Uruguay news brief: Mujica rejects economic sanctions for Paraguay

Today Uruguay’s President José Mujica rejected using economic sanctions against Paraguay because of the “parliamentary coup” that removed President Fernando Lugo on June 22. Venezuela has already applied sanctions and cut off oil exports.

In statements on the president’s website, Mujica referenced the political situation in Paraguay. He said that “from a realistic view-point, it was a type of parliamentary coup”, but he clarified that he is not a supporter of economic sanctions “because the people end up paying”.

The president said that Uruguay will oppose sanctions against Paraguay a the next Mercosur summit. That summit is scheduled for 28 and 29th of June and will be held in Mendoza, Argentina.

The foreign minister, Luis Almagro, on June 23rd released a declaration from the Uruguayan government about the political situation in Paraguay.

The declaration stated that the trial of ex-president Fernando Lugo did not comply with the essential guarantees of due process included in the democracy clauses of Mercosur and the Union of South American Nations (Unasur). It added that Uruguay hopes Paraguay will hold new elections as soon as possible.

This Uruguay Business Reportsnews article is a translation of an article that appeared in the Uruguayan Newspaper El Observador. The original Spanish language 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.

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.

Uruguyan ports see new decreases in container port activity due to decreasing transshipments; a conversation with ANP President Alberto Diaz

Uruguyan port activity fell in April for the second consecutive month and while the situation has not generated “great concern” the governmnet has admited that “that they have to pay attention”. Less transshipments of goods for Argentina is one of the causes.

In April, Uruguayan ports handled 70,000 teus (1 teu is the average volume of twenty foot cargo container) between imports, exports, and goods in transit. That is 9% less then the 77,000 teus moved during April 2011 according to preliminary data from the Uruguayn National Administration of Ports (ANP).

This is the second month Uruguyan port activity has declined– in March Uruguyan ports moved 14% less containers then in March of 2011–after 13 consecutive months of increases.

On the other hand, during the first four months of the year Urugyan port activity has fallen by a total of 8% said the President of the ANP, Alberto Diaz.

The cause: less transhipments, that is shipments which arrive in Uruguay but whose final destination is another country in the region. After that, the ANP analyzed the situation with several operators and detected a “decrease in the trade with Argentina”, said Alberto Diaz.

That is, “if [Urugyan ports] were moving Argentian cargo, and that country is reducing imports, there are some effects” Diaz said.

On top of this, the shipping company CSAV  has stopped making transshipments through Uruguay.

“This is closely linked to the lack of warehouses currently between Montevideo and Paraguay which are needed to quickly move goods” explained ANP president Alberto Diaz.

The containers arrive in Uruguay but there aren’t enough warehouses on the lines that go to Paraguay to quickly send them to that country. While “everytime we have more lines that go to Paraguay, we have to show that it is possible for the shipping companies to come in and make quick runs” Diaz said.

“What can not happen is that the goods come and we don’t have warehouses” so we can unload them quickly, said the ANP president.

ANALYSIS

While the ANP authorities are utilizing their regular meetings with port operators to understand the situation, at the same  time ” we are not concerend enought to hold special meetings” the president said. “We still do not have a complete diagnosis” added Diaz.

For the moment “there is not great concern but we have to pay attention. We are waiting to see if it (the decline in activity) will reverse” said the ANP President.

For now the other two parts of the movement of containers (import and export) “have not fallen” with respect to last year. Although some operators did see a fall in the containers moved for export. With the Uruguayan economy still predicted to grow by 4% this year “we hope that imports and exports will respond to the increase” said Diaz.

Transshipment activity “is more volitle” and “we have to see how we attract it” Diaz added.

THE FIGURES

9%

Is how many fewer containers moved through the port of Montevideo this April compared to April 2011.

This article is a translation of a story appearing in the Uruguyan newspaper El Pais by Fabian Tiscornia. You can view the original article here. An article on the same subject appeared in El Observador without the analysis of ANP President Alberto Diaz. You can view that article, in spanish, here.