Uruguay’s exports to Argentina continue to fall with no end in sight

Uruguay’s latest export data, released yesterday, showed a clear increase in Uruguay’s total exports. Soy remained Uruguay’s top export. However, the data also showed a clear decrease in exports to Argentina, which has maintained strong restrictions on imports despite the changes it has implemented to its macroeconomic policies.

Uruguay’s exports increased 7.8% in May over May 2013, according to data from the Instituto Uruguay XXI. Uruguay’s exports have increased 5% between January and May of 2014. The total value of Uruguay’s exports in May reached $1,128 million USD, $81 million USD more than in May 2013.

Brazil remained the number one destination for Uruguayan exports despite a .2% drop between January and May. China remained the second biggest destination for Uruguayan exports. Exports to China fell 14.4% since January. The Nueva Palmira free trade zone received the third most Uruguayan exports. Venezuela, following a 33.5% increase between January and May, was the fourth most significant destination.

Uruguayan exports to Uruguay fell 16.3% during the first five months of 2014 when compared to the same period in 2013. The value of Uruguayan exports to Argentina decreased $33 million USD over the same period. Argentina remains the fifth largest destination for Uruguayan exports.

With Argentina “something chronic” is happening, Álvaro Queijo, the president of Uruguay’s Exporter’s Union (UEU), told the newspaper El Observador. “On one side trade is not good and on the other, Argentina’s changes to the exchange rate at the end of January caused [Uruguayan exporters] to lose competitiveness”. “That the official exchange rate has gone from $ 6 (Argentinean Pesos) to $8 which has changed the numbers a little. Whats more, the restrictions have not changed, they have remained the same; Argentina’s industry is very reluctant to buy imports”, explained Quejio.

Quejio does not believe that there will be any significant changes in the short-term to produce an opening for trade or an improvement in Argentina’s macroeconomic conditions. “This is a process that has been going on for some time, for some two or three years, with a continuing deterioration of exports to this country. If we compare it to 2012 the drop is bigger and if we use 2011 the decrease is even more pronounced”.

Quejio reported that the sectors most affected have been clothing, graphics, chemicals and plastics. He added that Brazilian demand does not make up for the fall in sales to Argentina. The decrease in exports to China, nearly 15%, can be attributed to the significant increase in exports to the Nueva Palmira free trade zone as most products are usually shipped from there to China.

Soy Stays In Front

Soy remained Uruguay’s principal export in May. Sales to abroad increased 14.7% over May of 2013 and represented 39% of Uruguay’s total exports in May. “Despite decreasing 2.8% over sales in May 2013, frozen beef was Uruguay’s second biggest export, making 9.3% of the total” reported the Uruguay XXI institute. Concentrated milk came in third with 4.9% of the total. Exports of live cattle saw the biggest increase in May. Sales of live cattle in May of 2013 did not even reach $300,ooo USD, in May of 2014 they topped $15 million USD.

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

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’s government unveils new incentives for foreign tourists

On Wednesday September 26th, Uruguay’s Economy and Tourism ministers, Fernando Lorenzo and Liliam Kechichián, and the director of the DGI (Uruguay’s tax agency) Pablo Ferreri, announced the Uruguayan government’s new incentives for foreign tourists. Argentina’s currency controls are expected to severely hurt tourism in Uruguay, so the government is creating several incentives to lure Argentinians and other foreign tourists into Uruguay. There are new five incentives designed to encourage foreign tourists:

22% discount on VAT taxes

Foreign tourists will pay 22% less in VAT taxes when they spend money on dining, catering, shopping, events and car rentals. To receive the discount they must pay with credit or debit cards issued outside the country.

10% VAT discount on real estate rentals

Tourists must pay with foreign credit or debit cards and the rental must be registered.

More areas will be “tax free”

Salto, Pausandú and Fray Bentos will be tax-free for foreign tourists in addition to the usual tax-free zones. There will be no IVA tax on leather goods, clothing, food, drinks and artisanal products in the three cities. The discount applies to products produced in Uruguay and abroad.

Fuel vouchers

Vehicles with foreign license plates will receive one voucher for $25 dollars worth of fuel.

Phones and communication

Foreign tourists will be eligible to receive special benefits on phone and broad band service from Uruguay’s state telecom Antel.
The first two incentives will be in effect from between November 15, 2012 to March 30, 2013. The fuel voucher will be available between the 15th of December, 2012 and will also last until March 30, 2013.

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

Uruguay News Brief: “11% or 12%” of bank deposits in Uruguay belong to Argentineans

Mario Bergara, the head of Uruguay’s Central Bank reported on Sept. 27 that between 11% and 12% of bank deposits in Uruguay belong to Argentineans.

Mr. Bergara explained that, while the number of deposits belonging to non-residents has increased, the pace of growth is “normal”. It is consistent with the rate of growth in non-resident deposits seen in the last few years.

The percentage of non-residents deposits has actually fallen as more Uruguayans begin trusting bank accounts with their savings.

The percentage of Uruguayan bank accounts belonging to Argentineans is four times smaller than during Argentina’s financial crisis in 2001.

This Uruguayan Business Reports news brief is a translation of an article that appeared on Radio Uruguay’s website. The original article is available here. Uruguay business reports translation by Donovan Carberry.

Martin Garcia Canal update: Uruguay will receive Riovia’s bid, Argentina will not

After a tense week in Uruguay’s relations with Argentina over dredging the Martín García canal, the delegates of the Río Plate Administrative Commission meet Monday 7.30 to review the proposals from business interested in taking over maintenance of the canal.

Sources within the Uruguayan foreign ministry told La Diaria that Argentina’s unilateral decision to exclude Riovia from the tender exhausted the patience of the Uruguayan authorities, who understand that the Argentinians “are desperate” and they want “to wash their face”.

According to the Foreign Relations Ministry, Uruguay has always acted with “transparency and seriousness” and it was Argentina who asked for an audit and who claimed that they would make CARP’s minutes public, in which they discussed the alleged bribe, and then later did not release them because the same Argentinean government did not permit it.

“Now they are desperate to clean their faces and expunge guilt associated with Riovia”, reported the foreign ministry source.

It will be Monday at 2:00pm when both CARP delegations meet in Buenos Aires to open the bids from the four prequalified canal maintenance companies. The President of the Uruguayan delegation will also receive Riovia’s bid, although Argentina will not.

Days after the Argentinean foreign minister Hector Timerman sent a letter to his Uruguayan counterpart, Luis Almagro informing him that the Argentinean government had decided to revoke Riovia’s prequalification following the Uruguayan Court of Auditor’s investigation into alleged bribery by the firm.

Uruguay understands that arbitrarily excluding Riovia from the bidding could expose both countries to multi-million dollar lawsuits under treaties signed by both Uruguay and Argentina for the protection of investments.

Riovia has already announced that it is studying how to react to being excluded from the tender.

Although Argentina has proposed suspending Riovia from bidding today, they know the Uruguayan delegation will not permit it. Argentinean representatives will not review Riovia’s proposal but the Uruguayan delegation will in order to “cover themselves” in the case of an eventual law suit.

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

Uruguayan government believes trade problems with Argentina will not improve

The Industry minister Roberto Kremierman admitted that the trade situation between Uruguay and Argentina will continue to be marked by difficulties with which Uruguay “will have to live”. The Argentinean government is pursuing an aggressive protectionist policy, using various different measures to restrict the entry of Uruguayan goods into Argentina.

“Argentina isn’t a 100 yard dash, it’s a 100 yard dash with hurdles” said one industrial exporter in a joking tone at the end of last year, when there was still hope for a change in trade policy.

Significant delays in granting the permissions needed to get import licenses is such a common problem that it has become the routine. After countless complaints from the business sector and repeated negotiation attempts by the Uruguayan government, which have served only ever reached momentary solutions, the Uruguayan government now firmly believes these trade barriers [within the mercosur free trade block] will remain.

“We do not believe the situation with Argentina will improve” the minister of Industry, Robert Kreimerman, told UNoticas when asked about future trade with that market. For the cabinet minister, the package of restrictions that Cristina Fernádez’s government has imposed “is part of a firmly established policy which will continue in the same line”.

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

Chery considers closing its plants in Uruguay because of Argentina’s import restrictions

Chery claims the plant has lost 4 million dollars this year.

With 81% of its employees now on unemployment insurance and losses reaching $4 million USD, the auto company Chery Socma is considering closing its assembly plant in Uruguay. The government has already scheduled a meeting to hear about the situation first hand.

“The Argentina tariffs and their refusal to grant access to the import quota for 4,000 [Uruguayan] vehicles into [Argentina]” (agreed upon in a free trade treaty) are the reasons that the directors of Chery Socma are evaluating closing, in the short-term, their factory in Uruguay.

It seems that the firm has exhausted its waiting time. “”We are [nearly] in August and they have released less than a third (1,250) of the quota” Daniel Villamarí, a Chery director told El País. The situation has paralyzed the business there is little chance that it will change. Wednesday afternoon the company’s partner in Argentina contacted his counterparts in Uruguay and told them that the firm’s situation “is unsustainable” and they should “discontinue production in Uruguay”.

According to Villamarín, this is not to say “[Chery] will retire from the market, because we sell Chinese [produced] cars also”. Given the situation and 300 employees placed on unemployment insurance since March, the company has not found a solution to the Argentinean problem.

The plant has been in trouble since the end of 2011. “Last year closed with bad numbers in red. We lost a ton of money, we exported around the clock and we have been suffering this for a long time” said the local director.

For Chery, the only solution is that Argentina “loosens and grants the quotas” and that they “honor and respect” pre-existing bilateral agreements.

The businessman challenged the Uruguayan government to get involved in the matter. According to Villamarin “the state is not taking the necessary steps to free this quota. The whole world protests, but they protest in the wrong place” he said.

For his part , the director of Industry, Sebastián Torres, told El Pais he will be on top of the situation and said that he will coordinate “a meeting between “Chery and the Economy Ministry next week to get all the details”. He confirmed that he will resume contact with his Argentinean counterparts to ask for the second third of the quota, “”we will ask again to them [the Argentinians] to free car exports”.

According to Torres, inside the Secretary of State they believe this protectionism, a product of the international crisis, “has come to stay; we have to realize this will continue for at least a year and a half. That is the logic that is driving us”, he said.

Despite Chery’s problems, the director of Industry told El Pais that the auto sector “is one of those that have grown the most compared to 2011”.

According to Ramón Cattáneo, the secretary for the Chamber of Automobile Industry (CIAU), the only way to end the problems in the sector is “for Argentina to free the quotas, but at this point in the year, it is difficult to believe that would happen, I don’t see any open door now”.

While Chery’s plant is the most affected since 60% of their exports go to Argentina, Cattáneo reported most plants are in a similar situation. Nordex laid off 110 workers from a plant that employees 350. Effa’s plant is paralyzed by the conflict with Brazil and its 300 employees have no work.

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

Uruguay Auto News: Argentinean trade restrictions put Uruguay’s auto manufacturers in a cage; Domestic sales jumped in May

The Uruguayan Chamber for the Automobile Industry (CIAU) is concerned about the “stagnation” in automobile exports to Argentina. Uruguay has not been able to export trucks to Argentina and is asking “the government to change its strategy”.

According to the president of the CIAU, Ramón Cattaneo, “Argentinean cars enter Uruguay with total freedom but going from [Uruguay] into [Argentina] we are completely barred”

“Argentina is not complying with established agreements”  and it is having a sever impact on the Uruguayan auto industry: “businesses have been weathering the storm as well as they can for six months now” Cattaneo told El País.

The most worrying problem is in truck exports. According to the president of the CIAU “very few trucks are entering through the general process”. Even “more serious” is the preferential free trade process (Uruguay negotiated tariff free entry of Uruguayan trucks into Argentina in exchange for allowing Argentinean cars into Uruguay tariff free) “we still can’t export a single vehicle [through that arrangement]”, Cattaneo said.

Argentinean car exports do not pay a tariff to enter Uruguay. Uruguay is supposed to be able to export 20,000 cars and 800 trucks a year into Argentina tariff free, a number that is far from being used up, according to the CIAU.

Cattaneo said that the CIAU believes “the lesson here is that the government has to change its strategy” and he added that ” the current strategy is not getting results for Uruguay”

Another root cause of the low number of exports to Argentina is that automobile manufacturers feel the need to focus on the Brazilian market. “We are exploring exporting to Brazil, but the logistics question is complicated. Trucking [cars] is expensive and the market is big and competitive”, said the President.

While exports to Brazil have increased, the higher numbers to don’t equal the losses stemming from Argentina’s closed market. Additionally, Brazil has limits on which brands can be imported, some businesses “do not have permission for their vehicles to enter”, said Cattaneo.

The situation has stagnated Uruguayan sales to the rest of the region and as a result 400 employees from various companies have been laid off.

Currently the CIAU is looking to the government to tackle the problem which “has remained unchanged since the beginning of the year and shows no sign of improving”, Cottaneo concluded.

Domestic Sales Jump in May

According to the Uruguayan Automobile Trade Association sales this May increased 2% over May of 2011. Dealers sold 4,607 vehicles this May compared with 4,515 in May 2011.

In the period between January and May sales increased 4% over the same period last year. Between January and May of this year 21,105 vehicles were sold compared to 20,369 in 2011.

The biggest increase this month was in regular auto sales which rose 7%. However between January and May sales only increased 1% over 2011. “Utility” vehicles fell 7% this May but are still up 11% since January.

Truck sales fell 11% in May although they are up 18%  through the first 5 months of the year. May’s decrease can be explained by the Uruguayan government’s decision to freeze the entry of new trucks into the National Registry of Professional Cargo Transporters.

Bus sales fell by 26% in May and are down 69% since January. However, the Uruguayan Automobile Trade Association emphasized that it “is a very volatile market and heavily depends on investments by only a few businesses”.

This Uruguay Business Reports news article is a combination of a translation of a news article by Pablo Rossi which appeared the Uruguayan newspaper El Pais and original reporting on data released by the Uruguayan Automobile Trade Association. The section up to the heading Domestic Sales Jump in May is the translation of the El Pais article, below that is the our original coverage. The original El Pais article is available here. Uruguay Business Reports translation and reporting 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 Exporters’ Union reports on stronger dollar and changing global markets

“We cannot lose sight of the need for an exchange rate that allows us to compete” said Alejandro Bzurovski, the president of Uruguay’s Exporters’ Union.

The changes in the value of the dollar, at a local and global level, and the changes in Uruguay’s principal export markets during the period between January and May were the subject of this month’s report by the Uruguayan Exporters’ Union (UEU).

With respect to the dollar, Alejandro Bzurovski, president of the UEU told El Observador that “we have to be careful”, because the dollar’s significant increase over the peso last week has not registered yet.

“They are saying that the dollar increased 7.3% in May but if you look at the average daily increase, it is a lot less. The average for the month was 3%”, he said. “The strong increase happened in the last three days of the month”.

Bzurovski added that there are countries where the dollar has appreciated a lot more than it has in Uruguay and Brazil, like in Russia, South Africa, Mexico and others. “We are living in a moment in which there are a lot of currency adjustments and it is difficult to know how this will affect Uruguay’s competitiveness. What I’m saying is it’s going to be very dynamic and we are going to be looking for where we are”, he said.

“What we have to highlight is that we cannot lose sight of the need for an exchange rate that allows us to compete”.

Bzurovski emphasized the dollar’s importance as one of the factors that most affects Uruguayan exporter’s ability to compete. “How significant? It is extremely, its one of the most important factors” he explained.

“Competitiveness is not only based on the dollar though, if we don’t have a good relationship between our markets and our competitors prices we can’t have a country that relies strongly on exports” , he said.

Market Fluctuations

UEU’s May report found that during the period between January and May of 2012 the sale of goods through export increased by US $3,613.3 million USD. That is a 9.27% increase over the same period last year.

However, sales to some markets dropped. A critical decrease was in sales to China. Uruguayan exports to China fell 9.24% in the first 5 months of the year.

“We are talking to businesses most involved with China, especially those that had a bigger decrease [in sales], and are asking if this drop is seasonal. Our analysis should not only be cold numbers, we have to do a survey” said Bzurovski.

With regards to the region, exports to Brazil increased 12% this month but exports to Argentina and Paraguay fell 17% and 24%.

Whats more, the study found that exports to 8 of Uruguay’s top 20 markets fell in physical volume or dollar amounts.

“The global situation is difficult, we are living in complicated times”, said the head of the UEU. “We have big decreases in Uruguay’s traditional markets, and exports to Europe are showing significant decreases, and in some markets where there haven’ t been big falls there are still many issues, for example in the US the recovery is still slow and weak”.

“There is no doubt that the Uruguayan economy is very tied to the future of its exports and that we must try to put in place policies which will help us maintain the flow of exports”, concluded Bzurovski.

Export Rankings: Meat, Soy, Wood and Charcoal

The UEU’s report indicated that during the period between January and May, meat continued to be the country’s top export by dollars accounting for 18.05% of total exports. Meat exports increased 7.08% over last year. In second place is soy, which increased 3.8% and made up 15.11% of total exports. Grain and cereals were third after an increase of 71.19%.

Between January and May 2012 wood and charcoal led the list of exports by physical volume despite a fall of 5.96%. Grain and cereals came in second after a 97.45% jump. Soy and meat were in third and fourth place.

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