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The Mercosur becomes less important to Argentine Trade

Argentina “beggar thy neighbour” trade policies continue to damage the Mercosur

Increase reflects administration’s efforts to boost ties with Asian giant as Mercosur trade drops.

Exports to China soared in the first quarter of the year, compared to the same period last year, rising by almost 50 percent to US$384 million.

Argentine TradePresident Cristina Fernández de Kirchner’s government has been making a concerted effort to increase ties with the Asian giant and that appears to have paid off in the first three months of the year, a period in which exports usually slump.

Trade between Argentina and China has grown 16 times over the last two decades, a clear illustration of how important the country has become for the local economy. Relations became even closer lately, with China investing in several key infrastructure projects and signing several more deals, including in February, when Fernández de Kirchner travelled to Beijing on a state visit.

When looking at imports, China also gained market share, as purchases from that country grew from 17 percent to 18 percent on the year, reaching US$2.3 billion.

Although total imports from China fell 11 percent, they did so at a slower pace than purchases from the rest of the world, which shrank 16 percent overall.

Global soybean prices dropped 22 percent between 2014 and 2015, so a decline is likely in the second quarter, when the harvest takes place and the weight of the oilseed as a percentage in total sales soars.

The trend seems to go beyond China, as exports to Asia rose by 15.7 percent in the same period. Asia, in fact, was the only region that saw more trade. Its volume was not insignificant either, as it totalled more than half that of the neighbouring Mercosur trade bloc.

Data comes from the INDEC statistics bureau’s quarterly foreign trade report, which is more detailed than the usual monthly data, as it includes a country-by-country breakdown and allows for more in-depth regional comparisons.

Although China’s economy is currently decelerating, it is still growing at 7 percent per year. Despite that, authorities are starting to resort to monetary and fiscal stimuli in order to avoid that rate to shrink further

This will be important for Argentina and the rest of the region, as Chinese demand has meant more purchases of Latin American products, and thus central to the region’s economic growth.

Neighbours take the biggest hit

The figures released yesterday also illustrate how the generalized drop in trade has hit the countries that have traditionally been Argentina’s biggest trade partners the most.

First quarter sales to the Mercosur trade bloc were down 23.7 percent on the year, while imports also dropped by 20.4 percent.

That was mostly explained by how exchange cooled down with Brazil, Argentina’s biggest commercial partner. Almost three-quarters of Argentina’s Mercosur exports were carried out with Brazil. Overall, they dropped by 24 percent.

Exports to Venezuela almost halved, while sales to Chile, Uruguay and Paraguay were down 12, 9 and 8 percent, respectively.

NAFTA trade bloc countries, which include Mexico, the US and Canada, witnessed the second-largest regional drop in exports, 21.3 percent overall, followed by Europe’s 18.3 percent drop.

In terms of imports, Mercosur was also the bloc with the largest decline, 20.4 percent in total.

Currently, Mercosur and Asia are head to head in terms of sales to Argentina, with Asia just in front. Overall, the country bought US$15.8 billion from Asia and US$15.4 billion from Mercosur countries.

In terms of exports, Mercosur continues to be the best destination for Argentine products, with US$20 billion sold to the bloc out of the US$70 billion that the country exported in total.

Last year, Brazil, China and the US led the table for both imports and exports. The US is taking second place in exports so far in 2015 but as soybean exports begin to be counted that is likely to revert to the norm.

As for the other big Asian market that Argentina has been trying to open up, Vladimir Putin’s Russian Federation, results are so far modest.

More traditional European markets including Spain, Italy, Germany and the Netherlands still spend more on Argentine products, while both imports and exports to Russia declined more than average in the first quarter, possibly influenced by the drop in oil prices, which is key for Russia’s economy.

BA Herald

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