Aduana News: How do you imagine the development of Argentine exports for the year 2003?
Answer: The Government has been working this year on the design and implementation of the National Strategic Productive Plan, in which exports are a decisive component but integrated with short-term recovery and with the demands for modernization and ensuring more permanent conditions for growth in the medium and long terms. We already think that exports will grow significantly in 2003, as we stated in the budget project sent to the National Congress, in which we estimate an increase in external sales in real terms of 5,2% with respect to this year.
But the most important thing is that we apply a strategic vision for the future in a sector in which not much effort has been devoted in the last 35 years, both in the country and in the region, despite the fact that conditions have been generally favourable. Our country not only needs to increase foreign sales. Among other things, it is necessary to diversify products and markets, and develop strategic plans to add industrial, agro-industrial and service goods to the export profile, in branches in which there are comparative and competitive advantages. It is also necessary to integrate the production of parts, pieces and inputs with marketing, develop an active and demanding internal market, quality services and competitive prices, well-trained human resources and appropriate infrastructure. In addition, exchange rate conditions must be flexible to prevent productivity gains from being converted into competitiveness losses due to excessive overvaluation of the national currency; and financing structures, regulations and taxes must also be adequate. In recent months, the government has signed three very important foreign sales agreements for the automotive industry, with Brazil, Mexico and Chile, which open up the possibility of exporting more than 150.000 cars annually. In addition, an agreement was signed for an IDB loan to finance the Border Crossings and Integration Corridors program, which provide Argentina with fluidity in accessing the Pacific and better land routes with all of its neighbors in the expanded Mercosur. Significant progress has been made in trade with China, Argentina's main partner in Southeast Asia. Last August, agreements were signed with that country that favor the trade of dairy products and poultry meat and talks were opened to diversify the exchange. With a vision for the future, the Ministry of Economy, the Ministry of Production and the Office of the Chief of Staff are working in three areas that have a direct influence on the export profile and a lot of potential for growth in the short and medium term. Additionally, the President presented the Argentec program, in which we propose the development of the software industry, a sector in which Argentina has human capital similar to that of developed countries and which can achieve exports of no less than US$ 200 million in two years, growth rates of between 15 and 20% annually and create directly or indirectly 10 to 15.000 jobs. The second programme is to develop the value chain for the use of gas as fuel, an area in which Argentina has achieved a very important competitive advantage. Today our country is the world's leading exporter of turnkey packages of equipment for service stations, gasoline to gas conversion equipment and cylinders. Currently, US$85 million are exported per year, but with a strategic plan to change internal energy demand and export development, sales of US$1.000 million per year can be achieved by 2007, plus an additional US$1.500 million from the export of oil and derivatives that would be released for domestic consumption. The third programme concerns financing and has a general impact on all foreign trade. We are working on creating non-traditional financing mechanisms, such as trusts, to support the various phases of production and marketing of goods, in some cases with specific focus on the sectors I mentioned earlier. We want to solve the problem of the lack of financing caused by not having abandoned the convertibility regime in time and as a consequence of the engineering operations that were tried to sustain it despite the evident collapse of the real economy and that have caused Argentina to become over-indebted. The current situation weakens the export potential, which is why, in addition to the need to restore order to the very chaotic situation at the beginning of the year and to regain confidence in order to strengthen the financial system, the Government has set as one of its priorities the achievement of an agreement with the International Monetary Fund (IMF) that will allow for the construction of better financial relations with the world. This would open up the possibility of accessing export financing programs, through guarantee schemes for deposits linked to marketing operations, through the International Finance Corporation or the Inter-American Development Bank (IDB), which would turn good prospects into real goals.
Aduana News: What do you think about integration with the FTAA and what implications could it have for the country?
Answer: The conditions in world trade have changed significantly and reinforce the two spaces in which our country has talks with the United States on trade matters: the meeting called 4 plus 1 - the Mercosur countries with the United States - and the continental negotiation at the level of the FTAA. A very important piece of news in this regard is that on February 15, 2003, the representatives of the 34 member countries of this area will begin to negotiate the concrete opening of the markets. No less significant are the proposals for agricultural liberalization by the United States to the World Trade Organization and the fact that the American president can now negotiate this type of free trade agreements. In our country and in Mercosur, which we believe should be the lever for active integration in these negotiations, we have the decision to advance quickly and firmly in matters of trade liberalization in the scope of the FTAA and the World Trade Organization, and in other negotiations such as that of Mercosur Mexico or with the European Union. The elimination of trade barriers in the developed world paves the way for more open and balanced trade relations and is the best way to take advantage of the global market as a tool to achieve genuine growth in our countries, avoiding having to resort to permanent financial assistance that has helped to deepen inequalities in development in recent years.
Customs News: What are the forecasts for the trade balance in 2002?
Answer: We believe that the result will be highly favorable due to the sharp fall in imports, but with a level of exports that grew despite the financing difficulties; in October we already had the data that the level of exports shows a 2% growth in the interannual comparison. We are at a trade surplus level of US$ 11.000 million in the period January - September. This is very close to what we estimated in the budget project to Congress, with a trade surplus of US$ 43.684 million forecast for the entire year. There is one fact that is important to point out: in addition to a significant recovery in sales, sales directed outside Mercosur have increased, towards third markets, among which NAFTA and the European Union stand out in particular. This is important because looking at the figures for the year 2000 there was a trade deficit in various sectors with the different regions of the world.
Aduana News: Which productive sectors have improved or been reactivated with the high exchange rate?
Answer: The change in relative prices has mainly benefited activities linked to the countryside and the industries of the agricultural complex, in addition to the sales of oil and its derivatives, which already had good international prices. The devaluation has been beneficial for regional primary productions that until then had been practically paralyzed, such as sugar, cotton, pears and apples, wines; or other productions that had a good level of sales, such as lemons and honey. The devaluation also strengthened other favorable factors, such as this year's extraordinary soybean harvest, attenuated by a drop in the sunflower harvest. In the case of livestock, two contradictory factors had an impact. On the one hand, the good prospects for the production of oilseeds, mainly soybeans, led many producers to allocate more fields for this exploitation, relegating those used for livestock; However, the increase in the Hilton quota for meat sales to the European market, achieved at the beginning of the year during a management period while he was ambassador to the European Union, and the recovery of the country's status as a foot-and-mouth disease-free country were very beneficial for this sector. In fact, the agro-food industry, which is the largest exporter, registered significant improvements, particularly in the production of oils and in meat processing plants, some of which returned to activity after years of being closed or working at very low production levels. In the rest of the industrial complex, the situation is varied. For example, import substitution has allowed activity in textiles, paper, metalworking and basic metals to improve. Meanwhile, the chemical industry benefited because its installed capacity was able to meet a greater demand for agrochemicals in the domestic market and have exportable surpluses. In general, in terms of sectors, 70% of activities have registered improvements in recent months.
Aduana News: A final reflection…
Answer:The last few years have allowed us Argentines to learn a few things, which from our point of view tell us at least two things. One is that the exchange rate matters when one talks about productive structure and exports in a country, and it matters in at least two ways. If the national currency is severely overvalued, there is no structural change that is fast and strong enough to compensate for the loss of competitiveness. In other words, the exchange rate mismatch eats up productivity gains and skews trade towards a small group of goods in which comparative and competitive advantages are strong enough to compensate for the exchange rate mismatch. At the other extreme, if the national currency is severely undervalued, as is currently the case, part of the profitability is transferred abroad with the fall in prices in dollars or other hard currencies, and there is a lack of attention to productivity. In other words, the undervaluation of the peso distorts the degree of competitiveness of the economy. The second observation I think can be made is that the exchange rate is not everything. In this sense, it is enough to look at our reality to notice the enormous negative impact that the interruption of financing that we are currently experiencing has on export activity, as well as the no less negative effect that arises from the weakness of the internal market that has been affecting us since 1995. A strong, demanding and, to some extent, sophisticated domestic market is a fundamental basis for a country to have an active and successful export policy. The current economic plan attempts to respond to these observations in order to take advantage of the good prospects for the end of convertibility, with some central definitions that guide action. Once the initial overreaction in terms of exchange rates has been overcome, our reference pattern should be the weighted evolution of the competitiveness and relative productivity of our trading partners and not a single currency, and even less so one that tends to appreciate. At the internal level, the consensus that can be reached between the different sectors will be very important and this is part of the spirit and design of the National Strategic Productive Plan, which proposes the formation of advisory committees to associate the State and the private sector around common goals, as is already happening and with very good results in the construction industry. The potential and needs of each sector of activity and each region of the country are thus integrated into the export strategy. The latter with the consequent improvement in the position of provinces that have a very low volume of sales abroad - such as Formosa, Santiago del Estero, Jujuy, Corrientes or La Pampa - or the balance in the relationship between sales and gross provincial product in cases where exports are not very relevant - such as in Formosa, Corrientes, Jujuy or San Juan. Provinces that, in addition to being affected by price crises such as the cotton fiber crisis in the second half of the 90s, must live on national assistance, thanks to the irrational development that Argentina has achieved, without ever resolving the deep economic and social deficits. But Argentines must not only learn from mistakes; there are also successes that must be taken into account in order to continue with the fundamental strategic visions for achieving development. An example is the 1986 agreement with Brazil, now extended to Mercosur, which was a key element in the creation of an expanded internal market that allows for the search for active insertion in world trade. Another was Juan Domingo Perón's decision in 1974 to promote soybeans in national agricultural production. Throughout the 90s, this crop made it possible to take advantage of the best technical and climatic conditions in Argentina and a higher profitability compared to other alternatives. Today it leads the production of oilseeds – 88% of the volume produced in the 2001-2002 season – and represents 44,4% of the total production of cereals and oilseeds in the country.
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