The Phaserl


Argentina Imports Still Closed For Business

from Wolf Street:

The new Macri administration has been tooting its own horn, so to speak, about taking giant strides to liberalize the country’s trade policy. On two important fronts, it’s right. By removing currency controls, or the infamous cepo and blue dollar system, the government removed a de facto tax on exporters. The government has also removed export taxes, or tariffs, on grains, meat, industry, minerals and pretty much every important export sector. But when it comes to liberalizing imports, the Macri government has been woefully negligent.

Imports Under Cristina

Former President Cristina Fernández de Kirchner restricted imports to almost zero in order to prop up the value of the Argentine peso and keep reserves in the Central Bank (BCRA).

Basically, every time Argentina imports anything, the BCRA has to give up dollars to pay for it, which weakens the peso and lowers reserves.

Cristina’s government used a system called Declaración Jurada Anticipada de Importación (DJAI). Under the DJAI system, importers had to submit a formal document requesting permission to import, and this request was then basically denied in most cases unless you were best friends with secretly paying off approved on the basis of merit to the country. This created a system whereby importers routinely brought complaints via the judicial system to get their DJAI approved.

In plain English: if you wanted to import anything, you went through the formal process, got denied, took the denial to a specialized legal consultant who got the request “approved” by a judge in exchange for a commission that floated between 10 and 20 percent. That’s corruption and what we economists describe as economically detrimental rent seeking behavior, when someone uses their resources to obtain an economic gain from others without reciprocating benefits to society via wealth creation.

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