Import system adjustment aims to accelerate companies’ use of their own dollars

The economic team aims to improve the import system and is closely following the rise of commercial debt. UIA warned that seven out of 10 companies struggle to obtain inputs, which may cause interruptions in some production lines.

The government is monitoring imports through meetings of the SIRA system committee and conversations with business chambers. The end goal: “managing” the shortage of dollars and preventing the lack of inputs from interrupting production in factories, thus causing labor problems. 

The Argentine Industrial Union (UIA) released a harsh report warning that 906 companies are struggling to get financing and seven out of 10 may experience interruptions in some production lines. The economic team’s next step is “speeding up” the companies’ ability to use “their own dollars” and monitoring commercial debt, which is currently over US$7 billion.

In recent weeks, business chambers have issued a series of statements about input shortages and their possible impact on factories. In the Economy Ministry, led by Sergio Massa, sources recognize that there may be problems, since the new SIRA system is less than three months old, and there is also a shortage of dollars in the Central Bank. However, they said that they are contacting any company that complains on TV or in the press. “In 90% of cases the problem is the supplier that does not want to sell, some sectors do not want to lose the excess stock,” said an official source.

“Not a single factory has stopped production,” added sources close to Massa. This is the official obsession: the picture they want to avoid is that of a factory closed due to a lack of imported inputs, and the resultant complaint from the unions involved, due to job losses. For this reason, the economic team has a “direct” line with some sectors in which the companies give notice of “warning situations”, such as the automotive, health, or food sectors that are part of the Fair Prices agreement.

Meetings of the Monitoring and Evaluation Committee of the SIRA (Import System) continue, gathering officials from the Foreign Trade Secretary, the Central Bank, tax agency AFIP, and Customs. One of the topics in last Tuesday’s meeting was how to modify the system and improve its functioning in cases where it does not involve money transfers. “We are adjusting the systems,” said an official source, so that companies can use their “own dollars.” The government had heard the complaint from small business chambers in the Buenos Aires suburbs as well as large mining companies, who transfer capital contributions instead of sending money.

The UIA’s strong statement on the import problem did not surprise the government, even though one of Massa’s closest collaborators had spoken with the entity’s head, Daniel Funes de Rioja, before he went on vacation. “That’s what the chambers are for, to complain,” said a source from the economic team.

The committee is also closely monitoring commercial debt. According to the consulting company Ecolatina, the cumulative postponement of payments up until November 2022 was close to US$7.2 billion, “a figure similar to the Central Bank’s stock of reserves at the end of the year.” They also warned that commercial private debt spiked, as did debt linked to liabilities local subsidiaries receive from their parent companies. In any case, this situation doesn’t alert the government. The SIRA system allows them to see a daily calendar with the amounts to be paid according to the imports approved.

Today, sources say there is no margin to reduce restrictions and that their administration must continue, even despite the fact that exports ended with a historical record in 2022. While INDEC data is not yet available, sources in the economic team estimate that personal property tax alone collected US$90 billion. “If we could take out a loan of US$44 billion to swell reserves, we would not have this problem,” said a Massa collaborator in relation to the IMF loan taken by the Cambiemos government.

Another planned change to improve foreign trade is to start paying for imports with China using the renminbi currency, based on the agreement President Alberto Fernández will sign with his Chinese counterpart Xi Jinping at the G7, according to Massa in an interview with El Cohete a la Luna. They will also attempt something similar with Brazil, the country’s main trading partner.

Complaints from UIA

In a report published by the Argentine Industrial Union, entitled “Restrictions on Foreign Trade”, the group warns about problems with imports. According to the survey, more than 80% of the companies indicated that the application approval periods are longer than with the previous SIMI system. In addition, 56% of companies said that their stock of raw materials had fallen compared with the previous quarter, although the latter was the highest in the period surveyed.

The UIA also stated that 90% of companies have difficulties obtaining the necessary  financing to import inputs, due to the increase in payment terms. The most common deadlines are up to 60 days, according to 43% of the companies, while 30% said the most common payment terms were 180 days or more. The figures vary widely depending on the size of the company. For SMEs, the terms are shorter: up to 90 days for 78% of micro and 65% of small ones. Medium and large enterprises face longer periods: the most common is 180 days, which represent 32.1% of medium companies and 68.4% of large companies.

This could have an “impact on production”: according to the UIA, seven out of ten companies stated that difficulties in supply of inputs could lead to stoppages in some production lines. “Rejection of requests and delays to deadlines were the reasons the companies mentioned the most as risks of partial factory stoppages,” says the document. That 70% figure is divided into requests not being approved (34.3%), stipulated terms longer than required (19.8%), difficulties in obtaining financing (9%), and restrictions on foreign trade (6.6%).

Originally published in / Translated by Agustín Mango


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