March 26 (Bloomberg) -- President Barack Obama plans to suspend trade preferences for Argentina in retaliation for the government’s failure to pay damages owed U.S. investors.
Goods worth $477 million, about 11 percent of total U.S. imports from Argentina last year, will no longer be eligible for tariff reductions under the Generalized System of Preferences, a program to assist trade from developing nations, the U.S Trade Representative’s office said in a statement.
The U.S. wants President Cristina Fernandez de Kirchner’s government to pay damages awarded by the World Bank’s International Centre for Settlement of Investment Disputes to companies including Azurix Corp. The Houston-based company that specializes in water services said in September that it is owed $235 million, including interest, stemming from the decision a decade ago to devalue the Argentine currency and freeze the utility’s peso-denominated tariffs.
“We urge the government of Argentina to pay the subject awards,” U.S. Trade Representative Ron Kirk said in an e-mailed statement. “This would allow us to consider reinstating Argentina’s GSP eligibility and promote the growth of a mutually beneficial U.S.-Argentina trade and investment relationship.”
Argentina had a trade deficit of $3.4 billion with the U.S. in 2011, according to the national statistics agency. About 5 percent of its total exports are shipped to the U.S.
Beneficiaries of the U.S. trade program include exporters of food and chemical goods, according to Mauricio Claveri, an economist at Buenos Aires-based Abeceb.com research company.
The measure announced by the U.S. may trigger similar action by other countries that were affected by Fernandez’s decision this year to boost import restrictions to protect the country’s trade surplus, Claveri said.
“There are several countries in Europe and in the region that are complaining against Argentina’s trade policies,” Claveri said. “This decision by the U.S. may generate further retaliations.”
Argentina, which defaulted on $95 billion in bonds in late 2001, said that the U.S. decision was a result of pressure from investors who didn’t accept the country’s debt restructuring offers in 2005 and 2010.
“The lobby exercised by the vulture funds to get this decision is a pressure that our country condemns,” said Argentina’s Foreign Ministry in an e-mail statement. “Argentina regrets the attempt to force our country to take a decision that violates national laws on payments of rulings.”
As part of the changes announced today, South Sudan, which was created as a nation state last year, was added to the GSP program.
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