Fernandez Curbing Imports Leaves Argentines Searching in Vain for Fridges

Retiree Teresa Teffer searched branches of Argentina’s leading appliance retailers for a fridge and oven she’d seen on display less than two months earlier. She gave up after finding neither.

“They have nothing to offer me,” the 71-year-old said as she left an SACI Falabella (FALAB) store in Buenos Aires’s Alto Avellaneda shopping mall. “There are only a couple of lesser- known brands. The government is forcing me to buy what it wants and not what I want.”

Consumers face fewer choices in everything from blenders to computer parts as President Cristina Fernandez de Kirchner curbs imports to shore up a dwindling trade surplus and protect manufacturers whose competitiveness is suffering from a peso that’s not weakening fast enough to offset inflation. The restrictions forced automaker Fiat SpA (F)’s local unit to suspend production this month and prompted Brazil’s Trade Minister Fernando Pimentel to say that neighboring Argentina is a “permanent problem.”

In response to the restraints, which are set to tighten further today, retailers and wholesalers are reducing the selection of brands and goods they sell in South America’s second-largest economy. Computer parts are among items that are becoming increasingly difficult to obtain, said Oscar Delpino, 39, who builds and repairs PCs.

Photographer: Diego Giudice/Bloomberg

President Cristina Fernandez de Kirchner. Close

President Cristina Fernandez de Kirchner.

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Photographer: Diego Giudice/Bloomberg

President Cristina Fernandez de Kirchner.

“Everything I use is imported, so I have to waste time going from one supplier to another to find what I need,” Delpino, who works from his home in the Buenos Aires suburb of Colegiales, said in a telephone interview. Sellers also take advantage of scarcities to increase prices, he said.

Replace Imports

Falabella declined to comment, according to Nueva Comunicacion, which manages press relations for the Santiago- based company.

Industry Minister Debora Giorgi said the government is defending Argentine manufacturers and rejected Pimentel’s charges about the country’s ties with Brazil, its biggest trade partner.

“The reality of bilateral trade between Argentina and Brazil shows we don’t deserve such comments,” Giorgi said in a Jan. 19 statement. “We defend our production from unfair competition.”

Imports from Brazil rose 23 percent last year as Argentina bought $5.8 billion more from its neighbor than it exported, according to Giorgi.

Friction between Argentina and Brazil, the biggest members of the four-nation Mercosur trade bloc, may rise from today, when Argentina will require importers to seek authorization from the federal tax agency before purchasing goods abroad.

Special Treatment

The measure will affect about 80 percent of Brazilian exports to Argentina and involves about 5,500 Argentine importers, according to the research department of the Sao Paulo Industrial Federation. Its president, Paulo Skaf, said he’s seeking special treatment for goods from Brazil given its status as a Mercosur member.

“If we have an industry with containers that are held up and need to be shipped, we can’t get into a dispute that’s going to take a year to resolve,” Skaf said in a Jan. 20 statement. Skaf will meet with Argentine Economy Minister Hernan Lorenzino tomorrow in Buenos Aires, officials at the industrial federation said.

In the past 12 months, the Buenos Aires Stock Exchange’s benchmark Merval (MERVAL) index lost 22.4 percent compared with a 5.3 percent drop in the Sao Paulo Bovespa (IBOV) index. Argentina’s dollar bonds returned 1.2 percent in the same period while Brazil’s dollar bonds returned 14 percent, according to JPMorgan Chase & Co.’s EMBI+ indexes.

Debt Default

Blocked from international credit markets since a 2001 default, Argentina relies on a trade surplus to build up central bank reserves, which the government uses to pay its foreign debt and slow the depreciation of the peso. This year, the peso has weakened 0.84 percent against the U.S. dollar, the only decline among the region’s major currencies.

Still, the peso isn’t weakening fast enough for the nation’s manufacturers to compete with foreign-made goods. Last year, the currency weakened 7.5 percent while economists estimate consumer prices rose about 25 percent, more than double the 9.5 percent reported by the national statistics institute.

“The government tries to restrict imports with bureaucratic barriers,” said Maximiliano Castillo, a former manager of macroeconomic analysis at the central bank, who now runs ACM Consultores in Buenos Aires. “These measures won’t reverse the decline in the surplus. More controls won’t solve the problem.”

Narrowing Surplus

Imports rose 11 percent in December from a year earlier, the smallest increase in two years. The trade surplus, fueled by demand for soybean and automobile exports, narrowed in 2011 for a second year, falling to $10.3 billion from $11.6 billion. The surplus will decline to $4.5 billion or less this year, depending on the effects of a drought that may cost $2.5 billion in lost agricultural exports, said Castillo.

To protect industry and encourage investment, the government last year reached accords with sellers of foreign- made cars to match their imports, dollar for dollar, with exports. As a result, Porsche importer Nordenwagen SA will ship wine and olives, while Bayerische Motoren Werke AG has committed to exporting auto parts, upholstery leather and rice.

The shutdown of Fiat’s factory in Cordoba province this month ended two days after it started when the government agreed to expedite approval of the parts the company was trying to import. Giorgi called the unit of Turin-based Fiat’s decision at the time “incomprehensible and small-minded.”

Sales Increase

Sales by Longvie SA (LONG), which manufactures stoves, washing machines and other appliances, increased last year, said Chief Financial Officer Ernesto Huergo.

“It’s hard to know how much is due to the economic growth and how much is a result of import restrictions,” Huergo said in telephone interview from Longvie’s headquarters in Buenos Aires. The company relies mostly on local suppliers for parts, said Huergo, who declined to give details of 2011 sales.

The new requirements to get permission ahead of bringing goods into the country will do little to help Argentina’s narrowing trade surplus, Gabriel Torres, an analyst at Moody’s Investors Service Inc. in New York, wrote in a Jan. 23 report. Continued inflation is making the country’s goods uncompetitive, according to Torres.

For Argentina’s 40 million inhabitants, the import restrictions mean less choice and higher prices, said Jose Lilino, head of the Argentine Federation of Home Appliance Stores, which represents about 1,400 retail outlets.

Supply Difficulties

Six months ago, Lilino started to sell furniture, gym equipment and plates and bowls at his home appliances stores in the province of Santa Fe because of difficulties in obtaining stocks of imported irons, refrigerators and blenders.

“I’m becoming a seller of whatever I can find to sell,” Lilino said in a telephone interview from Santa Fe, the province’s capital.

While the availability of goods has fallen, prices have soared, said Lilino.

“An iron that cost 50 pesos ($11.5) last year today sells for 120 pesos,” said Lilino. “It’s the consumer who’s paying the cost of these measures.”

To contact the reporter on this story: Eliana Raszewski in Buenos Aires at eraszewski@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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