Amcham, which brings together U.S. companies in Argentina, warns of "the critical state of the Argentine productive sector"
"As of December 10, the government of President-elect Javier Milei will face obstacles and challenges that the country and the economic-social fabric have been suffering over the last decades," warns the chamber chaired by Facundo Gómez Minujín, head of JP Morgan Argentina, and whose CEO is Alejandro Díaz.
Translated into numbers, the delicate situation warned by AmCham points out that the commercial debt that importing companies accumulated with their suppliers since March 2022 reached 56,000 million dollars
"In general, the lack of a country model with stable, predictable and consistent rules of the game, with State policies that promote investment, improve competitiveness to increase employment, end poverty and social exclusion and put Argentina on the path of sustainable development, has been limiting to the development of our society," he said. he points out.
With a strong criticism of Alberto Fernández's administration, the document written by AmCham underlines: "Added to this was the lack of a macroeconomic stabilization plan, which mitigates market volatility, restores the balance of the economy's relative prices, implements fiscal and monetary policies to reduce inflation and contain monetary issuance. based on budgets that guarantee fiscal surpluses."
On the other hand, the business chamber highlighted that:
1) The large commercial debt that importing companies have accumulated with their local or foreign suppliers since March 2022. This accumulation occurred due to the impossibility of accessing the official foreign exchange market to cancel them, a direct consequence of the delicate situation of liquid reserves in the Central Bank of the Argentine Republic.
At present, Argentine companies that import inputs and other goods from abroad are in a critical position: exhausted credit limits with suppliers, cancellation of deliveries of inputs and products because they have exceeded these limits, absolutely unnecessary logistics, storage and customs costs, inefficiencies in import processes, financial costs due to the use of alternative payment mechanisms, etc. plant shutdowns due to lack of productive inputs, inefficiencies in production and marketing costs, shortages of products in the marketing chain, loss of employability especially in the segment of medium-sized companies, to mention just a few.
The total accumulated debt would amount to US$ 56,000 million, if we consider imports of inputs or services received. In the stock, the main creditor is the companies themselves (intercompany debt), with more than half of the total (59%). In second place, and to a lesser extent, are the suppliers themselves than those they finance (36%). Any scenario of exit from the exchange rate scheme and access to foreign currency will imply a jump in the exchange rate and its correlation with inflation, and a potential deterioration of confidence with the headquarters of many companies operating in Argentina.
Our main suggestions to the next administration on this issue are:
• Guarantee the payment of future debts generated by imports (flow),
• Allow importers to access the MULC or financial dollars for the stock of debts, with the possibility of alternating between the different exchange rates without any limitation.
• If the limitations due to the lack of liquid reserves in the BCRA make it impossible to access the MULC, we propose to negotiate with the companies its future cancellation through the agreement of a credible, reliable, committed and finally respected payment path.
2) The second problem is the existence of an import process with strong interventionism by the Executive Branch, called SIRAS, and made up of several State agencies, which decide through their approvals the destination of the input or product that the private sector intends to import.
In addition to the existence of this mechanism, in recent years, but particularly in recent months, there has been a lack of approvals to be able to deal with imports that supply our country's commercial or productive system. It is common for it to be impossible to detect and predict the criteria for approvals or denials. Although the level of approval has fluctuated, currently it could be said that authorizations are almost zero, without being able to guarantee the industry the supply of the value chains of the different sectors of the economy, a situation that will be shown more visibly during the next government despite not having been responsible for the problem.
Our main suggestion to the next administration is:
- Eliminate this bureaucratic approval mechanism, limiting production and supply, or in any case, that it only remains as an information system, so that the State knows the time of payment for imports agreed with suppliers and based on this information make the movement of dollars for future imports predictable.
"In short, the next administration will face a challenging and complex scenario. The capacity for negotiation and dialogue will be crucial to build consensus and move towards sustainable economic stability, which will allow the normalization of the commitments assumed and convert the obstacles into measures in favor of Argentina's productive sector, deregulating, simplifying and seeking the efficiency and competitiveness of companies," AmCham concluded.