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Argentina Seeks To Assure Brazil On New Import Measures

Published Saturday, 19th February 2011 05:20 am - © 2011 Dow Jones


(Updates with information on trade among Argentina, Brazil and Uruguay and Argentine trade policies.)

By Ken Parks

Of Dow Jones NEWSWIRES

BUENOS AIRES -(Dow Jones)- Argentina's government Friday assured its largest trading partner, Brazil, that recent measures to restrict imports won't damage trade relations between the two South American countries.

In a resolution published earlier this week in the Official Bulletin, Argentina expanded to about 600 from 400 the number of imported goods that have to request a Non Automatic License, affecting items such as luxury automobiles, consumer electronics, glass and metal products.

"Through the application of this regulation, Argentina's government isn't going to affect any of Brazil's sales to our country," Industry Minister Deborah Giorgi said during a press conference.

Giorgi said the expansion of the list of products that require an NAL was aimed at "unfair competition" from countries located outside of the Mercosur customs union, which includes Argentina, Brazil, Uruguay and Paraguay.

Brazil Trade Minister Fernando Pimentel said at the press conference the NAL resolution had "caused a certain amount of concern" among Brazilian manufacturers.

The ministers said they will jointly monitor the application of NALs by both countries to ensure the speedy approval of import licenses.

The Fernandez administration has tried to boost local industry and job creation through formal and informal trade barriers. The central bank of Argentina also regularly intervenes in the foreign-exchange market to foster a gradual peso depreciation to keep export-oriented manufacturers competitive and protect the local industry from imports.

According Giorgi, those policies allowed Argentina to substitute $9.2 billion in imports during the last year.

Trade between South America's two biggest economies has grown tenfold in the last two decades to nearly $33 billion in 2010, although Argentina posted a $3.38 billion trade deficit with Brazil last year.

However, the trade relations between the two neighbors haven't been free of the occasional spat. In 2009, Argentina raised barriers against its top two trading partners, Brazil and China, in an effort to protect local manufacturers during the global economic crisis.

Brazil retaliated with similar measures against Argentine goods, mainly agricultural products and car parts. In the end, diplomacy prevailed and commerce between the two neighbors has since prospered.

Argentina is a major buyer of Brazilian tractors, automobile parts and iron ore, while Brazil imports large quantities of automobiles from Argentina and buys about 90% of its neighbor's wheat exports.

Indeed, exports to Brazil have helped to underpin Argentina's booming economy, which President Cristina Fernandez said Friday expanded 9.1% last year.

Pimentel said he and Giorgi discussed ways to open the Brazilian market to Argentine exports such as veterinary and chemical products.

"The Brazilian government doesn't want to deepen [or] increase the trade deficit between Brazil and Argentina at this moment. We aren't interested in that. On the contrary, we want an equilibrium in the [trade] balances," Pimentel said.

Argentina's efforts to limit imports have angered Uruguay, which ran a trade deficit of $1.28 billion with Argentina in 2009.

"This isn't a problem for industry, it's a problem for Uruguay," Washington Burghi, president of Uruguay's leading industrial trade group, the CIU, told daily El Pais on Friday. "We've turned the other cheek, and they've left both sides of our face red. I think the time has arrived to negotiate a little less and take stronger measures."

Giorgi said Argentine authorities have been in contact with their Uruguayan counterparts to discuss NALs and other trade issues.

Trade barriers have also angered China in the past, and it retaliated by refusing to import Argentine soyoil for six months in 2010. That spat was eventually smoothed over with China resuming soyoil imports and pledging to loan Argentina about $9.5 billion to upgrade its railway network and buy Chinese-made railroad equipment.

However, Argentina has continued to take actions to protect local manufacturers against Chinese imports. On Thursday, Giorgi signed a decree renewing antidumping measures against Chinese-made air-conditioning units.

-By Ken Parks, Dow Jones Newswires; 54-11-4103-6740; ken.parks@dowjones.com

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