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.

The Value of Uruguay’s Beef Exports Increased 3.6% During The First Five Months of 2014

The average value of Uruguay’s beef exports during the first five months of 2014 increased 3.6% compared to the same period in 2013, reaching a an average value of $3,951 USD per ton of meat from the front of the carcass and an average value of $3,812 USD per ton of meat from the back half.

Beef exports fell 5% as a proportion of Uruguay’s foreign currency inflows compared to the first five months of 2013, according to Uruguay’s National Meat Institute (INAC).

The volume of meat exports fell 9% amounting to 142,624 tons.

China held its position as the leading destination for Uruguayan beef. Uruguay exported 37,479 tons of beef to China, a 10.6% increase in volume. The value of Uruguay’s 2014 beef exports to China has reached $109.7 million USD so far, an increase of 7.8% over the same period in 2013.

Beef exports to the European Union continued to bring in more foreign currency than any other destination. So far in 2014 they have earned Uruguay $160.3 million USD, that is a 9.7% increase of the amount generated between January and May of 2013.

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

Texhong to build a $250 million USD textile factory in Uruguay

Texhong, a Chinese textil company has acquired 160 hectáreas in San José, Uruguay and is awaiting authorization from Uruguay’s National Environmental Management agency (Dinama) to begin constructing on a $250 million USD factory.

Texhong’s site is located on the Route 1’s 46 kilometer. All of the factory’s production will before export, principally to Brazil and other countries in the region.

The director general of the San José local government, Francisco Zunino, told the Uruguayan newspaper El País that shortly the company “will begin to address construction; they have already been consulting businesses in the sector and they have an architectural firm designing the project”.

Zunino reported that the town is collaborating with the company negotiations with UTE, Uruguay’s state power company, since the factory will have high energy requirements.

The work will be done in three stages. In the first stage, which will begin once the project has received the necessary authorizations, Texhong will build a 40,000 square meters of storage sheds at an estimated cost $80 million USD.

The first stage will require a work force of two hundred people. One hundred and fifty of those will be from the department of San Jose (Uruguay’s administrative regions are called departments). Zunino explained that “the other fifty will come from China to train the local workforce”. When the project is finished, sometime in the next three or four years, the factory will employ six hundred people.

Texhong produces raw material for textiles that are later used in clothing industry. It is one of the main producers and traders of textile raw material in China. The proposed factory in Uruguay is Texhong’s first initiative in Latin America. They have eleven manufacturing plants in China, as well as factories in Vietnam and Turkey.

Texhong’s entrance into Uruguay will help revive the country’s textile sector, one of the industry’s most affected by Uruguay’s decline in competitiveness.

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.

Lifan Uruguay will resume exporting the Lifan 320 to Brazil

Lifan’s Model 320 on display at car show in China. Model 320’s are produced in Uruguay for the South American market.

For two years, Brazil has prevented Chinese automaker Lifan, which produces cars in Uruguay for the South American market, from exporting cars into the country. Lifan now has 2,000 vehicles sitting in Uruguay which were produced for sale in Brazil. After receiving special approval from Brazil, Lifan will resume exports with a shipment of 70 model 320 cars in the next few days.

Brazilian authorities solicited a series of documents from Lifan to certify that 35% of the parts in Lifan’s model 320 are Brazilian, a requirement of the special decree signed by Brazilian President Dilma Rousseff that lifted the ban which had blocked Lifan’s imports for the past two years.

Lifan will ship 70 of these cars from Uruguay to Brazil in the next few days. Lifan has not been allowed to ship into Brazil for the past two years.

Pablo Revetria, the head of Lifan Uruguay told the Uruguayan newspaper El Observador that Lifan has until October 29 to move the 320 and 620 model vehicles currently in Uruguay into Brazil.

Asked what Lifan would do if they were unable to export the cars to Brazil, Revetria explained that some cars could be sold on the Uruguayan market and Lifan is “very far along” in Venezuela’s import approval process. “When that process is completed we will be in place to move an important amount of stock”, Revetria said.

This Uruguayan Business Reports news article is a summarized 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.

China predicts dairy cattle imports from Uruguay will decline steeply in 5 years

Since 2009, China has been the world’s largest importer of dairy cattle. Currently Uruguay, along with Australia, and New Zealand, is one of the top three exporters of dairy cattle to China. In 2011, Uruguay sent over 23,000 dairy calves between 8 and 16 months old to China: 14% of all Chinese dairy cattle imports.

Li Shengli, the chief scientist  at China’s National Milk Industry Technology System and a professor at China Agricultural University expects that number to continue to increase in the short-term but drop off within 5 years.

The surge in dairy cattle exports to China is because companies like Modern Farming Group Co Ltd, Liaoning Huishan Holdings Group and other top Chinese milk producers are setting up dozens of large farms to ensure a consistent supply of milk to the People’s Republic. China Mengniu Dairy Co Ltd plans on constructing between eight and twelve large-scale dairy farms by 2015 at a cost of $549.15 million.

The increased Chinese investment in milk production can be traced to several tainted milk scandals in 2008. These scandals scared consumers away from Chinese milk and led to a dramatic increase in the amount of milk China imported. The Chinese government responded by establishing production goals for domestic producers, cutting taxes on production and introducing other financial incentives for China’s big milk producers. The government also encouraged foreign investors to bring in capital and technology.

The current revolution in the Chinese milk industry has produced a surge in demand for Uruguay’s dairy cattle. Although China already has a substantial herd of dairy cattle, milk companies have been importing higher yielding breeds from Uruguay and other countries in order to increase production.

However, that surge in demand may end before the decade. Li predicts that within 5 years Chinese dairy companies will have enough livestock  to breed high yielding dairy cattle on a large-scale. They currently have the technology to ensure first-born calves are female which greatly increases the speed the cattle population increases at.

Uruguay Business Reports original reporting by Donovan Carberry. Sources include: Uruguay’s National Milk Institute and China Daily.

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.

EFFA motors forms joint venture with chinese auto company Lifan: plans to expand Uruguayan manufacturing plant

Uruguayan auto producer EFFA motors group has formed a joint partnership with the private chinese car manufacturer Lifan. The partnership will join EFFA with the top Chinese car exporter and focus on serving the Brazilian market. They will form a new company called Lifan Motors do Brasil.

The companies will make joint investments in Uruguay and Brazil totalling around $120 million USD. The investment will go towards expanding EFFA’s plant in San Jose, Uruguay as well as to the construction of a new factory in Brazil by 2014, and the expansion of Lifan’s showroom network in the region.

EFFA’s San Jose assembly plant currently builds Lifan 320 which looks very similar to the BMW mini, and the Lifan 620 a four door sedan.

EFFA could produce between 20,000 and 50,000 vehicles per year starting in 2013 if Brazil lifts new trade barriers which are slowing Uruguayan exports.

Lifan, which is based in Chongqing, began producing automobiles in 2003 and has had success targeting markets in developing countries.

Uruguay Business Reports original content by Donovan Carberry.

China seeks to import high value cuts of beef: Proposes deal for 100 metric tons of beef monthly

Chinese importers no longer only talk of buying offal, they are constantly seeking more beef including high value cuts pushed by growing domestic consumption that doesn’t seem to have an end in sight. At the recent Sial China trade show, a Chinese state-run business expressed their interest in buying 100 metric tons monthly of beef fronts with bone and ribeye steaks for distribution in six provinces to the Uruguayan National  Meat Institute (INAC). The news was confirmed to El País by the vice president of INAC, Fernando Pérez Abella, who led the official delegation at the trade show where they displayed only three freezers.

Mr. Abella explained that INAC will continue to advise the company, but it will be the industry which negotiates the deal and sets the prices.

“Our biggest concern is that the majority of Uruguayan beef continues to go to the mincer and is mixed with others in the final product. We have the quality to sell directly to the plate, so we need to target niches to beef that buy our meat for that purpose, because we can add more value [that way]”, emphasized the head of the INAC delegation.

“What surprised me is how they eat beef. There are millions of people who eat more beef every day in a potential market of 500 million people” he added.

For his part, the broker Alejandro Berrutti, representative of United Breeders & Packers that also was at Sial China, confirmed the market’s potential. “China is not the market of the future, it is the market of the present” and he emphasized the Uruguay’s advantage: that when a sale is completed the logistics are already in place. Offal which isn’t consumed in the west is sold to China, but the potential we see in high value and bone beef cuts is more interesting”, he said.

According to his talks with chinese importers, “the market can handle today’s high prices, the potential is enormous and there is a lot of interest in beef”.

This Uruguay Business Reports story was translated from an article which appeared in the Uruguayan newspaper El Pais by Pablo Antunez. The original article, in spanish, can be viewed here. Uruguay Business Reports translation by Donovan Carberry.