BUENOS AIRES, ARGENTINA (July 17, 10:20 a.m. ET) — Despite plastics production growth of 7.3 percent last year and an insatiable market with per capita consumption leading Latin America, Argentina's plastics industry is nearing a panic level, facing concurrent threats of energy shortages, government restrictions on imports and U.S. dollars, rapid inflation and reduced demand from Brazil.
Argentina's economy nearly doubled in size between 2003 and 2010, and unemployment hit a multi-year low of 7.1 percent in the first quarter of this year. But gross domestic product growth for the rest of the year is projected near zero by private-sector economists, and industries of all types are struggling with similar economic roadblocks.
The government is assessing a new 14 percent tariff on imports that compete with locally made goods, or blocking them outright by requiring written authorization and pre-approval requests for all imports. It's also restricting foreign currency that companies can use to spend abroad, to ensure enough dollars are available for Argentina to pay its debt.
“Argentina is trying to protect its national plastics industry because we think 2012 is going to be a year of drastically reduced global consumption,” said Sergio Hilbrecht, sub-manager of Argentina's plastics industry chamber, Cámara Argentina de la Industria Plástica (CAIP) in Buenos Aires.
“The [European Union], U.S. and Chinese economies aren't growing enough, overwhelming the market with [cheap] plastics. There's no end date set by our government for how long the import controls will last,” he said at Argenplás, held June 18-22 in Buenos Aires.
But Argentine manufacturers said the limitations put national industry at risk, because companies of all types depend heavily on raw material and parts imports — particularly plastics. Hector Mendez, former head of the Argentine Industrial Union and a plastics business executive, said earlier this year that the plastics industry will struggle as much as any in the nation with those restrictions.
The wait to import a foreign-made plastic injection mold — even when no domestic manufacturer offers the product — is now projected at 1½ years and will suffocate growth opportunities for local producers, Mendez said.
On June 22, the U.S. demanded at the World Trade Organization that Argentina immediately end its import licensing scheme and tariffs against foreign suppliers. The WTO said it will decide this year if Argentina must lift some of the import restrictions.
Argentina's economy is very close to a prolonged recession, according to a May report from the University of Torcuato di Tella (UTDT), a respected source in Argentina for economic forecasts. The nation's top manufacturing industry, automobiles, reported January-May production was down 11 percent year-on-year. Auto exports, of which three-fourths have historically been sold to Brazil, were down 26½ percent.
The new tariff on imported goods that compete with local options, which starts at 14 percent, isn't necessarily a deal breaker, Buzzi said. It's the multiple authorizations buyers must get from customs agencies and the central bank, with random denials for purchase or lending of dollars reportedly coming back to applicants with no reasoning offered from authorities.
Companies in the South American countries of the Mercosur trade agreement face fewer taxes on their products and machinery, but Argentine customers will still have to pass through the same new bureaucratic steps of import and financing approval.
“Markets like Chile, Peru, Colombia and Mexico are so much easier to sell into [than Argentina],” said Wilson Carnevalli Filho, commercial director for extruder producer A. Carnevalli & Cia. Ltda. of São Paulo, who credits those countries' consistent economic growth in recent years to their free-trade policies.