Argentina: Buenos Aires Considers New Import Restrictions

SEPTEMBER 9, 2016 | 14:40 GMT 

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(Stratfor)

Argentina is reportedly preparing to level new restrictions on imported textiles, a measure that would fly in the face of President Mauricio Macri's plans to liberalize his country's economy. According to a Sept. 8 Cronista report, officials from the Argentine textile industry have admitted that they are negotiating with Buenos Aires to put the trade barriers in place next year.

Pressure has been mounting against the Argentine government to restrict trade in certain sectors such as textiles, shoes and electronics. Opposition lawmaker and one-time presidential candidate Sergio Massa has even proposed the suspension of imports — with the exception of raw industrial materials and medicines — for 120 days. Several other prominent opposition figures, including Daniel Scioli, have backed Massa's bid, arguing that it could protect the country's small and medium-sized enterprises.

But Macri was elected on a promise to liberalize the Argentine economy. Since assuming office in December 2015, the president has removed some of the bureaucratic red tape surrounding imports, reached a deal with holdout companies to pay the country's defaulted debt, lifted foreign currency controls and lowered taxes on grain exports. As a result, Argentine imports by volume increased by 6.4 percent in the first seven months of 2016, compared with the same period the year before. However, inflation has also remained stubbornly high and is expected to climb to over 40 percent this year. The International Monetary Fund predicts the Argentine economy as a whole will shrink by 1.5 percent this year — a likely scenario, considering industry production fell 7.9 percent in July alone, the largest dip in industry production the country has seen in 14 years.

Argentina's biggest labor unions, the General Confederation of Labor and Argentine Workers' Central Union, have pushed back against Macri's liberalizing policies as well, in large part because of the effect they have had (or could have) on jobs. The government has admitted that more than 120,000 jobs have been lost this year because of the recession. Of those, more than 10,000 were cut because of Buenos Aires' decision to slash its spending by laying off public sector employees. This, coupled with a public utilities price hike of over 200 percent and the lifting of import restrictions, has prompted the unions and several social movements to hold a national strike in October to protest the government's economic policies. The exact date of the demonstration will likely be set during a Sept. 23 meeting.

It is possible that Macri will yield to labor union and industry demands by enacting some form of import regulation on certain products in 2017. Should he place limitations on foreign shoes, textiles and electronics, the countries most affected would likely be Brazil and China — two trade partners Argentine industries have specifically complained about. Still, it is unlikely that Macri would go so far as to agree with Massa's proposal to suspend imports, even temporarily, for fear ofscaring away the foreign investors the president has worked so hard to draw to Argentina. And so, even if Massa's suggestion is approved by Congress, Macri is liable to veto it.

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