Entrepreneurs warned that barriers to imports are already holding back investment and growth

Importers warned today that “restrictions on existing external purchases hinder normal supply for production, which could mean lower investment, exports and lower economic growth for Argentina.”

For this reason, the Chamber of Importers of the Argentine Republic met yesterday with the Central Bank “to discuss it”.

“This is because renewed official barriers to imports create additional price increases and obstacles to economic growth sought by the government itself,” CIRA said in a statement.

The Central Bank of the Argentine Republic (BCRA) ordered, in the first days of March, through Communication “A” 7466, the allocation of a specific category linked to the access to the exchange market and the availability of foreign exchange for certain imports. As proposed by the regulations, higher than expected economic growth would generate greater demand for imports and the imposed limit would end up having an earlier and more negative impact on production and consumption.

During 2022, demand for external purchases is estimated to be higher due to increases in international prices, which may contribute to the value of Argentine exports. An increase in the volume of exportable supply is required, which will be possible if the imports needed to produce are also increased.

The ongoing recovery of economic activity in Argentina requires imports. 41% of imports are intermediate goods, 35% capital goods and parts thereof, 9% fuel and 14% consumer goods. Taking the average of the last six months, the intermediate goods category increased by 52% per year, followed by parts and accessories for capital goods (46%) and capital goods (33%).

In this scenario, limiting access to the foreign exchange market by up to 5% above the value of 2021, with expected GDP growth of around 3% and with input prices rising sharply due to events in Ukraine, it is to be expected that an impact on output will be seen as intermediate inputs and capital goods are the first items that would reach the limits.

Yesterday, authorities from CIRA and BCRA met to discuss and discuss this situation and the aforementioned Communication “A” 7466. Regarding the latter, CIRA expressed concern about the negative impact, in the short and medium term, on the plans of enterprises, production, economic activity and employment in Argentina. An important channel of dialogue was opened to follow up on current and operational issues, in order to minimize the impact and uncertainty on foreign trade operations.”

Faced with the implementation weeks ago of a system of additional controls for automatic licenses, sources from an industrial chamber pointed out that “the big problem with the Central Bank rule is that it not only slows down growth and generates a shortage of products which leads to higher prices or more inflation.”

It should be recalled that the entity presided over by Miguel Pesce ordered its incorporation into the Comprehensive Import Monitoring System (SIMI), which evaluates each import operation and in which the Ministry of Productive Development and the AFIP participate. In this way, the Central Bank assigns a category to each order to access the dollars to pay for the import.

At the same time, BCRA also provided for “maintaining until the end of the year the market access conditions applicable to import payments, prior agreement to make payments of foreign financial indebtedness with related creditors and rules on refinancing external liabilities”, that is, the entire regulatory body in force to import.

But one more step was added: the Central Bank assigned each SIMI a category, A or B. In the first case, the importer receives the same treatment as it had so far; if category B is awarded, the import of associated goods must be financed at least 180 calendar days from the registration of the entry customs office of goods to Argentina.

The BCRA enabled exchange market access to an importer for SIMI category A by the equivalent of the lower of two amounts: the FOB value of its imports in 2021 plus 5% or the FOB value of its imports in 2020 plus 70%. For new importers, the limit will be set at USD 50,000, as well as for those who have not exceeded that amount based on the previous calculation.

The BCRA regulations cover almost all products with automatic licenses.

In addition, sources indicated that this administrative decision “is based on 2020 plus 70 percent or 2021 plus 5%, whichever is less.”

“In the case of most factories they were reactivated in 2021, because 2020 was a pandemic year with many items closed directly and with a lot of raw materials missing, rather than due to the change of government in 2019 and it was only last year that industrial changes were normalized,” he emphasized.

In this regard, they indicated that “all incentives for domestic manufacturing are affected by the extension of non-automatic licenses”

“All factories have the base of 2020 very low and, therefore, in 2022 they will have fewer inputs and imports than in 2021, which not only does not allow them to grow, but on the contrary it would paralyze them shortly, since many of them have just opened or started up,” they indicated.

For this reason, it was stated, “there are already many questions being made by the industrial chambers on this subject”.

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