Discussions on Trade – a key to the relationship with Argentina
We may have been at the opposite end of the globe but it wasn’t too difficult to find a few reminders of home. A Susan Boyle CD in a Mendoza record shop, a series of Johnnie Walker adverts as we arrived in Trelew airport in Chubut and a meeting with a major wine producer with a Glasgow based agent. All are to be found in Argentina.
Inevitably the BGIPU visit in mid November attracted considerable TV, radio and print media attention focussing on the longstanding impasse on the Falkland Islands (Las Malvinas) but our support for the UK’s clear commitment to the right of self determination for the inhabitants was fairly reported. Our visit’s purpose however was to show that there is much to unite our two nations and to recognise the success of 30 years of continuous democracy in the country.
Our meetings and visits highlighted common interests in human rights, culture, higher education and trade. On the latter issue, we expressed concern that UK imports have dropped in the last year largely as a result of a new system of permits introduced at the beginning of 2012 which covers all foreign products. Argentinean export levels to the UK remain steady with more than half consisting of soya based animal foodstuff, with other agricultural products and wine making up the majority of the remainder. However our hosts, including Foreign Minister, Hector Timerman, were not slow to point out that against a domestic tariff on imports at a maximum rate of 35% they continue to face high levels of EU tariffs particularly on agricultural produce – the EU rate on rice imports for example is 128%.
But their major concern on EU trade was the issue of industrial imports and the need to protect local jobs whilst the country catches up on technological advances. Trade talks between the EU and the South American Mercosur Group are still ongoing.
The legacy of the economic crash between 1998 and 2002 is still felt despite the benefit of rising prices on export commodities over the last decade. The Government is currently negotiating settlement of a number of debt default cases taken by private creditors in the USA. Recent restrictions on the repatriation of dividends and profits by foreign owned subsidiaries, the controversial nationalisation of the oil and gas company, YPF from Repsol and the lack of co-operation with IMF in providing accurate data have led to a recent substantial fall in foreign investment which has led to foreign reserves dropping 23% in the last year and is placing stress on public finances.
The immediate economic and political climate has certainly become much choppier in the last couple of years but recent discoveries of huge amounts of onshore high quality onshore shale oil and gas are set to see Argentina become the world’s third biggest supplier and could herald a new period of prosperity. In the run-up to the next presidential elections in 2015, questions will inevitably remain as to how the country will use its control of YPF and these newly found assets. Our impression from our meeting with YPF’s Chief Executive, Miguel Matias Galuccio, who was recently profiled favourably in the FT, did appear to suggest a strategic business like approach will be adopted. Perhaps following the example of its neighbour Brazil, Argentina could use the state run company to drive its industrial strategy and start to rebuild investor confidence. And interestingly Mr Galuccio was quick to quash suggestions that his company would be rushing to drill for oil in the seas around the Falkland Islands – their lack of experience in deep sea work and the long distance from major centres of population would simply not present a convincing business case at this time.
From the UK perspective there certainly is scope for further opportunities to increase trade links and it is important that our foreign policy reflects the need for a nuanced approach. We need to work to minimise the tension around areas that we will disagree on and support measures such as trade agreements that can harness benefits fairly for both sides.