The Mercosur – European Union Agreement requires Argentina to be more competitive

Jorge Vasconcelos

Regional Economist

Competitiveness is an important explanatory factor for each country's level of wealth per capita. In one of the most cited rankings, the World Economic Forum, Argentina ranks 97th out of 137 countries and Spain, for example, occupies about 60 places. Thus, it is not surprising that Spain's GDP per capita is multiplied by 3.5 times that of Argentina.

Argentina and Brazil have been in a period of economic stagnation since the beginning of the decade, in stark contrast to countries such as Chile and Peru, which experienced growth of 21.9% and 31.6%. % in the last eight years. Moreover, because of its characteristics, Mercosur had acquired a procyclical character during the last period, in which the recession of one country explained that of the other. Due to the lack of competitiveness, industrial exports can not reach third markets with the required volume whenever intra-Mercosur demand suffers.

Argentina has accentuated the anti-export bias of its policies, with out-of-scale expansion of public spending, with the impact of distortionary taxes on GDP more than doubling. The elimination of stocks to change and foreign trade has opened a new stage to correct these biases, but there is still much work to be done

The Mercosur-European Union framework agreement, if it is implemented, will have to order the reform program to make a leap forward in competitiveness. From the comparison with Chile, it appears that the fronts on which transformations will have to be given priority concern macroeconomic stability, the development of the financial market, the efficient functioning of the markets for goods and labor, the institutions and institutions. l & # 39; infrastructure

Three questions about the agreement

"The agreement would strengthen the current weak integration into global value chains by reducing barriers to cross-border movement at different stages of development and by facilitating, through the harmonization of investment regulations. , the arrival of foreign direct investment these channels, "said economist Gabriel Sánchez.

The main advantage will probably be the reduction of transaction costs related to regulatory harmonization and mutual recognition of certifications, which reduces logistics costs and fixed costs related to compliance with external quality requirements, technical regulations trade and obstacles. sanitary and phytosanitary The reduction of these fixed costs is essential for the entry of SMEs into the export market

Trade integration with the EU could displace some manufacturing companies and activities at the end of the tariff reduction process, but it should be emphasized that the removal of tariffs for sensitive sectors will take between 10 and 15 years . On average, the manufacturing sector will have to develop alongside intra-industry trade and regional integration, which is the norm in these agreements.

To maximize profits and minimize costs, reforms and investments must be implemented to increase the competitiveness of Argentine companies, while facilitating the reallocation of capital and labor from companies displaced for the benefit of expanding companies. And, in addition, introduce social containment networks for displaced workers.