come in cheap credits for the auto sector, while broad consumer credits would run to 1.1 billion USD. Mrs. Kirchner made the announcement in Government House before hundreds of political and business leaders. The auto sector which has been one of the most dynamic of the Argentine economy with an annual average growth rate of 9% saw sales plummet 28% in November and exports 24%, according to data from the automobile manufacturers association. The funds would be provided by the state-owned Banco de la Nacion which acts as a development corporation and from ANSES the social security agency which is expected to receive a significant cash injection from the nationalization of the private pensions' funds. Mrs. Kirchner said that these funds would be offered to tendering banks with a benchmark deposit rate of 11% via an auction system that would aim to drive down the spread for commercial and other loans. The funds would be invested over a one-year period, she said, in a bid to "give more certainty" to banks' sources of funds. Regarding the farm sector the cut in export duties would apply only to wheat and corn, which would see their rate initially reduced by 5 percentage points to 23% and 20%, respectively. Mrs. Kirchner said there would be additional tax cuts in response to increases in production. However it seems the giant soybean production sector will not see its 35% export tax rates cut. The announcement comes on the heels of other stimulus measures revealed last week, including an infrastructure public works program worth 21 billion USD and a set of tax amnesty incentives to boost the number of documented workers and encourage Argentine savers to repatriate undeclared funds held abroad. Business leaders reacted cautiously Thursday, calling the stimulus plan a step in the right direction. "The measure is trying to reactivate the economy in two ways: credit for consumers and credit for production," said Jorge Brito, head of the Argentine Bank Association, which represents the country's largest banks. "It's a positive move." But economic analysts doubted it would be enough to correct the slowing exports, overvalued currency, and diminishing investor confidence that is plaguing Argentine growth. According to Argentine consultancy Ecolatina last October Argentines sent 4 billion USD in investments and cash out of the country. Consumer confidence dropped by 24% in November over the year-ago period, while buyers willing to spend on big ticket items like cars and refrigerators fell by 41%, according to a study by the Centre for Financial Investigations at Buenos Aires' Torcuato Di Tella University.