Uruguay’s exports to Mercosur plunged during the first eight months of 2013

Despite the theoretical benefits of the customs union, Uruguay’s exports to Mercosur have declined dramatically this year

During the first eight months of 2013, Uruguay’s exports to Argentina fell 5.6%, exports to Venezuela fell 15.1% and exports to Paraguay fell 9.2% compared to the first eight months of 2012. Although Uruguay’s exports to Brazil continued to grow, they rose only .1%.

Put together, Uruguay’s exports to Mercosur from January to August 2013 fell 3.9% compared to 2012 and totaled $1.748 billion USD. Exports to non-Mercosur countries rose 4.8% and totaled $6.478 billion USD.

The executive secretary of Uruguay’s Exporter’s Union, Teresa Aishemberg, told the Uruguayan newspaper El País that the organization does not expect positive changes in Argentina, Brazil or Venezuela this year. However, they did see an increase in exports to Paraguay during August.

Aishemberg said that the situation with Argentina cannot improve as long as President Cristina Fernández Kirchner’s government maintains the trade barriers it has imposed. “Evidently we have to look to other markets, but not all products are competitive outside the region” Aishemberg said.

The economist Pablo Moya from the consulting firm Oikos agreed with Aishemberg about the situation in Argentina. “There is a real loss of the competitiveness that Uruguay always had in comparison with Argentina beyond the increased costs”, he said.

Moya does not expect any changes in Argentina’s trade policies under the current president. He was more optimistic about the situation with Brazil.  “With them there is a greater possibility that they will reverse and again be a market demanding Uruguayan products, a strong destination for our sales”, he said.

Nevertheless, Moya does not expect significant changes in regional trade soon. “Significant change with Argentina and with Brazil would be slow, the outlook is not reversible in the short-term”, Moya said. Given this situation Moya also expressed the need for Uruguayan exporters to look toward other markets but didn’t negate the difficulty of doing that. “Many [exporters] that want to trade outside the region aren’t able to. They lose competitiveness.” he said.

“For a long time exporters have been looking toward the rest of the world, principally because of the tariff barriers and the bureaucratic obstacles that they are applying, while in theory the free circulation of goods and service within Mercosur generates advantages”, added Moya.

With a prediction that conditions will not improve in the short-term, exporters are demanding the government apply a series of measures to confront Uruguay’s loss of competitiveness.

Declining competitiveness, customs procedures, and soybeans to the “rescue”

Teresa Aishemberg emphasized to El Pais that the Exporter’s Union called on the government to take several measures to improve Uruguay’s competitiveness. These measures include a reduction in employer contributions and or improvements in export pre-financing.

“What’s more there are hidden costs. There are delays in the procedures and logistics aspects generate financial costs to businesses when these procedures slow down”, said Aishemberg.

The export sector also called for cheaper energy and said that Uruguay’s energy costs are not very competitive compared to the region.

Uruguay’s five principal business chambers (the chambers of Industry, Trade, Commercial and the Rural Federation and Rural Association) released a report a few weeks ago on Uruguay’s declining competitiveness.

The report spared no criticism of the government and annoyed the executive branch. Although Uruguay’s Exporter’s Union has called for measures to address the country’s declining competitiveness, it has distanced itself from the report and emphasized that the Union was not involved with the report.

Up to now, what is “rescuing” Uruguay’s export numbers is soybeans. Soy bean exports grew 32.9% in the first 8 months of 2013 compared to 2012 and totaled $1.814 billon USD.  Out of every $100 USD Uruguay has exported in 2013, $28 USD has been soybeans.

This Uruguayan Business Reports news article is a translation of a news article that appeared in the Uruguayan newspaper El País. The original article is available in Spanish here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay News Brief: Mujica and Rousseff sign agreement to strengthen trade ties

 The pact will help free the circulation of goods and services between the two countries. The text of the pact had been proposed at the Rio+20 summit in June.

Uruguayan President José Mujica and his Brazilian counterpart Dilma Rouseff signed a bilateral agreement Tuesday, July 31 in Brasilia to strengthen the circulation of goods and services and strengthen political and commercial ties between the two countries. The text had been drafted in the middle of June during the Río de Janeiro environmental summit Rio+20 but the events in Paraguay delayed the signing.

The areas included in the principal of the agreement are: production integration, science, technology, innovation, communication, infrastructure integration, free trade, free movement of people and energy integration.

The presidents met in the Placio de Planalto in the midst of the ongoing Mercosur summit in Brazil.

 This Uruguay Business Reports news brief is a translation of a news story that appeared in the Uruguayan newspaper El Observador. The original news article is available here. Uruguay Business Reports translation by Donovan Carberry.

 

Paraguay will join Uruguay in opposing Argentina’s proposal to raise Mercosur’s common external tariff

Paraguay’s Economy and Treasury Ministry warn about economic damage if Mercosur partners decide to raise the common external tariff

Paraguay’s Treasury Ministry analyzed the feasibility of the Argentinean government’s proposal to raise the Mercosur common external tariff to the highest amount permitted by the World Trade Organization (WTO): 35% on goods for final consumption, capital goods and inputs.

When taking into account the Paraguay’s previous policies and the size of the country, the national trend is to not support Argentina’s proposal. “Our country is small so it usually does not have high tariffs, therefore, this proposal has little in common with the trade policies we have had in recent years and that we have maintained over the years”  said vice Economy minister, Manuel Caballero.

He added that Argentina’s intention to apply protectionist measures is understandable since it is in a complex situation.

He pointed out that in past Mercosur summits raising the regional block’s tariffs had been proposed, but only for temporary increases. “The proposals were not to increase the common external tariff for all the countries, it was a more localized thing, a type of exception, like how we have in some cases asked for to have a lower tariff, but for them it was to have a little higher tariff”, he said.

Impact on Paraguay

The vice Economy minister said that the if the higher tariffs are only applied to some Mercosur partners (most likely Argentina and Brazil) it would not have a negative impact on the economy because Mercosur has been working for years with different tariffs.

However, if the proposal is applied to all Mercosur partners the macroeconomic consequences would have another tint.

The Federation of Production, Industry and Trade (Feprinco) has already said that the proposed measure would result in closed international markets and generate greater dependence on Argentina and Brazil.

“We tell other countries they want to be careful moving their tariffs. Even in Argentina’s current situation it is going to harm them, since when they raise all the tariffs on all the universe, it will increase the cost of manufacturing inputs which is the opposite of their intentions, since [the price of inputs] is something they need to save”, explained the vice Economy minister.

This Uruguay Business Reports news article is a translation of a news story that appeared in the Paraguayan newspaper La Nacion. The original Spanish language news story is available here. Uruguay Business Reports translation by Donovan Carberry.

Uruguay will take on Argentinean trade restrictions at next Mercosur summit

Upcoming summit to address “normality” within the block.

During the next summit of Mercosur country presidents, Uruguay will “require” that countries “keep” to the agreements established bythe block and that they “rapidly” resestablish “normality”. Uruguay’s complaints are directed at the trade barriers Argentina recently imposed.

Uruguay saw exports to Argentina fall 9.2% in the first five months of the year equal to the fall in 2011. This year’s drop is due to nonautomatic import licenses and sworn import declarations that Argentina recently put in place.

Up to now, Uruguay’s strategy had been to negotiate directly with Argentina to end the nonautomatic import licenses and import declarations but this method has only had partial sucess. Argentina has also recently raised import taxes on capital goods. In response to these issues, “the first thing” Uruguay will do at the next meeting of Mercosur presidents “is demand compliance with already established agreements” and request “a rapid return to normality”, according to the Uruguayan minister of Finance and Economy, Fernando Lorenzo.

“That is the first thing. We have no other initial position other than that”, he added.

Lorenzo said that once “we have reestablished normality, (we will try) to understand the problems that other countries have, like those Brazil raised in December”, when Uruguay approved raising the Common External Tariff (AEC) on 100 imports to Brazil.

“(We are going) to be understanding and at the same forcefully and firmly demand that our interests are understood by our partners” said the minister, sending a clear message to his Argentinean counterparts.

Afterwards, he clearly addressed Argentina’s increased import taxes on capital goods. “Argentina’s distortions are affecting us enough that we are already concerned about them. Every time that they take measures which distort or hinder bilateral trade, instead [of complying with Mercosur] agreements, it affects us. Obviously, every time they advance these measures they hurt us a little more”, said Lorenzo.

At the summit, the government of Cristina Fernández de Kirchner will ask its Mercosur partners to raise the general common external tariff to 35% for all members.

Uruguay does not favor the increase and will say as much at the summit. Lorenzo and president José Mujica shared their concern about the eventual consequences for Uruguay of raising the tariff at a meeting held last Friday, according to a report in the weekly magazine Búsqueda.

The magazine also reported that they will invite Paraguay to join them in taking a stance against the proposal and they are ready to do “everything that is necessary” to prevent Argentina and Brazil from imposing their trade policies on Uruguay.

When asked about it yesterday Lorenzo said that “Uruguay has already ratified the current tariff structure, and there is no reason for us to modify this structure”.

“Remember we have agreed, as an act of cooperation, to Brazil’s request for authorization to raise the external tariff on goods entering Brazil, but this did not extend to us”

He added that Uruguay agreed “because being part of an area of cooperation also implies understanding other’s problems. We suffer a lot when they don’t understand our problems”.

The minister emphasized that “while we are defending our interests, we also have to understand when others have difficulties. This does not imply that we change our policies”.

This Uruguay Business Report news article is a translation of an article that appeared in the Uruguayan newspaper El Pais. The original Spanish language article is available here. Uruguay Business Reports translation by Donovan Carberry.

Uruguayan government believes raising mercosur tariff on imports “is not ideal” for Uruguay

The proposal would affect industry and Kreimerman says its “is not ideal” for Uruguay.

The Uruguayan government will study Argentina’s proposal to raise the Common External Tariff (AEC) to 35%, the highest permitted by the WTO , although in principle it considers the proposal “not ideal for Uruguay” due to the impact it will have on industries which use imported components in production.

“Whenever there is a request from one of our [Mercosur] partners we have to analyze it, but we start with the point of view of a small and open country and that point of view considers our we dependence on components which we bring in from abroad. We will be very careful”, the Industry minister, Roberto Kreimerman, told El País.

The proposal will be formally proposed by Argentina June 28th in Mendoza, Argentina at the next meeting of the Mercosur trade block, but it came to light n the press after last week’s meeting between Argentinean foreign secretary Héctor Timerman and his Brazilian counterpart, Antonio Patriota.

Kreimerman, the Uruguayan Industry minister, said he doesn’t know the details of the proposal yet.

“(Uruguay’s position on the proposal) can not go far because we have to see what will be the complete plan” he said. He then added that “in principle it is not ideal” for Uruguay.

In Montevideo, the ministry is working on a report about the possible effects of an increase in the tariff like the one proposed by Argentina

The measure proposed by Argentina seeks to protect Mercosur from the strong flow of European and Southeast Asian products that are arriving in the developing world thanks to the recession.

Mercosur’s average tariff is currently 22%. To raise it to 35% Argentina can count on the support of Brazil and Paraguay, but they need the unanimous approval of the block and for that reason Uruguay’s position is key.

Kreimerman said that when they make the proposal it will be “more specific then what we are talking about now”  therefore it is possible it wouldn’t affect intermediate industrial inputs (which Uruguay imports). Nevertheless, Timmerman’s proposal [to Brazil] did not exclude certain sectors but called for a broad increase in the tariff.

This Uruguay Business Reports news article is a translation of a news story which appeared in the Uruguayan newspaper El País. That article, in spanish, is available here. Uruguay Business Reports translations by Donovan Carberry.