Protectionism imperils peanut butter and other imports in Argentina

Will this be your first e-car? Bravo Motors hopes your answer is 'si.'

Eilís O'Neill By Eilís O'Neill

These days, it’s hard to find peanut butter and vitamins in Argentina, and the country’s sizeable expat community, which includes as many as 60,000 Americans, is not pleased. Neither is the Obama administration; the U.S. generally runs a sizable trade surplus with Argentina.

“I brought an Apple computer down here which has slowly been breaking…”

The source of the displeasure started in March, when Argentine President Cristina Fernández de Kirchner began blocking imports after a surge in foreign goods threatened Argentina’s trade surplus. She continues to defend the restrictions, saying she wants more investment in Argentine industry.

President Barack Obama and Argentine President Cristina Fernandez de Kirchner were all smiles in April, but the U.S. is growing angrier about a trade dispute between the two countries. (Reuters)

Almost everyone in Argentina feels the effects of Kirchner’s protectionism. Expats and locals struggle to find electronics, specialty foods, and books in foreign languages. Multinational companies like Staples can’t stock their shelves.

Who broke the ‘easy’ button?

Staples lost 20 percent of its Argentine electronics’ revenue in April and May, says Carlos Nielsen, the director of business intelligence of Staples Argentina. While Argentina represents less than one percent of Staples’ overall sales, the company is the biggest office supplier in the country, accounting for five percent of Argentina’s office supplies market.

Based in Framingham, Massachusetts, Staples has two stores and extensive online operations in Argentina. Some suppliers have factories in the country, Nielsen says. Others, like Hewlett-Packard, don’t, which means Staples’ customers go wanting for ink cartridges.

“Your printer only uses a certain product, and, if that’s not available, you can’t print,” Nielsen says. That’s not true for laptops – if an HP is not available, a Dell or Lenovo will probably meet a customer’s needs.

A Staples in Buenos Aires. The company is the largest office supplier in Argentina. (Eilis O’Neill)

To keep as many customers happy as possible, Staples tracks their purchases and maintains supplies based on historical purchasing averages.

“We have to make sure that a few clients don’t buy all the merchandise in order to save up a six-month stock,” Nielsen explains.

Staples is suffering, but the import restrictions are doing exactly what they’re supposed to in the case of products such as pens and notebooks.

“Before, we would sell fifty Argentine pens and fifty imported pens,” says Nielsen. “Now, we sell one hundred Argentine pens.”

Lining up for cellos

Where Staples rations, other companies wait.

Ellen Casey, a music teacher from Scotland, says one student has outgrown her cello. If the student is lucky, she can buy a new one in July, when stores selling the stringed instrument receive their next shipment. If not, the student will need to wait three or four months until the next shipment.

“If you make children wait…chances are they’re not gonna want to do it…”

Casey understands how import restrictions are supposed to help domestic industries. But blocking cheap instruments from Asia is self-defeating, she says. Argentine craftsman build handmade, expensive instruments aimed at advanced musicians. Her students are their future customers.

“If there are no instruments for people to start out on, and there are fewer people playing, then there are fewer people who are going to buy the instruments that are being made by Argentinian makers,” says Casey.

Two main rules keep peanut butter and printer cartridges from the shelves: One is preregistration requirements, where companies have to tell the government that they intend to import something.

The other is non-automatic licensing, bureaucrat-speak for slowing the entry of foreign goods into a country. Importers must now apply for licenses and wait for bureaucrats to approve the transactions. It’s a standard protocol allowed by the World Trade Organization. But the WTO mandates that imported goods be approved within two months. Argentina takes longer.

Trade tensions

Argentina’s actions have riled the U.S. At the Americas Summit in Bogotá in mid-April, President Barack Obama discussed the issue privately with Kirchner. The U.S. and other nations pledged to formally complain to the WTO if Argentina doesn’t lift the restrictions. You can read that letter here.

On May 25th, Europe filed a formal complaint with the WTO. But the U.S. has yet to sign on. Instead, in June American officials blasted the restrictions at the World Trade Organization. The Argentine government responded by claiming that its trade barriers are within WTO guidelines.

Individuals are finding their own solutions to the restrictions. Expats in Buenos Aires have private pipelines to peanut butter, running shoes and their favorite tea. There’s a website, the mule pool, where you can ask people to ferry goods into Argentina for a small fee.

“It makes you value these things more…”

Twist of fate

In an unexpected twist, the import crackdown means more electric cars will be made in California. That’s because of a loophole in Kirchner’s protectionism: companies can import as many dollars of goods as they export, no questions asked.

Argentine entrepreneur Miguel Ángel Bravo, the owner of the Buenos Aires-based Bravo Motor Company, plans to use that loophole to his advantage. Since the tougher restrictions were announced, Bravo hasn’t even tried to import the unique technologies he often requires for his new inventions.

Miguel Bravo and his Auto Popular in the factory in Argentina. (Eilis O’Neill)

“We make new products all the time,” he says. “Therefore, when we want to import something, they ask us, ‘But, what is this part of?’”

When he tells them “it’s a new invention,” things get complicated, since he needs parts for a product that does not officially exist. Argentine customs allows parts into the country that are destined for a finished product, it doesn’t have a good system for dealing with inventions.

Bravo may soon resolve his difficulties. By the end of 2012, Bravo hopes to open a factory in or near Los Angeles that will manufacture electric cars to market to Californians. By exporting Argentine parts to the U.S., Bravo will build up credit so that he can import the parts he needs to design new cars in Argentina.

Bravo Motor’s electric concept car, which the company plans to manufacture in Southern California. (Eilis O’Neill)

It may look as though protectionist policies hurt Bravo Motors, but it actually benefits from the government policies.  Thanks, in part, to the new barriers to importing finished vehicles to Argentina, there’s high demand for Bravo’s “autos populares” — cars designed for families and taxi drivers. Though the first complete car has yet to come off the assembly line (Bravo is waiting on government permission to manufacture), Argentines have placed orders for more than 30,000 of the 40,000 vehicles he intends to make this year.

Soundscape from the Brave Motors factory

Despite challenges that the import restrictions create, Bravo nonetheless supports them. He  says, “What the government is doing seems good to me, even if, in my daily life, it hurts. I believe in re-industrialization policies because I am an industrialist.”