Argentina whets Chinese appetite for food and wine
By Adam Thomson in Buenos Aires
Published: October 22 2003 18:21 | Last Updated: October 22 2003 18:21
Argentina has a new friend: China. The world's most populous country became the biggest destination for Argentine products for the first time this year, in June and July. In dollar terms, exports have risen almost 150 per cent since last year.
China's emergence as a trade superpower has potentially worrying consequences for countries such as Mexico and many Central American nations, whose manufacturing sectors have been hit hard. But it is a godsend for Argentina.
Economists agree that Argentina has to start exporting more if it is to recover fully from the financial meltdown of December 2001 and find a sustainable growth path. China could be the ideal partner, they say.
In December, Rafael Bielsa, the foreign minister, will visit Beijing as part of efforts to form closer trade ties and even confirm a presidential visit early next year. "China is very important for us," says Martn Redrado, Argentina's chief trade negotiator. "We are mainly producers of food and that is exactly what China needs."
Indeed, 75 per cent of the almost $1.8bn in Argentine exports to China during the first eight months of this year was agricultural products and, in particular, soya beans.
China imports about 21m tons of soya beans a year and Argentina provides roughly 30 per cent of that. Moreover, exports are expected to rise in coming years to meet the country's seemingly insatiable appetite for the grain.
Ernesto Fernández, of the Sino-Argentine Chamber of Commerce in Buenos Aires, admits that soya dominates exports to China but he believes the possibilities extend far beyond grain. Already, China has become the 10th most important destination for Argentine wine, for example, though most of it is exported in huge tanks and mixed with sugar, alcohol and other products to cater to local tastes before being bottled. The remainder is fine wine, bought mainly by upmarket hotels and restaurants for foreign tourists.
Some Argentine wine producers, such as Norton and San Huberto, have even entered the Chinese market directly, with vineyards and processing facilities on the outskirts of Beijing.
There are other areas with export potential. China is now the seventh principal buyer of Argentine fish, the biggest purchaser of Argentine wool, buying about 30 per cent of the country's production, and an increasingly important destination for Argentine leather for its 5bn-pair-a-year shoe industry.
Mr Fernández even believes Argentina can play an important role in providing China with services, such as education.
Several universities in Buenos Aires and smaller regional cities are in the process of designing courses taught in English for Chinese students who are unable to find places in Chinese universities.
Of course, there are problems. Exporters complain that China's import rules are extremely complex, bureaucratic and unpredictable. According to Alberto Rodrguez, of the Chamber of Cereal Exporters in Buenos Aires, decentralisation in China has added several layers of bureaucracy to what was already a difficult process.
"Today, you have to deal with municipal, provincial and private agents, compared with just the central government a few years ago. Each and every one seems to have its own rules, and they change them at the drop of a hat. On top of that, you still need to go to the central government to get your import license."
The lack of predictability is a particular problem, the consequences of which became clear a few years ago when Chinese authorities decided to encourage local production of soya oil. At the time, China was the most important buyer of Argentine soya oil and the market virtually disappeared overnight.
Many say such policy U-turns make it almost impossible for companies to take big investment decisions. "You just can't tell what they are going to be importing in five years' time," says a grain trader with one of Argentina's leading soya producers.
In the shorter term, some worry that China's ambiguous attitude towards genetically modified products - a temporary government authorisation to import such products expired in July but has since been extended to March next year - could cause problems for Argentina's soya, 95 per cent of which is genetically modified.
A second problem is cultural. Mr Fernández says Argentine executives have to develop resistance to three things that go hand-in-hand with doing business in China: cigarette smoke, copious amounts of food and Maotai - a strong, local spirit.
"It is not exactly that they are testing your manliness, but that is definitely a factor," he explains.
Still, the Argentine government and private sectors agree that China's membership of the World Trade Organisation since December 2001 will eventually eliminate a lot of the risk factor as the country increasingly adopts internationally accepted trade rules. For Argentina, therefore, things can only get better. |
