Marcela Cristini: "The trade war between the United States and China can be seen as a crisis and an opportunity for Argentina"

Bad news from the international arena appeared again, again at the origin of the geopolitical and economic conflict between the United States and China, which revived the strong vulnerabilities of the local and external front. Faced with this situation, Finance Minister Nicolás Dujovne has tried to convey the tranquility to local markets by stressing his confidence in consolidating the local program as the main reinsurance against such attacks: "More our fiscal position will be solid and more credible program, less will be affected by movements of international currencies and financial movements.

Marcela Cristini, Senior Economist at FIEL (Foundation for Economic Research in Latin America), specializing in the badysis of the international economy (also Professor at Torcuato Di Tella University in Housing Policy and financing), was also relatively optimistic, due to the fact that: "Every crisis always opens an opportunity"but highlighted in an interview with Infobae the need to advance in unilateral trade agreements because it does not see the future in Mercosur broke down, and less in an agreement of the regional bloc with the European Union.

– What is your reading of the international scenario and its effects on the local economy?
– In terms of the international scenario, what is of interest to Argentina is financial stability, it is the United States interest rate in particular and the level of activity in the world, because they are related to global trade outcomes; and for Argentina, the exchange of goods and services with the world should be the key to its growth. Since the 2009 crisis, all emerging countries have had to deal with a rather unfavorable international climate, until we think that from the end of 2013, Improvement was under way, mainly because the world was again developing and so was international trade.

The truth is that regardless of the surge in commodity prices that has clearly benefited Argentina and South American countries, the world has already strongly boosted the growth of emerging economies until 2009, to such an extent Economies, especially in Asia, have absorbed half of international trade: they accounted for 10% of trade in 15 years and they started to be very competitive.

– Was it about a round trip growth of exports, but also imports?
– obviously, because you can not increase exports if you do not increase imports in a developing countrybecause they are or inputs for exports; or fixed badets for internal investments; and in particular the growth of those 15 years has been with globalization. This means that production lines have also been put in place; central enterprises, multinationals, in countries that offered them certain advantages. They left their headquarters in the countries where they worked with technology, such as Germany and the United States, and transferred some of their productive stadiums to nations that had natural resources or labor necessary, especially labor. The North Americans went to invest in Asia, but the Germans, for example, went to invest in Poland with great efficiency, because it is a country that, at this time of integration with the rest of Europe, I have been working with fantastic skills, well above average, as in all of Eastern Europe, as they were full of engineers and technicians.

– Why do you think the United States is launching a trade reaction against China's competitive, geopolitical and economic or purely electoral interests and is complicating the global picture?
– The situation is complex. I think there are several causes, but the first is that, on the one hand, the United States had acquired, until the presidency of Donald Trump, a point of productive and commercial view, a role of advanced technology generator for the first economy, Germany probably the second. In the context of globalization, phenomenal technological change is also occurring; and in the technological change we are facing in the United States, people who have worked in the high-tech sectors have increased their wages a lot and those who have done so in craft activities too. ; but the average bangs had not stayed with a stagnant salary for a long time.

– What caused this stagnation of incomes in the intermediate sectors of the United States?
– It was about robotization, although I do not know exactly what's going on, the threat exists. In addition, China, which at the beginning of the 1990s occupied the lowest part in terms of average wages in the production chain, began to develop and has positioned itself in very important enterprises, which have already internationally recognized names, further down the value chain replacing some US high-tech companies. These two threats made a significant portion of voters very dissatisfied with the situation in the United States. Same syndrome in Europe, with some differences, because Europeans have more national nuances; This is not the same in the Nordic countries, Germany or Italy where it is fully manifest.

This leads to a change of political trend in the United States and a change of strategy, because the new strategists have an ideological cut very different from the previous ones in the very long term. Although we are about to enter one in 2020, especially during the election years, we are trying to keep voters and win elections. As a result, short-term causes are mixed with long-term causes.

– And China?
– I see in China an explicit development program that has raised the country from less than $ 800 per capita to $ 10,000, and this in 25 years, a phenomenal success, and now designed to replicate it, with an infrastructure plan, such as the famous silk road map. From both points of view, the United States perceives threats, not their geopolitical leadership, perhaps also threats to its economic growth.

– Because?
– Because in many ways, this is similar to the situation in Japan in the 1990s, when productivity was increasing thanks to the adaptation of American technologies, through the famous Japanese Ministry of Industry. In that case, China uses US technology and adapts it to its growth objectives. The problem is that those who have invested in this technology are North American companies.. And China, in a way, imposes this diffusion of technology by imposing the obligation to create joint ventures and other types of badociations.

– What are the United States and China doing to defend themselves and attacking commercially higher import tariffs, is it in line with the rules of the World Trade Organization?
– Clearly not. International badysts are debating whether imposing rules for a while does not really help the world. This was the case of the USA and Japan, where the WTO rules on both sides have also been twisted for a short time.

– The scenario was then not the same …
– exactly. Japan was a strategic military ally of the United States. In Japan, the United States had organized democracy in the aftermath of the war. It was a completely different relationship. Now, I see a relationship where there is a trust built from the 1970s, but also a potential mistrust to the extent that the two countries are very big, and China is not an easy economy to read, neither the politics nor the economy of the rest of the world. Another thing that has happened is that, for example, China and the United States account for 4% of world trade, not 15%; but its commercial link is very important: The United States is one of the main customers of finished products in China. Therefore, they are not easily replaceable because they are all products of the industry. in the United States, China is the main funder of its Treasury bonds. Although this agreement lasted about 15 years, there was mutual trust that was not in any treaty.

– What change?
– That China wants to accelerate the growth of its per capita income again, because it finds that, with the old model, it has reached a ceiling, with an economy that seems much more planned than it does the thought; whereas the United States wants to lead the technological change, but meet a commercial adversary who must today understand where they want to go.

– And with a domestic image complicated by the stagnation of wages in the intermediate sectors of its economy …
– of course. With all this, the United States is facing a situation in which another political vision might have more used the instruments of the World Trade Organization, the geopolitical alliances, as with Europe, by example. But instead, he wanted to make what is called the American exceptionalism prevail, because it is by far the country that has made itself alone, without alliances, from its own creation. Although it was not so much because they never came out of the world, they received the influence of the French Revolution, from English immigration. But they understand and, many authors save it from the American exceptionalism, relying on these ideas to choose an aggressive strategy, such as unilateralism, which does not respect the rules of the WTO..

– How do you imagine that this will affect Argentina, beyond what has been seen in terms of rising country risk index and exchange rate volatility, due to the fragility of the external front? Do you see niche opportunities, or are they all in crisis?
– No, there are both. Obviously, if the scenario becomes much more complicated than we expect at the international level, because it is not part of the final aspirants, China in particular wants to achieve growth and is based on commercial bases and economic, and not geopolitical. In that case, I see that Argentina has opportunities and faces some challenges, some risks. Some are short-term and that's the problem.

– For example?
– The short-term problem is that Argentina sells its natural resources to the rest of the world, turning them into grains and oilseeds. From time to time, in the oilseed market, we depend on China, which is one of the major customers. And, unfortunately, this year, not only the trade war, as we call it, between China and the United States has left more soy in US silos and therefore tends to lower the price, but also in China there is a swine fever that forces to liquidate the cattle that consumes the oilseeds.

– There is the knot of falling soybean prices at the lowest level in 11 years …
– Yes, however, China diversifies its sources of supply in the long term, which benefits Brazil and Argentina. Even in recent days, we have seen a greater openness for beef in Argentina and for pork. And once it's in and the markets are tested for the quality the country offers, that's great.

– This can not generate retaliation for Argentina by the US government?
– No, because in reality, global production, given the growth in demand, is only redistributing customers. We will sell more to others if China buys more in the United States. Argentina sells in more than 130 countries; and the rest of South America, in small quantities, grains, oilseeds and beef. Without a doubt, Europe is a key customer of Argentina, like China, and they are not easily replaceable, but we are not talking about China preventing us from buying. Maybe it changes a bit, because it will not be exposed either. And I think that Argentina's competitiveness in these products is very high and that it has been strengthened.

– Does this competitiveness affect the measures taken by the government to withhold emergency deductions, reduce the tax refund, increase the statistical rate for all imports and thus make certain production costs more expensive?
– This is part of the problems of recurring macroeconomic crises in Argentina. When these emergency measures were not fiscal, the exchange rate had to be allowed to drop, as between 2011 and 2014, resulting in the destruction of exports from 80,000 million USD to 60,000 million USD. Look at the graph showing how the trade surplus has been destroyed.

– Was it more on his merit than on the international scene?
– Absolutely, international trade was growing and, for Argentina, it was down because of the backlog of trade. Therefore, if the reading of the economic cycle is well done, Argentina is often confronted with these problems. The difference is that, I believe, today they are read as an emergency measure while a policy of substance is being implemented, which means, in the objectives of the government, to reduce public expenditure in real terms, which constitutes a significant weight of the Argentine economy. and what is needed to reduce taxes and be more competitive.

For that The response of the agricultural sector was immediate. Since the sowing of 2015, one finds that it is starting to recover, regardless of the climatic effects that caused initial losses, first by floods, then by drought. And the estate invests everything in the field, as seen in some activity indices, especially in equipment investments.

– Some criticize the fact that exports are redefined. It's like that?
– We observe today that Argentina has a composition of the exports of which more than 50% corresponds to the agricultural origin, which is the traditional article. They grow in volume, and that's finebecause it means that the export effort is increasing, no matter what happens in the international price environment. You then see 17% of industrial exports, mostly in Brazil and the rest of Latin America. There, the panorama with Brazil must be much clearer. This is not just the situation of China and the United States and its trade war.

– What's the problem you see?
– What Our problem for industrial exports is our Brazilian partner and the way we do it, especially those with a certain link in a Brazilian-Argentine chain, with other parts of the world; how the idea of ​​an export platform for Mercosur is recovered.

– What are you missing or do you think is unfeasible?
– What we need is the same thing we needed 25 years ago, to do something like the Pacific Rim countries: to make trade deals bilateral. I do not see that. The agreement with the European Union will not take place in the short term and the rest of the portfolio is not advanced. This is clearly seen in a comparative chart with other countries of the degree of openness of the economy of Argentina and Brazil, with exports plus imports halving then GDP.

– The government says that many markets have been opened.
– It is true that very important efforts have been made to indicate that he wishes to return to the world. in bilateral relations; show that it can be a very good country food supplier; that good agreements have been concluded with China; participated in all negotiations; directed the G-20. It has been shown that you are at the beginning of the road, but you also have to do the internal work to improve competitiveness, without trains or roads, you could not aspire to much. The law on SMEs has also been drafted; We are worried about the competitiveness that would be permanent within the government, beyond the crises that began last year.

However, there are aspects that have to do with the negotiation with Mercosur, but the political period has not helped, Jair Bolsonaro has just taken office and begins to see where he wants to go; while Argentina is in the middle of an electoral phase. However it is always different, political or economic. That's why I think maybe we should think about being very realistic about Mercosur and pull together the list of tasks we want to do, and list the tasks that we can not do. not to do. and be less ambitious.

– What other point would highlight the trade of Argentina?
– Argentina is a more open country in the capital market than in the commercial market. And we know that the capital market is very volatile and therefore destabilizes more quickly.

– And the consequences are worse, because it affects the country's risk index, causes devaluation and inflation …
– This is not a simple situation, but it is a scenario we know, that we have gone through several times. I am optimistic because Argentina continues to be a major economy despite the decline of our years, while the per capita income of most Latin American countries has increased. But the country is still on a high fuel economy and the government has reestablished itself as an export market, in a context in which, moreover, we are witnessing a future change of sources of energy. energy.

– So, are you optimistic in the medium term, despite the economic and political situation?
– Yes, what I'm saying is that, beyond some structural aspects related to the recovery of human capital that typically characterized the exports of Argentina because it was badisted by very good technicians. This is a problem because there are now other technicians we need with new technologies. But on the other side it still has a potential in natural resources that allows the country to finance the development; that is, to finance the transition to a much more complex economy; if you want the Canadian, the Australian, where always in the latter more than 40% of its exports are still natural resources.

We must do the same thing. Keep thinking that with very good financial intermediation; with aggravated agricultural producers; with value chains that end up in food; On the basis of this wealth which provides us with exports and financing in a transition, we will be able to resume the activity with the new modality of exportable services and a high-end exportable industry, badociated with new technologies. Argentina should not have any problems. The restriction he has is that he has not been able to organize himself more and more to take advantage of all the resources.

But What Argentina has done is become more and more disorganized, especially in the last 15 years. But this is not an intrinsic failure of the country, it can be resolved, so it should not be optimistic. All we need is a scenario of political and social tranquility, coupled with achieving economic stability to organize ourselves, the private sector and the Argentine public sector, which must be more efficient.