Argentina’s New Import Regulations
The Argentinian government has recently imposed more restrictions on foreign trade, a move that has raised concerns among experts and industry professionals. A new resolution (26/2022) has been enacted, significantly increasing the number of items subject to non-automatic licenses (LNA) for importation, adding more permissions and bureaucracy for certain goods to enter the country. The resolution stipulates that it is essential to evaluate the commercial flows of a series of goods, which include pressure washers, golf clubs, skis, and ice skates, among others1.
The Central Bank has announced a new import regime, which limits access to dollars until September 30 for large companies and excludes small and medium enterprises (SMEs). This move aims to stem the further loss of reserves due to purchases from abroad, which negatively impact the country’s foreign currency reserves2.
Implications for International Trade
These new regulations have sparked a debate on Argentina’s compliance with the World Trade Organization’s (WTO) principles of liberalization and the reduction of barriers to trade. Argentina has been a member of the WTO since 1995, and the organization’s principles encourage trade flows to circulate smoothly, freely, equitably, and predictably. The WTO’s agreements also establish commitments to reduce customs tariffs and other obstacles to trade1.
While non-automatic licenses are foreseen by the WTO, they are usually implemented in exceptional cases, such as when an imported product affects the security, environment, or health of the importing country. However, they are not typically used for exchange rate reasons or protectionism. Critics of the new regulations argue that Argentina’s use of these licenses and exchange practices that hinder import and export puts the country in a questionable position regarding its international trade obligations1.
Government officials, on the other hand, insist that Argentina will not face sanctions because it is not closing imports. The change is in the traceability regime to organize them. They also assert that the change to non-automatic licenses does not mean these goods cannot enter the country, but rather they will go through a slightly more detailed procedure1.
The “Dirty Port” Situation and the Issue with Freight Charges
Argentina has recently been categorized as a “dirty port”, where freight cannot be paid in local currency. This situation was initially only applicable to imports, but with the decision taken by MSC, a leading shipping company, and followed by seven others, the same condition now applies to exports. This means freight charges will now be billed to the party receiving a shipment, often called the consignee. Since May 15, shipping companies have stopped charging import freight in Argentina, a response to the Central Bank’s resolution that deferred payments of around US$ 2 billion in service and freight imports.
Companies are accumulating Argentine pesos while being unable to exchange them into dollars or foreign currency, which raises concerns over the country’s financial stability and the competitiveness of its foreign trade. This situation has prompted the Federation of Foreign Trade Chambers of Argentina (Fecacera) to express its deep concern about the impact of these regulations on international trade operations.
In the long run, there are concerns that logistics systems may collapse, disrupting trade flows to and from Argentina and having serious implications for the country’s economy and society as a whole.
Conclusion
Argentina’s new import regulations and the “dirty port” situation represent significant changes in the country’s foreign trade landscape. While the government insists these changes are necessary and will not lead to sanctions, critics argue that they risk violating WTO principles and could potentially undermine Argentina’s international trade obligations. Furthermore, the inability of companies to exchange their accumulated Argentine pesos into dollars or foreign currency due to these new regulations and the “dirty port” situation can negatively impact the country’s financial stability and competitiveness in international trade.
As we move forward, it is crucial to monitor the effects of these policies on Argentina’s economic and trade dynamics. The country is navigating a delicate balance between protecting its domestic industries and maintaining healthy trade relationships with other nations. The situation calls for careful handling to prevent the collapse of logistics systems and the disruption of trade flows that could have profound consequences for Argentina’s economy and society. The hope is that Argentina can find a path that safeguards its financial reserves while fostering a conducive environment for international trade.