Argentina The here and now: towards a more competitive country

Today more than ever it is important to emphasize that achieving a competitive economy remains one of Argentina’s outstanding objectives.

Given the fact that the most competitive countries in the world are the ones that are the most developed and, in most cases, have less inequity, only a significant leap in our competitiveness will allow us to go through a sustainable path of economic growth.

Structurally, a country is competitive when under open market conditions it has created and maintained the conditions for its companies to compete successfully on the global stage and, also, with any imports that it already manufactures.

There is a correlation between competitiveness and productivity. One country is more productive than another when, through the combination of capital factors, work and efficiency in the use of these factors, it obtains, per unit of work, a greater product.

ABECEB periodically prepares the Global unit labour cost ranking of manufactures (CLU). The measurement focuses on the sectors devoted to the transformation of raw materials into manufactures; It does not take into account sectors such as agriculture, mining, oil and non-industrial gas, and construction.

The CLU is a measure used internationally to measure the competitiveness among the countries and its use allows to perceive in a simpler way with the integral and worldwide rankings, the measure of the competitiveness of any country.

CLU is obtained by the total cost of the work needed to produce a manufacturing product unit, weighted by its productivity.

Argentina was in the ranking of 2017, among 25 representative countries, as the highest CLU of manufactures and, therefore, the least competitive. As of today, and as a result of improving the real exchange rate, it has climbed ten positions, but this improvement should be considered temporary until a new relationship between exchange rate and wage costs is established. It is foreseeable to think that the definitive result will position Argentina one a step higher than that of 2017.

While the improvement in terms of labour costs in dollars has been substantial and is improving, Argentina is still an expensive country for our level of productivity, and even if economic policy stabilizes the situation, the path to a competitive and integrated economy world will take much longer.

The structural problems that have been dragging Argentina down have yet to be addressed.

In the form of a middle-income country, it is not feasible in the manufacturing sector to have a strategy of a significant increase in competitiveness by significantly reducing wage costs, but must be achieved in line with an increasingly significant productivity.

It will be crucial to advance the modernization of labour regulation and to attack the highest informality levels that leaves more than 30% of the workers in a vulnerable situation. It will have to be put in the centre of the scene to the investment in infrastructure, now potentially relegated for reasons of force majeure ( no money ).

Nor should we forget the availability of energy supplies at competitive costs, interest rates and capital markets commensurate to that of a normal country and a more reasonable tax structure. Finally, the trade policy of integration into the world remains to be deepened so that our production can find greater export destinations.

Macroeconomic stability and the establishment of clear rules of play are only the basis of a comprehensive agenda that Argentina will not be able to postpone. A competitive and predictable exchange rate can be a good transition bridge, but it is not a shortcut to an economy based on investment, productivity, and exports, the current government’s short-sighted aspirations, are somewhat society-wide.

Source: La Cronista