On December 10 2015 Mauricio Macri became president of Argentina. After less than a month in office, the new government introduced new international trade regulations.
During the previous 12 years, former presidents Néstor Kirchner and Cristina Fernández de Kirchner had promoted several protective measures, including:
- restraining traders from importing foreign products;
- limiting access to foreign currency; and
- applying high taxes on commodities such as soya beans.
In order to increase international trade, the new regulations address the foreign currency exchange market, the import of products and export transactions from Argentina.
Foreign currency exchange market
Following the financial crisis in 2001, Parliament passed Act 25,561/2002, which authorised the government to control the foreign currency exchange market to prevent capital from leaving Argentina. Further, under Decree 285/2003 banks and financial institutions had to report all operations involving foreign currency to the Central Bank.
As the government had the power to regulate the foreign currency market, there was a direct link between the market and the volume of the Central Bank's international reserves (in US dollars). Importers that wanted to pay for purchases had to obtain foreign currency indirectly from the Central Bank. From an export perspective, remittance from overseas buyers had to go through the Central Bank before appearing in the seller's bank account in Argentine pesos.
The Central Bank applied several restrictions on overseas payments in a bid to bolster its trade surplus, including limits on the amounts of foreign payments. If the limit was superseded, the transaction was subject to authorisation from the Central Bank.
On December 17 2015, following instructions from the new government, the Central Bank announced that all restrictions on overseas payments had been lifted. Further, it was announced that the foreign currency rate will be established by the local market with less Central Bank intervention. As a result, the day after the announcement the currency market forced the devaluation of the Argentine peso to 40% of the US dollar, a favourable scenario for exporters from the grain sector, which carried out transactions worth $870 million during the first week of 2016.
From 2012 the Federal Administration of Public Revenue's General Regulation 3252 had limited imports through an affidavit system that required prior approval of overseas purchases. As a result, the Secretary of Commerce was in charge of assessing each and every import application made by traders, through a long process which was likely to end in rejection. In this context, in January 2015 the World Trade Organisation (WTO) ruled against Argentina in a case that had been brought in 2012 by the United States, the European Union and Japan for violation of WTO obligations.
The import restrictions resulted in a notable reduction of the volume of containers transported to Argentina.
Under the new General Regulation 3823, the affidavit system was replaced by import licences as of December 21 2015. Regulation 5/2015 establishes which products are subject to an automatic licence – with no discretionary refusal option for government – and those subject to a non-automatic licence (ie, for which the importer must submit an application with specific information required by the regulation). Although the list of products subject to a non-automatic licence is limited, it provides scope for future import restrictions, particularly to protect products manufactured in Argentina.
With Decree-Law 133/2015, as of December 17 2015 the government removed customs duties on wheat and corn and reduced customs duties on soya beans from 35% to 30% and crude soya bean oil from 32% to 27%.
Further, as of December 21 2015, Decree-Law 160/2015 lifted the 5% customs tax applied to the majority of industrialised products.
With a struggling economy, the new government is doing its best to differentiate itself from the previous administration. From a transport perspective, the removal of import restrictions will result in an increase in the volume of containers transported to and from Argentina, which will be welcomed by liner ships calling at Argentine ports. From an export perspective, the devaluation of the national currency and the reduction of customs duties will increase the volume of international trade. However, the price of soya beans has remained low and producers are hesitant to sell, preferring instead to store their produce and wait for growth in the commodities market. Should this happen, it is likely to result in increased demand for bulk carriers and tankers calling at Paraná River ports.
For further information on this topic please contact Francisco Venetucci at Venetucci & Asociados by telephone (+54 3476 421 556) or email (email@example.com). The Venetucci & Asociados website can be accessed at www.venetucci.net.
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