Argentina’s SMEs Call for Special Exchange Rate to Increase Exports, Competitiveness

Buenos Aires — Daniel Rosato, president of Industriales PyMEs Argentinos (IPA), a body representing industrial, small and medium-sized enterprises in the country, has called for a segment-specific exchange rate in order to put factories producing goods for export on an equal footing with the agricultural sector that has been benefited by a new exchange rate announced earlier this month by Economy Minister Sergio Massa.

“We need an SME dollar, because we have stopped exporting and we are losing markets in the world due to the lack of competitiveness,” Rosato said, calling on the government to implement a new ‘SME dollar’, with the aim of reverting the fall in exports by the sector caused by the lack of competitiveness.

“We are aware of the efforts made by the economy ministry to overcome the conflicts due to the lack of reserves and the need to reduce the fiscal deficit, but we want to make it clear that the industry is one of the solutions to these problems that the country is going through, because it fulfills the double function of creating quality jobs and, at the same time, generating dollars”, Rosato said.

The request by industrial SMEs comes just a week after the government’s economic team announced the arrival of a new differential exchange rate of 300 pesos to the US dollar for the agriculture sector, and which will be extended until the end of May for soybean, and until the end of August for the country’s regions.

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When setting out the reasons for the request, Rosato pointed out that “the effect of the drought hit the farming sector hard and directly, but we cannot lose sight of the fact that the consequences of the fall in agricultural production also increased industrial costs and had an impact on the competitiveness of exports”.

“Today, many SMEs have started to abandon some markets in the world, because it is more convenient to allocate everything to the domestic market,” he said.

“The payment of exports at the official dollar has become unsustainable, since many companies have to import to produce with very high costs, both because of the financing necessary to pay for purchases in the world, and also when the urgency of having to pay arises by appealing to financial dollars,” the IPA’s president added.

He also warned that “the absence of an incentive will have a very negative consequence for the medium and long term of the country”.

“While it is true that industrial exports do not represent the same amount that the agricultural sector contributes to the reserves of the central bank, the latest news of a trade deficit, due to the fall in the sales of SMEs, should be more than a wake-up call for the government because there will be fewer and fewer factories destined to sell their products in other parts of the world,” Rosato said.

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The IPA president also warned that “the fall in exports by SMEs has another effect on the economic activity of the country, in addition to the loss of market and the lack of dollar income, since factories have begun to redirect their sales to the domestic market. However, in view of the loss of workers’ purchasing power due to inflation and the impact of the drought on trade, businesses will shrink and internal competition will begin to be seen, which will lead to a unemployment, greater informality, and even the closure of factories”.

For Rosato, “the application of an ‘SME dollar’ will not only recognize the exporting industries, in their international competitiveness, but will also boost employment, since a company that sells abroad has to hire more personnel and needs the conditions to be able to sell to the world”.

“SMEs, together with the trade unions, are the first to participate in the dialogue with the national, provincial and municipal governments to develop the industrial model, with import substitution, which allows the country to have a foreseeable future in terms of production and employment. But, at the same time, we depend on urgent measures to sustain our activities, because our factories depend on a day-to-day basis,” he said.

“Unlike large companies, the profitability of SMEs does not allow them to have a financial back that can withstand a long-term crisis”, he added.

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