Il new Argentine government, led by Javier Milei, finds himself having to face a disastrous situation from an economic point of view. During the election campaign he said it: «I want to do the opposite of what has been done in the last 100 years, as Argentina has gone from being the richest country in the world to having 40% of the population poor». From the previous administrationIn fact, the new president inherited a stagnant economy, little open to international trade, indebted and without access to credit.
New measures to reduce the fiscal deficit
The recipe for reduce the fiscal deficit and healing the country's economy is based on a package that includes several emergency measures, which should then be followed by more structural reforms. L'Milei's goal is "cause a shock to investments" putting dollar and peso in competition. But most of all, "put an end to the caste kiosks”. The first move was the weight depreciation by 50% against the dollar, with the official exchange rate being set at 800 pesos per dollar, compared to the previous approximately 400.
Other measures include cuts in public spending, reduction of energy and transport subsidies, increase in tax pressure, and a real reform of foreign trade policy which should allow the country to adapt to international standards regarding trade in goods and services on the basis of WTO and OECD recommendations.
Liberal Argentina is moving closer to the USA
There is no shortage of paradoxes: theLiberal Argentina is moving closer to the US but rejects Trumpian protectionism, adheres to the liberal-conservative family but rejects what remains statist and gradualist in the European centre-right, including Italy. Symptom of a challenge that probably goes beyond Argentina alone.
To make these measures operational the government has the registration requirement has been eliminated to the Sistema de Capacidad Económica Financiera (CEF), a procedure used to restrict and limit foreign trade operations. This measure aims to simplify and provide certainty to importers and local producers, guaranteeing them greater freedom while avoiding any arbitrariness on the part of the State in purchasing processes abroad.
The decision to eliminate the CEF System is part of the broader framework of the dismantling of the old import system previously in force (Sistema de Importaciones de la República Argentina – SIRA) and of theelimination of Non-Automatic Licenses. It was based on the discretionary power of the bureaucratic staff on duty, who decided which products could be imported and which could not, making the outcome of the practice uncertain and fueling continuous episodes of corruption.
The same resolution establishes the Sistema Estadístico de Importaciones (SEDI), the new platform for the analysis and monitoring of statistical data on the import of goods, promoted by the government with the aim of normalizing and rationalizing foreign trade, and which will to replace the SIRA.
To this is added the resolution 1/2023 of the Ministry of Commerce which repeals resolution 523/2017 which established the Non-Automatic Import Licenses, applied to approximately 1500 tariff lines, which affected almost 26% of EU exports to Argentina.
The rules for accessing the foreign exchange market are changing
Among the other measures launched, the modification of the rules for access to the foreign exchange market for the payment of imports of goods and services. The delay in bills of exchange and the consequent lack of currencies (in particular the limited access to dollars) have in fact determined the impossibility for local importers to be able to pay off their debts towards foreign suppliers, leading them to accumulate a debt of around 31 billions of dollars. To unblock this situation, the Bonus for the Reconstruction of a Free Argentina (BOPREAL). It's about bond issued by the Central Bank in US dollars, which importers with outstanding payment obligations for imports of goods with customs registration and/or services rendered before 12 December 2023 will be able to subscribe to have access to foreign currency and thus settle their debts.
A tiered mechanism for payment times is in place
For all imported goods after December 13, 2013, a tiered mechanism with payment times which can reach up to 180 days from the registration of the entry of the goods into customs, depending on the type of imported products, according to the following scheme:
- from the date of customs registration – applicable to mineral or bituminous oils, their preparations and residues; petroleum gases and other gaseous hydrocarbons; loose bituminous coal; electric energy;
- starting from 30 days after customs registration – applicable to pharmaceutical products and/or inputs used in their local production; other goods related to healthcare or human nutrition; fertilizers and/or plant protection products and/or inputs that can be used for local production;
- starting from 180 days after customs registration – applicable to finished cars.
For the goods not included in the previous points, payments can be made in four instalments:
- 25% within 30 calendar days of customs clearance,
- 25% additional within 60 days,
- additional 25% within 90 days,
- the remaining 25% within 120 days.
For the payment of new imports of goods with pending customs registration, prior authorization from the Central Bank is required, with the exception of some cases, such as when payment is made with a loan for the importation of goods granted by a local financial institution against a foreign credit line .
As regards theimport of services, differentiated treatment is provided for access to the foreign exchange market depending on the type of service. Specifically, payments to unrelated parties for services rendered on or after December 13, 2023 may be made after a period of 30 calendar days from the date of performance or accrual of the service. Payments to related parties may be made after a period of 180 calendar days from the date of performance or accrual of the service.
