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Import permits — an inside look from Chamber

By Michael Soltys / Senior Editor / Economic Outlook

CIRA lobby sees DJAI system as dysfunctional

With complaints rife about imports being strangled to protect shrinking dollar reserves and with reports of new turns of the screw in the pipeline, the Herald decided to go to the horse’s mouth and ask the Argentine Import Chamber (CIRA) how it all works.

According to CIRA Secretary Rubén García, the problems lie precisely in how it works or does not work. While the system is technically illegal as lacking any statutory basis, there are no restrictions either — he would describe it as “highly administered free trade.” Imports are not so much banned as unpredictable with their authorization dysfunctional, hampering industry.

The DJAI (Declaraciones Juradas Anticipadas de Importación) import forms were designed for “single window” centralization and are useful as such but are simply unmanageable as too much at once.

All the DJAI forms for the first half of the year are already in and must be processed at once according to government priorities. These are clear enough in principle — ensuring that national industry has the imported goods it needs — but complicated in practice when it comes to distinguishing what is necessary.

Thus certain screws or valves might seem easy targets for import substitution but can only come from a highly limited source abroad if the product is to be correctly assembled.

While imports are regulated worldwide with greater or less efficiency, there are also a couple of hurdles other than the DJAI form. One is the self-inflicted “live off our own” limitation of not resorting to global credit markets, which strains currency reserves and crimps import possibilities. But also in recent years fuel imports have been crowding out other sectors, reaching 12 billion dollars last year.

And within this highly subsidized sector, households are consistently favoured over industry. While García does not wish to comment directly on energy policy and while he acknowledges that runaway growth and mass consumption were also fuelled, he points out that Argentina had a fuel trade surplus of five billion dollars as recently as 2005.

Paradoxically enough, protectionism on behalf of national industry actually narrows the trade surplus, he argues, because the two biggest net losers in trade terms fall into that category.

One is the Tierra del Fuego industrial promotion zone — quite apart from the tax breaks for the electronics assembly plants, this costs the country some nine billion dollars just for the inputs imported. And the other is the auto industry, despite its stellar reputation (until very recently) among the country’s big exporters.

While the gross and net earnings for soy are more or less the same thing within the trade balance, the national components within auto production have shrunk to 20-25 percent in García’s estimate.

If a balance is drawn between 20-25 percent of all exported cars and the cars (mostly made with imports) sold at home plus the vehicles and parts imported from Brazil, it works out to around six or seven billion dollars to Argentina’s disadvantage.

A trade winner the auto industry is not but García acknowledges its importance for creating jobs. After listing all these problems, he still expects a trade surplus of at least US$9 billion to be posted for last year.

García is not too much bothered by protectionism here since he finds it universal — neighbouring Brazil protects its industry by buying our wheat (when it is for export) but not our flour while the European Union and and the United States subsidize agriculture. What does bother him is the idea that imports are basically negative to be substituted at all costs. No country has everything — thus Argentina must import cacao to make chocolate. Far from being anti-development, imports trigger development, he insists.

To mark its 107th anniversary this year, CIRA plans to publish a book to explore these ideas in more depth.

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