Bewilderment, fear and a strong uncertainty. This is the feeling that prevails in the business sector after the latest measures that further restricted imports, in a context of shortage of foreign currency that worsens day by day. Fear of not being able to continue with their business, in the cases of net importers, and many doubts among industrialists about the supply of the inputs they require for production. The consequences in everyday life? Less supply of products, national and imported, and strong pressure on prices.
Rule 7532, which the Central Bank (BCRA) released this Monday in agreement with the Ministry of Productive Development, generalize the constraints that have already been in force since the beginning of March in terms of access to the official dollar for importers. Specifically, the measure that established a quota for access to the foreign exchange market for all products under Automatic License now included all those goods that, as they are produced in Argentina, have a Non-Automatic License (LNA) and must have, first, with the approval of the productive portfolio to be able to enter the country. Until the publication of this latest rule, these tariff positions, once they obtained the so-called SIMI, had no restrictions on access to official dollars. But now, with exceptions such as energy, capital goods and medicines, everything was included in the stocks. Foreign trade sources explained that the measure affects 17% of imports (everything that is under LNA), which in 2021 explained purchases for USD 1,300 million per month.
Therefore, for all imports that exceed 5% of those of 2021 or 70% of those of 2020, there will be no access to the foreign exchange market and companies must obtain financing to be able to carry them out.. In the measure, there was only flexibility for SMEs whose imports last year did not exceed USD 1 million. In those cases, they will be able to access official dollars for up to 15% more than what was entered in 2021. The rest must also be financed within 180 days.
“I am going to try to sit as much as possible on top of the merchandise to wait for September to see if they return to the previous situation. I have to take care of my merchandise as if it were gold”, another importer was honest
It happens that there are few companies that can obtain credit abroad, and even less at this time, with the country risk above 2,500 points and the great macroeconomic uncertainty inherent in Argentina. “Since I never needed financing, I didn’t investigate. But at most, they can give you credit for 90 days from when the merchandise left. And the BCRA now gives you 180 days from when the product entered the country. With the February norm, many suppliers have already stopped delivering. The result of all these months is very negative and there is nothing to indicate that this measure will end on September 30,” said a bazaar importer, with great annoyance and concern.
The businessman said that he has stock for three or four months and that although in these situations sales accelerate, “Most likely, this will be resolved with a sharp increase in prices to lower demand and take care of the merchandise”. He also said that many colleagues suspended operations for a few days until they were not clear on how to proceed and that although some obtain financing, many from Brazil resist because they have many doubts about what will happen in the next six months. “At what price do I sell it?”, they ask, since at the end of the year no one can predict what might happen to the official exchange rate, and even less so in the current scenario of a wide exchange rate gap and a shortage of reserves. Added to this, the higher financial costs that a six-month loan implies.
A great concern in the import sector at this time is all containers that are in transit to the country and that should be canceled once they enter the country. With this measure, they will have to tell their provider that they will not be able to pay them until December.
“There is going to be a lot of adjustment of the imported quantities and the demand is going to continue to be sustained because people do not want to keep the pesos. This is going to push prices up, in addition to the uncertainty factor of the replacement cost,” said another importing businessman.
consulted in this regard, Diego Kravetz, one of the partners of MacStation, the main distributor of Apple in Argentina, was concerned about the recent measure of the BCRA, since it will force them to obtain more external financing than they were already obliged to since March, in addition to the fact that this will have an impact in prices. However, he also trusts that from the portfolio he runs Daniel Scioli they will not stop the authorizations of SIMIs, necessary for the development of the knowledge economy.
“Since 2019, the Ministry of Production received us and considered our products as production inputs, essential and irreplaceable for many segments of companies that export services abroad. We are optimistic that they will continue to do so and that we will be able to obtain credit abroad,” said the businessman. “I am going to try to sit as much as possible on top of the merchandise to wait for September to see if they return to the previous situation. I have to take care of my merchandise as if it were gold”, another importer was honest.
“The possibilities of obtaining financing from foreign suppliers are very limited and at high costs, especially when faced with a scenario of scarcity of various products at a global level,” said the Argentine Chamber of Commerce.
According to foreign trade data, the 20 main importing companies required USD 15,320 million of the almost USD 64,000 million purchased abroad in 2021. And half of what was imported was consumed by 292 companies. That means that the other half is explained by more than 8,300 companies. Half of these firms, which have more difficult access to financing abroad, bought in 2021 for up to USD 1 million; that is to say, that they have now achieved flexibility.
Among the companies affected, there are some that are State contractors. This is the case of Army Technologies, which provides hardware, has just won several tenders and cannot pay its foreign suppliers to manufacture the equipment. “We are evaluating how to request the suspension or inapplicability of the regime for this type of operation, especially with complex products in the hardware sector,” the lawyer told this medium. Julio Fonrouge Echague, from the JP O’Farrell study. What it evaluates to present is an administrative challenge, since the products involved are essential for the activity of the State.
In other sectors they will analyze measures to adopt, but the lawyer anticipated that “there will be a lot of administrative and judicial challenge” against this recent rule, which “turns out to be one more obstacle added to the CEF, BCRA rule 7466, the DJCP of the textile sector, and the SIMIs, which affected sectors in competition that are paying the piper for the passivity observed by the national administration with regard to the energy sector”, the main problem of the imbalance.
The 20 main importing companies required USD 15,320 million of the almost USD 64,000 million purchased abroad in 2021. And half of what was imported was consumed by 292 companies. That means that the other half is explained by more than 8,300 companies.
For its part, the Argentine Chamber of Commerce (CAC) also questioned the measure and remarked that “given the current macroeconomic situation in Argentina, with a very high level of country risk and a credit history that is far from immaculate, the possibilities of obtaining financing from foreign suppliers are very limited and at high costs, especially when faced with a scenario of scarcity of various products at a global level”. “This makes imposing this requirement very similar to condemning numerous Argentine companies to drastically reduce – or even eliminate – their purchases from abroad,” the entity said.
In addition, he stressed that this decision “threatens to paralyze the operations of multiple branches of activity, severely damaging the economy as a whole, with its consequent damage in terms of employment, tax collection and many other variables”, in addition to the fact that “the lower supply of goods will add additional pressure on prices, thus aggravating the inflationary phenomenon”.
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