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US relation with Argentina souring: Congress to cut special trade benefits

Saturday, March 24th 2012 - 02:31 UTC
Full article 79 comments
Ambassador Argüello heads a delegation to promote Argentine exports Ambassador Argüello heads a delegation to promote Argentine exports

The US administration of President Barack Obama is loosing its patience with Argentina and in coming days is expected to finalize special tariff benefits for certain Argentine exports.

The measure can be seen as a reaction to Argentina’s reluctance to comply with court ruling favouring two US companies plus the latest restrictive chapters of Argentine trade and money transfer policies.

Diplomatic sources have anticipated that the elimination of Argentina from the Generalized system of Preferences (GSP) is ‘imminent’ and is linked to a formal request from the US companies Azurix and Blue Bridge which won demands against Argentina at the International Centre for Settlement of Investment Disputes, ICSID, involving 400 million dollars.

Apparently only two countries are going to be excluded from the annual preferential system review when Congress addresses the issue: Argentina because of the default and Sudan which sees no end to its decades’ long civil war.

Even when the sanction is not that strong in economic terms (it is estimated it involves 500 million dollars in exports with tariffs losses of 30 million), what really matters is what seems to be a clear signal of “enough is enough” in the bilateral relation.

“For several years now Argentine political power authorities have been warned that if the US companies with favourable rulings at ICSID are not paid, the US congress will adopt this decision, and they did nothing to stop it”, said diplomatic sources.

Actually Argentina is prepared to abide the rulings but wants the companies to accept payment in similar terms to those of other creditors. Informally Argentina even tempted the US companies with the terms of the defaulted sovereign bonds from 2005 and 2010, basically payment in Argentine bonds but with a 70% rebate.

A paper on the issue from two foreign trade experts, affirms that the GSP benefit for Argentina is virtually zero and the exports enjoying such a benefit represent only 14% of total sales to the US and less than 0.007% of total Argentine exports. The sectors which would most suffer refer to “footwear, plastic, rubber, textiles and clothing”.

However US companies operating in Argentina pointed out that President Obama can decide on the partial or total annulment of the tariff benefits but there is also “an extended feeling of frustration among US officials as to the economic course of Argentina”.

US companies in Argentina are divided: those working for decades know the market and more important the rules and risks of the game; but the new ones are complicated with imports controls, restrictions on funds’ transfers be it for royalties or dividends and the cancelling of credit lines for exports with foreign banks.

The anticipated suspension or cancelling of the tariff preferences, takes place when a top level trade delegation is planning to visit the US to try and promote Argentine exports. The delegation is headed by Foreign Trade Secretary Beatriz Paglieri and the head of International Economic Relations Cecilia Nahón together with Ambassador Jorge Argüello.

“Bilateral trade deficit with the US has meant red numbers for Argentina to the tune of 4.12 billion dollars in 2011, so the argument of the alleged trade restrictions coming from the US do not correspond to what the statistics are showing” said Argüello.

However in private talks apparently Secretary Paglieri said restrictions will continue until Argentina manages a trade balance with all those countries with which is has significant deficits. But US trade officials have said that the strong appreciation of the Argentine Peso is really the main obstacle to achieve such an objective.

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  • tobias

    This article is a bit all over the place, both for Mercopress and regular contributors here who push forth a certain narrative. Relations souring but the effect the US has on Argentina with this is effectively 0%.

    Further, how can the US claim the Argentine peso has strongly appreciated when everyone here insists it is weak? Of course, our resident “economists” seem to not understand that while the nominal face value of the ARS is 4.30/4.50, the real value is much higher than 3 years ago because of internal inflation.

    If you are an American and came in 2009 and got 400 pesos for your 100 dollars, you could buy 5-6 nice dinners. If you came today and got 450 pesos, you can only get 3. So while the face value exchange seems similar, the real costs are not. Argentina has reflated in value from within, not through the currency value.

    The only thing consistent in all this is the complete amateurism and nauseating diplomacy of the Kirchner government, on that we can all agree.

    Mar 24th, 2012 - 02:49 am 0
  • Braedon

    But how can this be!? argentina must have sent their best man to sweettalk obama....

    oh wait, its the guy who whined about the Falkland Islanders being supporessed hostages who “longed to be argentine” before publically screaming they were liars when they disagreed

    I just wonder how the upcoming ambassador to the UK will do

    Mar 24th, 2012 - 06:17 am 0
  • Beef

    Tobias, you lot voted her in. It is your collective fault.

    Mar 24th, 2012 - 07:37 am 0
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