The International Trade Law Review: Argentina
Overview of trade remedies
Historically, Argentina has actively used trade defence instruments in support of various economic policies to promote national industry. Between 2011 and 2015, however, Argentina used trade restrictions to maintain a positive trade balance in the interests of preserving foreign currency reserves, and to promote domestic production. Between 2015 and 2019, under a Conservative government, Argentina abolished many of these restrictions.
While the policy shift led to a freer exchange of goods and services, it exposed the inability of most Argentine exporters to produce goods at competitive prices. Persistent budgetary deficits and renewed pressure on the local currency since 2018 prompted the Conservative government's return to imposing export duties on goods and services in September 2018 – a move that would have been unthinkable just a couple of years earlier. Nonetheless, the policy change engendered a trade surplus of almost US$16 billion in 2019, which was followed by a surplus of US$12.5 billion in 2020, though trade volume was significantly reduced.
Worsening inflation and little to no economic growth convinced voters to change the government at the end 2019, returning the populist party to power and reverting to policies that had existed between 2003 and 2015. The global health crisis caused by covid-19 has consumed most of the government's policy initiatives and, since its election in December 2019, the new government has not significantly modified customs or international trade policies. Instead, it has focused on consolidating the exchange controls initially restored by the outgoing government, sharply limiting access to the foreign exchange market. This has adversely affected international trade and has spawned the return of multiple currency exchange rates and a robust black market, allowing residents to purchase and remit foreign currency. The deliberate policies and the collateral responses have increased pressure on the government to further devalue the Argentine peso, though it has resisted doing so. The virtual shutdown of the economy, which began in March 2020 in response to the covid-19 pandemic, and the inflow of US dollars from agricultural exports have temporarily eased and delayed some of that pressure.
In 2020, the Argentine government initiated 21 anti-dumping and safeguard investigations to mitigate the economic impact of imported industrial and textile products. In the first half of 2021, one new investigation was initiated. Most of the investigations initiated in 2020 are continuing and involve products originating from China, Thailand and Turkey. Since 2020, Argentina has applied almost 13 definitive countervailing measures to imports from China, Indonesia, Turkey and Brazil. With the exception of one proceeding involving China, the government has generally been willing to await the outcome of proceedings before taking specific action (such as implementing countervailing duties).
Argentina is a member of the General Agreement on Tariffs and Trade and the World Trade Organization (WTO) Agreement. In 1995, the Argentine Congress passed Law No. 24,425 ratifying the agreements creating the WTO signed at Marrakech in April 1994, known as the Final Act of the 1986–1994 Uruguay Round of trade negotiations. This ratifying legislation also incorporated trade remedies into Argentina's internal regulations based on the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, the Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards. Concurrently, the Argentine Congress supplemented these remedies with specific domestic procedures.
i Anti-dumping procedures
In 2008, the Argentina Executive issued Decree No. 1,393/08 (replacing Decrees Nos. 1,326/98 and 1,088/01) to regulate and supplement the government's procedures in connection with the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement) and the Agreement on Subsidies and Countervailing Measures.
The Ministry of Productive Development is responsible for carrying out the investigative process and for determining whether to apply countervailing measures provisionally, during the course of the investigation, or definitively upon its conclusion. Investigations into dumping or subsidies are carried out by the Secretary of Industry, Knowledge, Economy and Foreign Commercial Affairs (the Secretary), the Undersecretariat of Commercial Policies and Affairs (the Undersecretariat) and the National Commission of Foreign Trade (the Commission). Investigations begin with a complaint filed by an importer or producer, or with an ex officio investigation brought by the Secretary. The Commission and the Undersecretariat may assist complainants in obtaining product information from foreign domestic markets relevant to an investigation or the formal requirements of a claim.
All claims must satisfy the formal and substantive requirements set forth in Article 5 of the Anti-Dumping Agreement. These requirements include statements on (1) the complainant's identity and the industry on behalf of which the complaint is made, (2) background information concerning the allegedly offending goods, and (3) how these products are alleged to adversely affect domestic commerce. The complaint must also furnish the Undersecretariat with specific evidence substantiating dumping (as defined by the Anti-Dumping Agreement), specific economic harm to the complainant and causation. Section 4 of Decree No. 1,393/08 requires complainants to furnish a wide range of evidence (e.g., expert reports or general documentary evidence regarding pricing and costs, among other things, in the country of origin) that meets these requirements.
Upon the filing of a complaint by an importer or producer, the Undersecretariat and Commission review the formal aspects of the filing and, if any formal errors are found, request amendments to the filing within five days. Within 10 days of filing, or as soon as all formal requirements are satisfied, the Commission shall inform the Undersecretariat that the claim may proceed. The Commission's report also identifies similar products manufactured in Argentina and opines on the extent to which the complainant is representative of the relevant industry sector.
Within two days of receiving the file from the Commission, the Undersecretariat must notify the complainant whether its claim has been accepted or denied. Within 10 days of accepting a claim, the Undersecretariat makes an assessment regarding whether the evidence offered is sufficient to justify commencement of a dumping investigation. If the assessment is affirmative, the Undersecretariat then requests the Commission to complement its report with data regarding the extent of harm inflicted on the relevant domestic industry and the causal link between the alleged dumping and injury.
On receiving a complete report recommending commencement of an investigation from the Undersecretariat, the Secretary must affirm or deny the recommendation within five days. If the recommendation is denied, the Secretary must notify the complainant of the grounds for the denial.
If the recommendation is affirmative and the desired investigation relates to subsidies in the exporter's country, the Undersecretariat must furnish the relevant national government with notice of the decision. This notice must include a request that the foreign government respond with information clarifying the situation and an invitation to reach an agreement on the same in accordance with Section 13.1 of the Agreement on Subsidies and Countervailing Measures.
If the Secretary decides to commence an investigation, it must issue a resolution for publication in the Official Gazette to effectuate its determination. As the resolution must contain substantive and procedural information pertinent to the investigation (e.g., the relevant time frames), issuance of the resolution is more than a perfunctory administrative act. The resolution must contain the following data:
- the product and the country of origin;
- the period to which the investigation applies;
- a description of the dumping practices or existing subsidies;
- a summary of the harm and the causal link to the dumping activity;
- the name of the third country qualified as a market economy, for comparative purposes, when the investigation involves a non-market economy (as qualified by Argentina consistent with Decree No. 1,219/06); and
- the start date of the investigation and the agency charged with carrying out the process.
Thereafter, the Undersecretariat notifies all interested parties and countries involved in the alleged dumping practice of the resolution and commencement of the investigative process.
As to the import transactions subject to investigation to prove dumping, the Undersecretariat will investigate alleged dumping practices or subsidies existing up to 12 months prior to commencement of the investigation. With respect to the existence of economic harm, however, the investigation may extend to operations performed up to three years prior to commencement of the investigation.
Within 10 days of the investigation being initiated, the Undersecretariat and the Commission send questionnaires to interested parties (including producers, exporters and importers), to which they are to respond within 30 days, pursuant to certain requirements set out in Decree No. 1,393/08.
The subsequent steps involve the Secretary's preliminary determination as to the facts under investigation. To start this process, the Undersecretariat has 100 calendar days from the investigation commencement date to issue a preliminary assessment on the evidence related to dumping or subsidies. Next, within 110 calendar days of commencement, the Commission is required to issue a report, giving its preliminary assessment on the economic harm and causal link relating to the relevant dumping activity or subsidy. The Undersecretariat's report may include a recommendation that the Secretary adopt countervailing measures to mitigate the harm caused by the dumping or subsidy. If the Secretary decides to implement countervailing measures during this preliminary phase, it must issue a resolution confirming its decision. The resolution must contain the following information:
- product descriptions and the name of the exporter;
- details of the dumping activity, the injury and the causal link;
- the justification for instituting countervailing measures;
- a description of the measures taken (generally an increase of import duties) and their duration; and
- instructions to the customs authorities.
At any time, the Secretary may suspend or conclude countervailing measures if the relevant exporter or foreign government offers to engage voluntarily in procedures to reduce anti-dumping pursuant to Section 8.4 of the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 and Section 18.1 of the Agreement on Subsidies and Countervailing Measures.
After completing their preliminary assessments, the Undersecretariat and the Commission serve notice of their reports on the interested parties. Once they receive service, these parties have 10 days to propose evidence to be offered in support of their positions, which the Undersecretariat and the Commission must then admit or deny, on a relevance basis only, within 10 days. The interested parties then have up to 80 days before the respective final determinations of the Undersecretariat (as to the evidence on dumping or subsidies) and the Commission (as to injury and the causal link between the dumping or subsidy and the injury) to produce the proposed evidence admitted. Both the Undersecretariat and the Commission may investigate the facts in the country of origin after notifying the interested parties of their intention to do so.
On conclusion of the evidentiary stage, all interested parties have 10 days to file their final arguments on the evidence. Conclusion of this period ends the investigatory process.
To issue their final determinations on the evidence of dumping or subsidies and causation, the Undersecretariat and the Commission may take up to 220 and 250 calendar days, respectively (from initiation of the investigation). The decisions shall be published in the Official Gazette and served on the interested parties. If either assessment concludes that the claimant has not proved its allegations, the Secretary will close the investigation.
If both assessments conclude that the allegations are proved, the Undersecretariat will send the Secretary a report recommending the application of anti-dumping or compensatory duties. The Secretary then makes its own recommendation to the Ministry of Productive Development, which makes a final determination, which is published in the Official Gazette and served on the interested parties.
The Secretary may apply definitive anti-dumping or compensatory duties retroactively to import operations performed up to 90 days before the Ministry of Production's approval. The maximum term for the prospective application of anti-dumping or compensatory duties is five years.
The anti-dumping or compensatory duties should equal the economic harm inflicted by the dumping or subsidy to neutralise its effect. Exporters that have not sold products into Argentina during the relevant term may file a request for a reduction of any anti-dumping duties with the Undersecretariat. The Undersecretariat must evaluate the request within 120 days and send a report on the same for the Secretary's review. Within 10 days of receiving the report, the Secretary must issue a recommendation for a final decision by the Ministry of Productive Development, which shall confirm its decision within 20 days.
Decree No. 1,393/08 also authorises measures and procedures to neutralise exporters' manoeuvres to elude anti-dumping or compensatory duties (e.g., through exports of products similar to those investigated). Definitive anti-dumping or compensatory duties may be reviewed two years after their application or once the established term has elapsed.
Administrative resolutions issued during the process as to the suspension, denial or conclusion of the investigation and any provisional or definitive anti-dumping or compensatory duties are subject to administrative appeals. At the conclusion of the administrative stage, final administrative decisions are subject to appeals before the federal courts.
ii Safeguard regulations
Decree No. 1,059/96 regulates and supplements the Argentine government's implementation of domestic safeguards under the Agreement on Safeguards.
The investigative procedure to determine whether an increase in imports of a given product is causing or threatens to cause serious harm to an industry is carried out by the Secretary, the Commission and the WTO Committee on Safeguards.
The complainant can be an industrial chamber, an individual company or a group of companies representing at least 30 per cent of the national production of the given product to be protected by this procedure. Along with the claim, complainants must file an adjustment plan containing proposed actions to make the relevant industry more competitive and productive.
After receiving the complaint, the Secretary requests technical reports for delivery within 50 days of the Commission analysing whether an increase in imports of a product is causing or threatening to cause serious harm to the industry. The Commission's report must contain the following information:
- a description of the facts giving rise to the complaint, an analysis of the import increase harming or threatening to harm national production, and the current or potential effects on national production;
- an assessment of the change in the trade balance for the product in the relevant period;
- a comparison of the imported product's share of the market relative to national production;
- the existence of any commercial agreements with the country of origin;
- an evaluation of the industrial sector with respect to investments, personnel and gross income; and
- an evaluation of the expected results of the safeguards.
Within 20 days of receiving the above, the Secretary must decide whether to open an investigation. The Secretary's decision to investigate must be published in the Official Gazette and notice of publication be sent to the WTO Committee on Safeguards. The resolution must contain the following: the name of the complainant; a description of the imported product subject to investigation; the name of the country of origin; the causal connection between the import increase and the injury or threat of injury; the date of the hearing prior to the close of the investigation period in which interested parties may give their opinion on the necessity and the effects of the safeguard measures proposed to protect the public interest; and details of any provisional measures to be taken.
As a provisional safeguard measure, within 15 days of receiving the Secretary's opinion, the Ministry of Productive Development may apply increased import duties for a term not exceeding 200 calendar days. If any provisional safeguard measures are revoked, the Customs Administration will reimburse the additional import duties charged.
The time limit for an investigation is nine months; however, this term may be extended for two additional months. During this term, the Commission is charged with gathering evidence from importers, businessmen, producers and consumer associations on which to base its final report. The final report may revise or ratify the initial reports or broaden the arguments contained therein. During the regular or extended term, the Secretary may close the investigation by publishing its decision to do so in the Official Gazette.
Once the Secretary receives the final reports by the Commission, it has 10 days to invite governments of the countries whose exports are involved in the investigation to participate in a consultation process lasting 60 days. After conclusion of this period, the Secretary issues a report to the Ministry of Productive Development recommending approval or denial of the requested safeguard measures and addressing the adjustment plan proposed by representatives of the relevant domestic industry sector.
The Ministry of Productive Development must make a final decision on the proposed safeguard measures within 15 days of receiving the Secretary's report. The decision shall be published in the Official Gazette and all interested parties, and the WTO's Safeguards Committee, shall receive notice. The Ministry of Productive Development may implement the following safeguard measures:
- increased import duties;
- total or partial import restrictions on the relevant products; and
- any other measures.
Safeguards measures may apply to a product for no more than four years; however, this term may be extended for up to a further four years. Along with any safeguards to last for a period of more than one year, the Ministry of Productive Development must concurrently issue a progressive liberalisation programme, the development of which the Secretary is responsible for overseeing. Decisions adopting safeguard measures are not subject to administrative or judicial appeals.
Since 1991, Argentina has focused its international trade efforts on the Mercado Común del Sur (Mercosur), a treaty between Brazil, Paraguay and Uruguay and, more recently, Venezuela (though its membership has been suspended since 2017), the aim of which is to form a customs union. The Mercosur parties agreed a Common External Tariff (CET) on 1 January 1995. Generally, the CET ranges from zero to 20 per cent depending on the product (with an average of 16 per cent). Mercosur will gradually eliminate non-tariff restrictions and other limitations on trade among Member States. With some notable exceptions, Mercosur countries apply no duties to imports from other Member States for approximately 85 per cent of traded goods. Within the context of Mercosur, Argentina is negotiating regional agreements with other Latin American countries, the European Union, South Korea, Turkey and Singapore.
Argentina abides by a general system of preferences on goods produced and traded within the Mercosur area. Additionally, Argentina has executed free trade agreements (FTAs)with several Latin American countries, including Bolivia (Acuerdo de Complementación Económica (ACE) No. 36 in 1996), Chile (ACE No. 35 in 1996), Peru (ACE No. 58 in 2005) and Israel (2007). Mercosur has also executed agreements with India (2004), Israel (2007), Egypt (2010) and the Southern African Custom Union (2008), all of which are currently in force.
Additionally, Argentina has executed preferential trade agreements with Mexico (ACE No. 6 of 2006), Uruguay (ACE No. 57 of 2003), Paraguay (ACE No.13 of 1992), Chile (ACE No. 16 of 1991) and Brazil (ACE No. 14 of 1990). Argentina has additional agreements specific to industries within the context of Mercosur: Colombia, Ecuador, Venezuela – Mercosur (ACE No. 59 of 2004); Mercosur – India (2004); and Mercosur – Mexico (ACE No. 55 of 2002, relating to the automotive industry).
For goods not covered by the above-mentioned agreements, Argentina also provides certain duty exemptions or reductions to members of the Latin American Integration Association. General and special tariff rates are published in the Official Gazette, each publication providing notice of the relevant country, products and tariffs.
On 22 January 2018, Argentina ratified the Trade Facilitation Agreement (TFA) drafted within the framework of the WTO, which had taken effect on 22 February 2017. The TFA is a multilateral agreement aimed at expediting the movement, release and clearance of goods, including goods in transit. On 19 January 2017, Mercosur and the European Free Trade Association executed a joint statement announcing the finalisation of the exploratory dialogue leading to the execution of an FTA. After 10 rounds of negotiations, on 23 August 2019, an agreement was reached but is not yet in force.
On 9 March 2018, Mercosur and Canada announced the launch of negotiations towards an FTA.
After more than 20 years of negotiations, the European Union and Mercosur reached a trade agreement on 28 June 2019, which includes tariffs and customs duties reductions on international trade between the two blocs. The agreed tariff reduction is likely to affect EU and Mercosur industrial and agribusiness sectors. The agreement includes provisions to facilitate trade between small companies operating in countries of both regions. Governments and parliaments for both regions (and their Member States) will now undertake the legal review and ratification of the agreement. At the time of writing, validations by the EU and Mercosur Member States and their regional authorities remain pending as members of each bloc continue to discuss environmental, sanitary and climate change issues required by Mercosur.
Argentina and Chile executed an FTA on 2 November 2017. On 11 January 2019, the Chilean Congress ratified the FTA, which entered into force in April 2019. The FTA relates to government purchases of goods and services, improved efficiency in bilateral trade operations, harmonisation of customs regulations, services, investments, e-commerce and bilateral cooperation.
Argentina also benefits from Generalized System of Preferences schemes with Armenia, Australia, Japan, Kazakhstan, New Zealand, Norway, Russia, Switzerland and the United States.
Recent changes to the regime
On 10 December 2019, the election of a populist government consolidated exchange controls implemented in the closing days of the preceding government, and led to the enactment of administrative regulations, including tax and customs rules, which have had a significant impact on foreign trade. Cross-border remittances are once again severely restricted and, save for a few exemptions (see Section V.iv), require prior approval from the Central Bank. This prior approval is largely illusory and the status of most requests simply remains as 'pending approval'.
Significant legal and practical developments
Other than the trade defence instruments applied by Argentina within the framework of the WTO treaties, the Argentine government has implemented the rules and regulations discussed below, many of which will have effects on international trading by Argentina.
i Customs Administration's interpretation of Mercosur rules of origin
On 3 November 2020, the Customs Administration released Memorandum 9/20, which offers guidelines to determine the place of origin of raw materials and products sourced from Andean Community members and benefiting from preferential trade agreements (ACE No. 59), Peru (ACE No. 58) Bolivia (ACE No. 36) and Colombia (ACE No. 72). The Memorandum clarifies that any products manufactured by Mercosur member countries will be treated as if sourced from a Mercosur member country, even if these products include raw materials and products originating from an Andean Community country .
ii Payment of export duties
On 6 November 2020, the Federal Tax Authority issued General Resolution 4,852/2020 to amend General Resolution 1,921. Together, these resolutions control the payment of Argentina's controversial export duties. Smaller exporters (i.e., those historically exporting less than US$20 million) may opt to pay these duties within 120 calendar days of export of goods, unless the exporter collects the proceeds sooner. In so doing, the Federal Tax Authority is attempting to afford smaller players leeway to match payment of the export duties with actual receipt of proceeds.
iii Cancellation of import licences
On 31 March 2021, the Secretary of Industry, Knowledge Economy, and Foreign Commercial Affairs issued Resolution 102/21 to modify Resolution 523/17, which regulates the issuance of automatic and non-automatic licences. Under this new resolution, an import licence will be denied if the importer fails to comply with any filings or other requirements within 10 business days of the licence request.
iv Exemptions to Central Bank approval for offshore payments
On 4 June 2021, the Central Bank issued Communication 'A' 7301 to exempt qualifying importers from obtaining prior Central Bank approval to access the official F/X market for certain offshore payments. To qualify for this exemption, the importer must:
- provide a certificate issued by a chartered financial institution to prove increased export volume in 2021 relative to 2020; and
- otherwise comply with the requirements to make cross-border payments (which have been in effect since 2019).
Potentially included within this exemption are cross-border payments for inter-company services, remittance of dividends or profits, payment of inter-company financial debts and servicing of foreign indebtedness.
Communication 'A' 7301 entered into effect on 14 June 2021.
v Customs and covid-19 policies
Argentina has suffered from the impact of covid-19 in health and economic terms, along with much of the rest of the world. In 2020, the country endured the world's longest shelter-in-place orders, requiring all but those persons working in essential services to stay at home. While much of the country has reopened, as at July 2021 the Buenos Aires metropolitan area still has strict movement controls in place.
The Customs Administration has remained operative owing to its characterisation as an essential service, and electronic processes encompass almost all filings and requests before the customs authorities. Since 6 November 2020, federal Law No. 27,573 has exempted the import of approved vaccines from import duties.
The Federal Tax Authority has temporarily halted bringing judicial claims to recover import and export duties against small and medium-sized businesses engaged in essential activities as defined by the federal government. It is due to commence bringing claims again on 31 August 2021.
According to WTO reports,2 Argentina has initiated 21 cases as complainant, mostly against the European Union, Chile and the United States in connection with various import barriers faced by Argentine agricultural products and biodiesel at those countries' ports. On the other side of the coin, Argentina has been involved in 22 disputes as respondent, most of which were initiated by the European Union and the United States. They relate principally to measures taken by Argentina to protect the shoe industry, peaches and other agricultural products. Finally, Argentina is currently participating in 65 disputes as a third party.
There have been no new dispute settlements in the past year involving Argentina as correspondent.
The most relevant dispute settlements in 2020 and the first half of 2021 informed by the WTO follow.
i DS572: Argentina v. Peru – Anti-dumping measures on imports of biodiesel
On 29 November 2018, Argentina requested consultations with Peru concerning certain anti-dumping and countervailing measures imposed by Peru on biodiesel from Argentina.3 After two years, Argentina's claim remains at the consultation stage.
ii DS537: Canada – Measures governing the sale of wine
On 12 January 2018, Australia requested consultations with Canada concerning measures maintained by the Canadian government and the Canadian provinces of British Columbia, Ontario, Quebec and Nova Scotia governing the sale of wine. This request for consultations follows earlier requests for consultations submitted by the United States (DS520 and DS531) pertaining to measures maintained by the Canadian province of British Columbia governing the sale of wine in grocery stores.
On 17 January 2018, New Zealand requested to join the consultations, followed by the United States on 19 January 2018, Argentina and the European Union on 25 January 2018, and Chile on 26 January 2018. Subsequently, Canada informed the WTO's Dispute Settlement Board (DSB) that it had accepted the requests of Argentina, Chile, the European Union, New Zealand and the United States to join the consultations.
On 13 August 2018, Australia requested the establishment of a panel. Having deferred the establishment of a panel at its meeting on 27 August 2018, the DSB then established a panel at its meeting on 26 September 2018. Argentina, Chile, China, the European Union, India, Israel, Korea, Mexico, New Zealand, Russia, South Africa, Taiwan, Ukraine, the United States and Uruguay reserved their third-party rights.
On 25 February 2019, Australia requested that the Director General compose the panel. The Director General composed the panel on 7 March 2019.
On 24 April 2019, the chair of the panel requested in separate communications that the DSB circulate to Members the panel's working procedures and a partial timetable. On 7 May 2019 and 12 June 2019, the chair of the panel requested that the DSB circulate to Members the additional Working Procedures on open panel meetings adopted by the panel.
On 25 July 2019, 28 August 2019 and 9 March 2020, the chair of the panel requested that the DSB circulate separate communications indicating changes to the timetable.
The chair of the panel informed the DSB on 21 August 2019 that the panel expected to issue its final report to the parties in the first half of 2020. In its communication, the chair also informed the DSB that the report would be available to the public once it was circulated to the Members in all three official languages, and that the date of circulation would depend on completion of the translations.
On 29 May 2020, Australia and Canada advised the DSB of their agreement to abide by the procedures for arbitration under Article 25 of the Dispute Settlement Understanding (DSU) in this dispute.
On 30 July 2020, the panel chair requested the DSB to circulate an amendment to the panel's working procedures to reflect the transition from the Digital Dispute Settlement Registry to the Disputes Online Registry Application system from 1 August 2020.
On 8 April 2021, the panel chair informed the DSB that, as of July 2020, it had accepted several joint requests by the parties to delay the issuance of its interim report to allow the parties to find a mutually agreed solution.
On 22 April 2021, the parties jointly informed the panel of the resolution of their dispute and on 12 May 2021, the parties gave notice of this to the DSB. On 25 May 2021, the panel circulated its report to the members and the case was closed.
The October 2019 elections prompted a return to Argentina's trade policies from the pre-2015 era but with lessons learned and more sophisticated tools. Argentina is enduring a prolonged economic crisis, worsened by the continuous currency crisis, the risk of default on external debt, and an inflationary economy that was already suffering before the covid-19 policies halted most economic activity. True to its predecessors, the current populist government has used currency controls, currency printing, and export duties on goods and services as means to close the budgetary gap.
The steady erosion of the Argentine peso since mid 2019 (almost 150 per cent) largely reflected pressures to compete internationally. In 2020, Argentina obtained a trade surplus of US$12.5 billion that was not far reduced from the trade surplus obtained in 2019. Nevertheless, this has not changed Argentina's continuing thirst for hard currencies such as the US dollar.
Although Argentina uses currency controls to protect its reserves and to maintain a positive trade, these foreign trade policies invariably prove unsustainable.
In the near term, one should assume the country's inability to pay its external debt, a continued devaluation of local currency relative to the US dollar, sustained inflation and sharp economic contraction, and restrictive international trade policies that seek to tax and protect domestic production. In the longer term, there is cause for optimism, as Argentina continues to enjoy self-sustaining natural resources coveted by much of the world. If and when commodity prices return to higher levels, Argentina's imports will quickly replenish reserves and, possibly, balance the budget. Whether the country has the political will to sustain a single economic direction, instead of alternating between a free(er)-market approach and the highly protectionist policies of the populist governments, remains to be seen.
1 Alfredo A Bisero Paratz is of counsel at Wiener Soto Caparrós.