Macri seeks to boost exports by SMEs

Macri seeks to boost exports by SMEs

On October 8th the president, Mauricio Macri, announced on Twitter a measure to encourage small and medium-sized enterprises (SMEs) to enter export activity.

Mr Macri announced that the government would finance the shipping costs of the first export for any SME that is looking to enter the export sector. The only caveat would be that the export must be less than 100 kg. The proposal seeks to redirect investment to export orientated activity, at a time when domestic demand is contracting sharply.

Mr Macri claimed that more than 2,000 firms had either entered or re-entered the export sector over the last two years. He also highlighted his administration's accomplishments in boosting the external sector, including opening up Argentina to new markets in 49 countries, and the conclusion of a long-awaited trade deal between the Mercosur customs union (Argentina, Brazil, Paraguay and Uruguay) and the EU. The president also drew attention to the Exporta Simple initiative, which reduces the bureaucratic and logistical costs of doing export business.

The export-promotion measure was part of a larger series of proposals announced by Mr Macri, as he seeks to build momentum ahead of the presidential election on October 27th. Other new proposals include an expansion of educational scholarships, a ban on single-use plastics and lower social-security contributions for young people starting their first job.

However, these proposals, although relatively popular, are likely to help only at the margins and will not be instrumental in turning the extremely weak economy around. We therefore continue to expect a victory for Mr Macri's main opponent, Alberto Fernández, of the Partido Justicialista (PJ, the Peronist party).

Given that policy from end-2019 onwards will be dictated by a presumptive Fernández administration, concerns will persist over the extent to which external-sector growth can cushion the overall downturn in domestic demand. A Peronist party committee recently presented Mr Fernández with a document containing policy recommendations for his first 100 days. The document proposes a segmentation of export duties, to shift more of the tax burden onto large-scale exporters. It also calls for stricter regulation of foreign currency earned by agro-exporters. If implemented, these policies could serve to dampen export growth and offset benefits from currency competitiveness.

Impact on the forecast

Our forecasts remain unchanged. A net positive contribution from the external sector will not be sufficient to halt the economic downturn in the near term.

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