Car firms

Car Firms Import to Export

CNN, October 2011

Alberto Principe’s Hyundai dealership is busy this year selling lots of cars to Argentine farmers flush with funds^[1] from their grain exports to China. Principe says he could be selling even more cars if it wasn’t for the recent 20 per cent import cut aimed at boosting Argentina’s auto industry and staying competitive with their biggest trading partner – Brazil.

The Argentine government recently reduced the number of foreign cars like these that companies are allowed to bring into the country, and then they told these companies they had to export goods worth as much as the cars that they import. And that’s forced many in the auto industry here to get creative, which means Hyundai will soon be exporting biofuel, BMW will be shipping rice, and Porsche will be selling Argentine Malbec wine overseas. Blackberries were in short supply here, so the smartphone maker relented and opened a factory this month in Tierra del Fuego. Sneakers, medicine, Barbie dolls and even books have been held up at the border recently too.

But according to Global Trade Alert, in recent months Argentina has taken more protectionist measures than Brazil, India and China combined. Economist Demian Dalle authored the group’s recent report on Argentina.

Demian Dalle: “We need to protect our market from imports, but I mean not the whole universe of imports, just the ones that are killing our production.”

It’s not just protectionist policies that are troubling to observers: Argentina is still battling creditors in court over 16 billion dollars in unpaid debt, and last month US lawmakers voted against a 230-million-dollar multilateral loan to Argentina, to send a message that it must meet its financial obligations.

Martin Redrado (president of Argentina Central Bank): “It has been using credit(?) in order to pump^[2] domestic consumption, and therefore my key problem or my question to the Argentine economy is first, the way you treat institutions, as in the case of the central bank - as you know, it is now being used to finance the public sector, and that’s inflationary in itself as a policy - but also that there is very little investment.”

Despite lack of foreign investment, shrinking reserves, capital flight and inflation, President Cristina Fernández de Kirchner continues to tout^[3] what she calls the “Argentine model”, and thinks other countries should follow its lead. Her former colleague disagrees.

Martin Redrado: “There must be something really weird about Argentina that when she explains it, nobody pays attention!”

But it’s likely that people will be watching, to see if she can continue leading a most unusual economic recovery.

[1] Flush with funds = having lots of money

[2] To pump = to boost, to inflate

[3] To tout = to promote

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