Letting Your Kids Starve

[Rich One]

This may create even more confusion as "on this thread that discusses the Increase in Cost of Living in B.A. " it doesn't look like anyone has mentioned the cost of living in any other city.

Two options:

1. I mixed up threads
   
2. A word of caution to Avoid citing Costs in Houston for Electric B) bills

 

[Ries]

The "governments" who have consistently stlfled exports have almost without exception Peronist including the last one which did every thing possible to render Mercosur non- operative.As Prat -Gay has recently stated the way to Argentina's recovery is thru investment and the development of an export economy.
If we don't see concrete steps in that direction soon,he must be taken to task to explain why this is not happening.
"The economy is going badly" ? The economy is in adjustment .What could be happening is that in Argentina neither the locals nor some of the expats have been used to using countercyclical economics and are not prepared for these changes like in Chile,for example Some examples with neighboring countries are definitely illustrative.
.Of course,with over 30% yearly inflation and a overly generous state acting as a main employer as El expatriado so adroitly points out in the graph you are bound to run into really big economic trouble.And it happened thanks to Kristina,Axel y compañia.

I agree- the K's were terrible about supporting any exports but soybeans, and it has hurt the economy.
There are a lot of people, however, who make money both legally, and illegally, with the current import/export restrictions, and some of them are friends of Macri.
While the current government has supported the dairy and wine industries, both of which are held in relatively few corporate hands, they have done nothing to help exports, manufacturing, or small business.
Opening up imports and exports is not an either/or process- it is possible to keep tariffs on certain products, and remove them on others, its possible to support important domestic industry segments in many ways, from tariffs and taxes, to actually assisting foreign sales, to education, special tax breaks, and many other things.
Every major industrial nation has policies that help key industries.
The USA, for example, has the import export bank, which allows Boeing to sell literally billions of dollars of jetliners, by guaranteeing commercial loans- the US government doesnt buy the planes, or even make the loans- it just backstops Boeing using ordinary commercial banks to lend money to smaller foreign airlines, and therefore export US manufactured goods.
A program like this would save far more jobs in Argentina than banning the import of repair parts has, and than the current policy of making it virtually impossible for small to medium sized businesess to export.

For instance, Argentina has an amazing shoe industry- it has a complete shoemaking infrastructure that can make, profitably, small runs of custom designer shoes for about half what it costs almost anywhere else.
China is cheap, sure- if you can order 40,000 pairs to be delivered in nine months.
But boutiques all over the americas and europe would gladly pay argentine shoemakers to make 3 dozen pairs of custom shoes, shipped in six weeks- IF you could air freight them, without export taxes or fees, the way you can from every other civilized country.
This kind of government interference HURTS argentina, does not create any local jobs, and is just stupid.

There should be a government department, paid for by taxes, that has showrooms in major foreign cities, that handles bulk shipping, consolidating small manufacturers, and sending their goods to Paris and NYC and Tokyo.
It would pay far more in taxes back from thriving companies than it would cost to do- but stupidly, Argentina instead hides behind the Empanada Wall it has constructed, and pretends it is not a part of the global economy.

 

[Noesdeayer]

Ries:
A very interesting post with some constructive recommendations.i would also add that the Ks probably supported exporting soybeans so readily because Monsanto was one of their largest taxpayers. They needed all of those U$D to keep their semi-welfare state afloat .It would appear that Macri's gov't has reached an agreement with Monsanto on royalties so that should more or less continue.Unless,of course,Monsanto takes Bayer's offer of about U$D 62 billion and then the Germans can have all of business and the international "progressive" headache that goes with it.
The Argentine shoe export scheme idea could fly if they do everything you say correctly and improve their quality workmanship.

 

[citygirl]

Off topic but how is quality control with the shoes? At one point, lots of (horse) saddle manufacturers were doing saddles here in Argentina to sell overseas b/c obviously leather was plentiful and somehow they had worked out how to export. Unfortunately, one of the biggest saddle makers had a real problem with the qualityl and now has a bad reputation b/c the quality just wasn't consistent. - some were great and some were really shoddy. Lots of lost business there.

 

[mc kenna]

That's been the problem with Argentina's exports when it comes to finished products, time and time again, for instance Argentina had better shoe quality reputation around the world in the early 70's than the italians, until the italians started buying leather in Argentina and their product took off because there was no lack of drive on the italian side to make a name for themselves and of course here with la vivesa criolla they figured, why make shoes when selling the leather is easier...... and that's why Argentina could never make a finished product that could compete , their quality was excellent , sometimes, their deliveries were on time, sometimes, so the only thing Argentina can do and even then sometimes they f ck it up is export grain, just grain not even wheat flour, if not ask the Spaniards how well they did buying wheat flour from Argentina in the 80's

 

[Ries]

Shoes are just one example.
personally, I think its baloney that all argentine products are low quality.
I own a lot of shoes, including at least a dozen pairs made in Argentina, and I have argentine shoes that I wear all the time that are six or eight years old and still look great.
But I also have argentine made clothes that hold up as well as any I buy in America, and were cheaper on an apples for apples basis.

there are many other industries in argentina, though, that could easily be globally competitive if only they could export without 50% added costs.

metalwork here is a good example.
agricultural machinery, small machine tools, hand tools, and many other sectors of metal products are quite well made.

I met a guy recently, an industrial designer, who makes cookware- he is actually doing pretty well, exporting in 25kg DHL boxes, but, of course, would do much better if he could utilize normal export channels.
His products are 1/3 to 1/2 the price of brands like Le Creuset, just as nice, and people want them. He ships to Europe and North America weekly.

Argentina also has a strong tradition of modern furniture manufacturing- lots of well designed chairs, tables, lighting, and so on, very competitive with Italian designs that cost triple. Again, big bulky things are the most expensive to get out of the country- if you can air freight something small and expensive, you have a chance, but chairs cost double their retail price just in handling cost by the time they get landed in NYC.

All kinds of textiles- Argentina makes great cotton, wools, and exotic wools like Llama- and is well positioned to make small run organic fair trade products- but its too hard to export.
The Italians buy most of the Patagonia merino output, in one massive purchase order every year. At the lowest cost- Argentina should be adding value, not selling raw materials.
Same thing with cotton yarns and fabrics.
The yarn industry in Argentina exists, and is competitive in quality and design with world sources- but its hard to get it out. Turkey wholesales yarn for similar prices as Argentina- but landed in the USA, Turkish yarns are much cheaper.

I could go on- there are lots of examples.
Argentina has the capability to be a strong manufacturing country.

 

[mc kenna]

No doubt at all that Argentina has the potential, what Argentina lacks is the drive to claim its place in the world, blame it on sindicatos or just plain bad management or policies from the state not helping exporters, at the end of the day Argentina is seen as a good quality products potential but very flaky at best when it comes to honor contracts....... i can also go on and on about the possibilities that Argentina could acheive, but looking back at the mistakes made in the past and how they are lining up to make them again, i doubt very much that Argentina will ever get anywhere as a strong manufacturer of quality goods

 

[Noesdeayer]

mc kenna:
A very good sumation of the situation up until now.However,let's hope it's not that conclusive.There were a lot of good export start ups but not enough follow thru and continuity.Perhaps there were too many intermediaries like the gov't,, taxes and others only interested in sucking up strong currency.So,it was back to exporting just the raw materials
Fortunately,what most people in Argentina have come to agree upon is that the old saying,"Con una buena cosecha solucionamos todo".is simply not enough any more.

 

[rrptownley]

I just came across a good Reuters article on Argentine industry's slow bounce back under Macri:
It even mentions shoemakers at the beginning!


Despite pro-business reforms, Argentina's factory owners struggle

BUENOS AIRES, June 2 (Reuters) - Since taking office in December, President Mauricio Macri has quickly ticked off a long-held wish-list of Argentina's manufacturers - lifting tough capital controls, easing import restrictions and freeing up access to dollars.
But his policies have yet to lead to a recovery in manufacturing. Initial optimism over the new business-friendly government has met the tough realities of stubbornly high inflation, an economy stumbling towards recession and job losses.
"We were selling around 28,000 pairs (of shoes) per month and then in October last year it suddenly dropped to 18,000. We thought it would only last a few months, but the situation still hasn't changed," said Jorge Boris, vice-president and partner at security footwear maker Boris Hnos, which makes steel-toe shoes used in construction and other industries.
The shoemaker, which employs around 70 workers on the outskirts of Buenos Aires, is not alone. Industrial output contracted a sharper-than-expected 6.7 percent in April from a year earlier, the newly revamped Indec statistics agency said this week.
Boosting factory output and turning around Argentina's economic fortunes are key to Macri's political fortunes.
He has promised to reverse years of protectionist economic policies under his leftist predecessor Cristina Fernandez but he could face labor unrest and an aggressive opposition in Congress and on the streets if he cannot quickly deliver growth.
"Up until now we haven't seen a change with this government ... The economic situation in the country is bad. People have less purchasing power and companies are also doing poorly," said Boris.
Macri's policies have been hailed by investors as a strong start to opening up the economy, but they have also swelled the ranks of the poor as a currency devaluation sparked a sharp hike in inflation and the government hiked utility rates and cut generous subsidies for gas and water.
At least, manufacturers say, they can finally import what they need. Under Fernandez, cumbersome quotas hampered the import of key components and disrupted factory production lines.
"As of December, we haven't had any problems with importing finished cars or auto parts," said an executive at Argentina's industry automobile association, who asked not to be named.
But that is of limited use if there is little demand. Added to the economic woes at home is a steep recession in top trade partner Brazil, where nearly half of Argentina's manufactured goods are shipped.
"The problem is no longer about access to dollars or a simplified import regime for auto parts, it's a question of activity and of where to sell what we produce," said the industry executive.
Argentina's vehicle production in the first quarter of 2016 dropped 18 percent on the year.
Argentina's auto makers have responded by looking to new markets, such as Colombia. But half of Argentine-made cars are shipped to Brazil so new markets will only partially compensate for the shortfall.

LIGHT AT END OF TUNNEL
Macri promises that Argentina's return to global debt markets after it paid off 'holdout' creditors, 14 years after a massive sovereign debt default that triggered a mass exit of investors and a wave of litigation, will help draw a wave of foreign investment.
And many business owners remain positive on the long term, saying Macri's policies have brought greater transparency for investment decisions.
"The private sector is now talking to the public sector and that gives you predictability ... it allows you to plan out the purchases you're going to make in far-away markets," said Ruben Oscar Garcia, secretary of import industry group Cira.
Small- and medium-sized companies that make up an important part of the manufacturing sector rely on "expectations and gut feeling" when making investment decisions, said Jorge Gottert, president of manufacturing industry group Carmahe.
"And there has been a radical change in that sense ... we're convinced that the measures this government is taking are correct."
Gottert said he expects a manufacturing recovery to begin in the second half of this year and a surge in 2017.
Another Macri business-friendly move was to cut the tax on shipments of soybeans, Argentina's main cash crop, from 35 percent to 30 percent days after assuming power, while scrapping export taxes on corn and wheat. He plans further cuts.
As a result, increased activity in the grains sector during the second half of the year should prompt a ripple effect in the economy, feeding into manufacturing, said Marcelo Quistorp, president of Tauro, which manufactures welding equipment in the grains export hub Rosario.
"Right now we're 20 percent below where we'd like to be production wise ... but we're hopeful this is going to take off. We can't get rid of our workers because we risk having to train new ones when it does," he said.
But not everyone is convinced the economy will turn around this year.
"Macri is doing a lot of good things, and it's right to be optimistic about the medium term prospects ... but the more painful cuts to social welfare spending, which will be needed to bring the fiscal deficit down, are yet to be implemented," said Edward Glossop, emerging markets economist at Capital Economics.
"The second half of the year if anything we would expect to be even weaker than the first half of the year, not stronger."

 

[Noesdeayer]

RichardRPTownley.
Very interesting analysis.
When I googled Edward Glossop of Capital Economics and saw that he was a graduate of Sheffield University I realized why he had made the only pessimistic comment.What "more paibful cuts to social welfare spending" was he referring to?