Argentina sees 22,000 companies close over two years

[SlowWalker]

All well and good to use tariffs to help local businesses compete against global markets. Nestor Kirchner did this and Argentina was able to recover somewhat during his first term; it ultimately was the right strategy, even though he ended up being a thief and ultra corrupt. However, the issue is that the taxes are stifling and the government makes running a business near impossible. The way forward for Argentina is to make things much more business friendly, but also protect local industries with tariffs. I think the whole full free trade thing is a scam. Argentina is a perfect case study, and now Nepal recently, of what full free trade does to a country by hollowing out its industry. On the other hand, Argentina needs to get rid of about 90% of its taxes and curb the power of trade unions by not permitting them to constantly shut companies down. Being able to actually export industrial products would be nice for a change, but with the crappy business laws, regulations, and red tape it is it basically takes a miracle to have a successful business, much less export.

Also, in the last 2 years, about 7k direct and 18k jobs industry wide (including supply chains) through the textile industry have been lost which represents about 3.5% of an estimated 500k jobs, for a similar reduction in installed capacity output, while at the same time a massive increase in the amount of imported goods at far cheaper prices.

That seems pretty good considering the amount of money its probably savings the other 46M in the country.
As others have posted here, there are some Argentinian brands and factories that produce sufficiently high quality and a reasonable or appropriate price point. So the importing is forcing the industry to compete, and those that choose not to will fail since the protectionist policies are no longer available to them to hold the country hostage.

Sounds like the policy is working as intended and to a positive benefit of society as a whole.

 

[LuckyLuke]

Also, in the last 2 years, about 7k direct and 18k jobs industry wide (including supply chains) through the textile industry have been lost which represents about 3.5% of an estimated 500k jobs, for a similar reduction in installed capacity output, while at the same time a massive increase in the amount of imported goods at far cheaper prices.

That seems pretty good considering the amount of money its probably savings the other 46M in the country.
As others have posted here, there are some Argentinian brands and factories that produce sufficiently high quality and a reasonable or appropriate price point. So the importing is forcing the industry to compete, and those that choose not to will fail since the protectionist policies are no longer available to them to hold the country hostage.

Sounds like the policy is working as intended and to a positive benefit of society as a whole.

It's a fascinating subject really... The restriction of imports should be a temporary policy to protect infant industries until they can compete, protect national security industries such as weapons, or prevent aggressive dumping practices used to wipe out competitors. The permanent application being essentially neo-mercantilism, which has it's history of colonial territories exporting raw materials and being required to purchase finished goods from the mother country.

 

[Ries]

Real industrial policy, as practiced by nordic countries, or places like Germany, uses a whole basket of tools to protect high wage export industries.
you need targeted tariffs, support for exports and sales, coordination with industry groups to find out what they really need, targeted education- (cristina built something like 12 separate 2 year trade schools, with specific ciriculums aimed at specific job categories)
low interest loans for desired results, government contracts to purchase specific products, and government pressure to encourage foreign investors to collaborate with local business to create jobs, and keep value added profits here, just to name a few strategies.
Most industrialized countries do this- The US has tariffs or price supports to support the sugar industry, or to buy and store strategic materials, or builds subsidized power generation, which was used to basically create the commercial aluminum production industry in the 1950s.
The money spent is often paid back multifold- Satellite phones, GPS, lasers, cnc machine tools, the internet, and many more industries that have been enormously profitable to private industry would not have existed without initial government subsidies- and not all of it in the US, either.

Argentina does not have a watch manufacturing industry, so it would make sense to encourage cheap imports, with low tariffs.
But it does have an electrical transformer industry, a shoe industry, and some great kitchen stove and plumbing hardware industries, and those should have higher import tariffs, as well as much more export support.
Pretty much nobody but Kohler makes sinks, bathtubs, or bath fixtures in North America- but all of my kitchen and bath grifferia and ceramics and SS is local. That industry should be encouraged, its cost competitve and easily exportable, if it wasnt so damn hard and expensive to get anything out of the country.

 

[FrankPintor]

I am very annoyed at this:

Tras alertar por una “avalancha de importaciones”, una importante empresa de electrodomésticos se presentó en concurso

La empresa le comunicó a su red comercial la implementación de una “etapa de reestructuración de pasivos”. Son varias las firmas del sector en problemas

www.infobae.com

Another victim of Mileinomics. Not that the POS in chief himself will notice, other than to maybe troll and insult the owners.

We've bought Peabody in preference for our kitchen appliances for the past few years, they're excellent products at a reasonable (for Argentina) price.

 

[SlowWalker]

I am very annoyed at this:

Tras alertar por una “avalancha de importaciones”, una importante empresa de electrodomésticos se presentó en concurso

La empresa le comunicó a su red comercial la implementación de una “etapa de reestructuración de pasivos”. Son varias las firmas del sector en problemas

www.infobae.com

View attachment 10814

Another victim of Mileinomics. Not that the POS in chief himself will notice, other than to maybe troll and insult the owners.

We've bought Peabody in preference for our kitchen appliances for the past few years, they're excellent products at a reasonable (for Argentina) price.

Its interesting because I wonder what this really means.

1) They are continuing to stay in business and respect client and vendor responsibilities. They will respond to individual parties as necessary if necessary.
2) It looks like this is the process to freeze interest and restructure the debts. Without knowing more details, the only guess would be thei loans were based in pesos under old terms, and now they can probably refinance under much better terms and in USD.
3) The article says they act as both manufacturer and importer from Asia, running parallel systems. The air conditioners and certain "larger volume" items are made in Argentina, but the smaller appliances are imported from Asia. Hence why there is so much overlap between Peabody, Liliana, Cuk/Gadnic/Bidcom, etc. They all purchase from the same factories and just brand them.
4) To suggest that the products coming from overseas lack quality control, are of poor quality etc is really poor arguments and more political talking points trying to gain support for import tariffs to protect them and maintain monopoly pricing than anything. They are also importing the products themselves rather than making them domistically!! Also, these are the same products that most the world purchase and don't have major issue with. Everything is a value proposition, and for most the price/quality of asian imports is more than satisfactory. If you try and compare the price of Cuisinart or Kitchen Aid products which are of superior quality they are super high prices.
5) The fact that they were exporting to Chile, Uruguar, Bolivia, Paraguay, Europe and United States also cuts across some of the arguements in this thread that Argentina cannot compete globally on exports. It is quite clear in this case they can.

So @FrankPintor I don't think you have anything to fear yet. It looks like this is more administrative than anything else.

 

[LuckyLuke]

3) The article says they act as both manufacturer and importer from Asia, running parallel systems. The air conditioners and certain "larger volume" items are made in Argentina, but the smaller appliances are imported from Asia. Hence why there is so much overlap between Peabody, Liliana, Cuk/Gadnic/Bidcom, etc. They all purchase from the same factories and just brand them.

This is exactly what I have seen many Argentines complaining about. If Argentine factories are allowed to simply rebrand finished imports with an absurd margin in a cornered market then consumers should be allowed to import them directly too. Even among products where 90% of the product assembly is imported with a token 10% to justify the margin. This is the unfair advantage industry received that set the stage for much of this protest against domestic manufacturers. Those that think that Milei somehow "duped" an entire country into begrudging Industria Argentina should look deeper into the issue.

Either restrict imports to protect the FULL assembly line of the product until domestic production can compete, gradually opening up import selection once achieved, or let the country's consumers import what it's domestic production has no actual intentions to ever produce. The crime of marked up rebrands is destroying much of the quality and goodwill domestic production merits.

 

[FrankPintor]

I think it's a bit off to accuse Peabody of simply rebranding finished products. The company has a factory in La Matanza that employs 300 people, and while I don't know exactly what they do, I don't think it's plausible to suggest they spend their time swapping labels on the products all day long.

We've used the company's products because they seem to be a cut above the rest, I don't see much overlap with the products of the other companies mentioned. Their products delivered, without demanding a price premium, unlike the expensive junk we've had to deal with from some other companies like BGH, Longvie, or Patrick.

There's an interview here with the owner of Peabody, https://www.infobae.com/economia/20...dy-alerto-por-una-avalancha-de-importaciones/ where he calls out the liberalization of imports without taxes or quality control, without reducing taxes on components for production. Some more background here: https://www.infobae.com/economia/fi...-busca-ser-la-apple-de-los-electrodomesticos/

I hadn't realized that "protective bankruptcy" was actually an opportunity. Something positive that every company should embrace? I must remember that. Pity it didn't work out for Gabarino, though.

In any case, more companies are being affected by the current economic policies, Whirlpool have closed their factory in Pilar, and Mabe is "restructuring". Unsurprising, given that "in the last two years, Argentina’s manufacturing sector fell by 7.9%, surpassed only by Hungary", but “Brazil expanded its industry by an average of 3.5% over these two years” and that Chile (+5.2%), Peru (+6.5%), and Uruguay (+3.7%) also grew" (from https://buenosairesherald.com/econo...e-second-worst-decline-worldwide-in-two-years). It's Mileinomics at work, erasing the industrial base is the objective: "Argentina should focus on sectors where it is “naturally competitive” – agriculture, livestock, mining, oil and gas. “What God gave us,”"

 

[SlowWalker]

I think it's a bit off to accuse Peabody of simply rebranding finished products. The company has a factory in La Matanza that employs 300 people, and while I don't know exactly what they do, I don't think it's plausible to suggest they spend their time swapping labels on the products all day long.

We've used the company's products because they seem to be a cut above the rest, I don't see much overlap with the products of the other companies mentioned. Their products delivered, without demanding a price premium, unlike the expensive junk we've had to deal with from some other companies like BGH, Longvie, or Patrick.

There's an interview here with the owner of Peabody, https://www.infobae.com/economia/20...dy-alerto-por-una-avalancha-de-importaciones/ where he calls out the liberalization of imports without taxes or quality control, without reducing taxes on components for production. Some more background here: https://www.infobae.com/economia/fi...-busca-ser-la-apple-de-los-electrodomesticos/

I hadn't realized that "protective bankruptcy" was actually an opportunity. Something positive that every company should embrace? I must remember that. Pity it didn't work out for Gabarino, though.

In any case, more companies are being affected by the current economic policies, Whirlpool have closed their factory in Pilar, and Mabe is "restructuring". Unsurprising, given that "in the last two years, Argentina’s manufacturing sector fell by 7.9%, surpassed only by Hungary", but “Brazil expanded its industry by an average of 3.5% over these two years” and that Chile (+5.2%), Peru (+6.5%), and Uruguay (+3.7%) also grew" (from https://buenosairesherald.com/econo...e-second-worst-decline-worldwide-in-two-years). It's Mileinomics at work, erasing the industrial base is the objective: "Argentina should focus on sectors where it is “naturally competitive” – agriculture, livestock, mining, oil and gas. “What God gave us,”"

With regards to the article itself, the following is a translated paragraph
"The company produces in the country, especially lines linked to air conditioning and some products of greater volume, and also imports. A relevant part of its portfolio — mostly small appliances and certain specific models — comes from abroad, mainly from Asia, under its brand. But even with a mixed, production and import scheme, the company could not cope with the crisis and had to appeal to the figure of the preventive competition to accommodate its financial situation."

So the smaller domestic appliances (typically kitchen appliances excluding ovens fridges etc), are imported from Asia under its brand (already branded in Asia). They aren't making food processors, blenders, stand mixers, etc in Argentina, they are imported. So I would love to know more about the factory you have identified in Argentina but it sounds like its just the "Air Conditioners and some products of greater volume" without describing what those products are.

We really don't know enough details of what exactly is their issue because they also say in the article they are continuing operations and will respect customers and vendors. If there is anything in particular they will speak to each individually. Based on the article, they aren't stopping business, so in my opinion they might be using the increased competition as an excuse, but that is still good for the customers across the country, and unless otherwise disclosed, it sounds like they are using the opportunity to restructure, which is usually done to restructure debts more favourably. Given the huge difference in raising foreign debt in USD instead of pesos with much higher interest rates and a stabilizing peso and devaluing USD, it is most likely just this type of restructuring that is going on which is good, because it means they could then afford to offer even lower prices than now. The cost of some of these smaller appliances, though lower than years past, can still be 50-100% more than comparable items in the US. I think the other article I shared has indicated that ~$8.5B of corporate debt has been raised over the last few months. So foreign investors have faith in Argentinian companies abliity to pay back in the future, and are loaning them money at favourable rates in USD compared to pesos.

My question is regardless of manufacturing capacity, what is the ultimate change in jobs, and how much is saved on those products that were being produced and now imported. The manufacturing capacity was artificially high in the first place because it was installed at a time with huge protectionist policies and restrictions on exporting (both as a tax and percentage of production I think). The exports were used to subsidize the domestic market. Everything was artificial. The government propped up the peso and financing rates for domestic consumption hence the blue dollar reaching ~3-4x the official rate prior to the devaluation in 2023.

It is important to be able to produce domestically which Argentina can do already. Even if plants are closed, the factories equipment already exist and can be brought back online easily. This is not the same as North America where factories and equipment need to be built, equipped, trained etc. There definitely needs to be some government tax reform. Passing a product through various companies even without producing a profit attracts hefty taxes and costs based on Gross Value (3-6%). This isn't a good practice, hence not being applied in any other country I am aware of. The only time Gross Taxes are applied that I am aware of are as royalties on mineral products/intermediates. Otherwise, any tax is usually a function of profit.

This country is suffering from a cost of living crisis as its in the process of changing the philosophy of the economy which doesn't happy overnight. So in that context, I understand supporting domestic production, but I am interested in knowing how much extra you believe the country (realistically the population) should be forced to pay to support some local manufacturing? The higher costs are born by the entire population while the benefits are just by a few. How do you decide which industries and to what extent of support is adequate. Not all demand is going to shift to imports, Government, Military, certain companies, and individuals will buy locally. As you and others have indicated some companies have adapted and offer good quality at a reasonable price. Why can't the others adapt?

 

[FrankPintor]

The roll-call continues: https://www.infobae.com/economia/20...os-voluntarios-y-evalua-como-seguir-operando/

Electrolux is reducing its 400-person workforce in Rosario by 100. They cite cheap imports and falling demand.

Again, we use Electrolux electrodomestics at home, and they're very good.

We now know that Milei considers anyone who defends the national industry to be a crook: https://www.infobae.com/politica/20...ntinos-en-connivencia-con-politicos-ladrones/ The closed factories and reduced workforces are the point of Mileinomics, Milei won't be content until the only Argentinian exports are unprocessed grains, unrefined crude, and rocks with copper and lithium in them. I see otherwise successful and competitive Argentinian companies like Peabody are now supplying their other Latin American markets from their Paraguay operation because they're being intentionally disadvantaged by Milei's government.

Anyone who believes mothballed equipment can be easily brought back on line is dreaming. Breaking up equipment, selling it, or selling parts are far more likely.

I see no need to respond to the rest of the Chat-GPT inspired verbiage above... the market can decide, on a level playing field, which companies and products are competitive and survive. A sensible government, would create an industrial policy for strategically important industries, in Argentina's case, vaccines, medical services and technology, nuclear reactors, jet aeroplanes, satellites, and the like. We can only dream of having such a government.

 

[SlowWalker]

The roll-call continues: https://www.infobae.com/economia/20...os-voluntarios-y-evalua-como-seguir-operando/

Electrolux is reducing its 400-person workforce in Rosario by 100. They cite cheap imports and falling demand.

Again, we use Electrolux electrodomestics at home, and they're very good.

We now know that Milei considers anyone who defends the national industry to be a crook: https://www.infobae.com/politica/20...ntinos-en-connivencia-con-politicos-ladrones/ The closed factories and reduced workforces are the point of Mileinomics, Milei won't be content until the only Argentinian exports are unprocessed grains, unrefined crude, and rocks with copper and lithium in them. I see otherwise successful and competitive Argentinian companies like Peabody are now supplying their other Latin American markets from their Paraguay operation because they're being intentionally disadvantaged by Milei's government.

Anyone who believes mothballed equipment can be easily brought back on line is dreaming. Breaking up equipment, selling it, or selling parts are far more likely.

I see no need to respond to the rest of the Chat-GPT inspired verbiage above... the market can decide, on a level playing field, which companies and products are competitive and survive. A sensible government, would create an industrial policy for strategically important industries, in Argentina's case, vaccines, medical services and technology, nuclear reactors, jet aeroplanes, satellites, and the like. We can only dream of having such a government.

1) Over the last year prices have dropped like crazy on some of these appliances, so people that were looking probably already bought. Last year they were operating on rotating shifts it looks like due to the lower demand. Now they bit the bullet an offered 100 early retirements with 3 extra monthly salaries and payout according to the old law, and 130 workers wanted it so they could pay off debts. So it looks like its kinda a win for both sides.

2) No one is knocking the brands. Even your own article mentioned Peabody imported the small appliances and didn't make them in Argentina. So they are both the victim and the agressor? In this article it more clearly stated that Peabody is restructuring its debt as I suggested. They haven't announced any layoffs etc.

3) Milei is not against the local industry. He is against protectionist policies and those that want to coninue to price their goods as though those policies are still in place or act as a cartel with the rest of the industry. He wants competition. Why when the gas pipeline contract went out and the Argentinian company lost, did they want the opportunity to rebid? They are a massive company that bids globally. They thought they would get away with massive overpricing just because they are Argentinian. The government was willing to still pay 10% more to buy Argentinian, Their bid was way higher. They could have come in with the competitive bid the first time, they chose not to. That is they attitutde that Milei is trying to change.

4) I think you have a romantic idea of how the economy should function. This country is going through a cost of living crisis while adjusting to a more open economy. And you seem to suggest that keeping higher priced goods on the shelf for the entire country rather than the cost of hundreds or a thousand jobs is better for society as a whole. The economy needs to change. The same way manufacturing plants changed with automation around the world and people lost jobs, its a transitory time right now in the economy. Is it good for everyone? Absolutely Not. Some will suffer more than others. I understand that. But maintaining high tariffs and taxes, artificially high prices, is just a huge tax on society as a whole. It would be more efficient to have a welfare system instead. But here, even that is difficult because of how prevalent the informal economy is.

5) Your previous article about Peabody said they exported from Argentina to Latin America, USA and Europe. I am not sure where the shift to Paraguayan is. Either way, as the article said, small appliances were imported from Asia. They aren't being manufactured in South America.

6) You can just choose not to respond rather than calling it ChatGPT veriage. Individuals are taking time to respond to your comments, no need to insult.

7) By opening the economy, the competitive marketplace is exactly whats taking place, and those that can adapt will win. Again, the entire economy is changing, so let it start to shift then policies can be made. Trying to pick the winners beforehand will usually not result well, and ends up with new protected industries and oligarchies.