TRADE AND COMPETITIVINESS IN
ARGENTINA, BRAZIL AND CHILE.
Mr. Roberto Villambrosa
22 November, 2004
GROWTH PERSPECTIVES FOR LATIN AMERICA
•
•
•
On the second quarter of 2004, the announcement of OPEC
to increase the production of crude oil and the decision of
the Federal Reserve to raise the reference interest rate to
1.25%, led to financial volatility that afected capital markets.
It is expected an expansion of 4.5% annual of the GDP (the
highest since 1997), for Latin America.
Risks of the international context:
- In the short run: oil price volatility.
- In the medium term: the imbalances of the american foreign trade
and the expected lower rates of growth in the chinesse economy.
- In the long run: some weakness for a sustained growth (external
debt, high unemployement and investment rates in the region).
GROWTH PERSPECTIVES FOR LATIN AMERICA
Latin American countries exports (million U$S)
350.000,00
+9,49%
300.000,00
250.000,00
200.000,00
150.000,00
100.000,00
50.000,00
0,00
1999
Argentina
2000
Brazil
2001
Chile
Colombia
2002
Mexico
2003
Other*
* Peru, Ecuador, and Uruguay
Source: UNSD comtrade data base
During the first five months of 2004, exports from Argentina, Brazil, Chile,
Ecuador, Mexico, Peru and Uruguay (wich represent more than 90% of the
commerce of the region), increased 20% annual with respect to 2003, due to
the strong growth of the interegional trade (50% annual).
The main markets are: United States, European Union, with 50% and 13% of the
total exports, and trade surplus with China.
ACTIVITY
Recovery started in the second quarter of 2002, and there have
been eight consecutive quarters of growth for the first time
since 1997.
Gross domestic product
Seasonally adjusted gross domestic product
at 1993 prices (million of pesos)
at 1993 prices (million of pesos)
280.000
290000
+1,5% +0,5%
+7%
280000
+3,0%
270.000
+3,4%
270000
260.000
260000
+2,2%
250.000
250000
240000
240.000
+3,0%
+1,4%
+0,1% +0,8%
230000
230.000
220000
220.000
210000
200000
210.000
I 02 II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04 II 04
I 02
II 02
III 02 IV 02 I 03
II 03
III 03 IV 03 I 04
II 04
ACTIVITY
Activity level and current account
300000
5000
Devaluation
290000
4000
280000
3000
2000
260000
1000
250000
0
240000
-1000
230000
-2000
220000
GDP
210000
Current Account
-3000
200000
-4000
I 00
II 00 III 00 IV 00 I 01
II 01 III 01 IV 01 I 02
Source: Secretaria de Politica Economica, Ministerio de Economia.
II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04
II 04
Million of US$
Million of $ (1993)
270000
ACTIVITY
Labour intensive sectors such as textiles, metalmechanics and construction,
recovered strongly in 2002.
MIE –TEXTILES
Seasonlly adjusted
MIE –HEAVY ENGINEERING INDUSTRY
Seasonlly adjusted
90
120
96,9
100
+173%
91,6 90
96,2
99,5
96,4
101,2
69,7
II 03 III 03 IV 03 I 04
II 04 III 04
62,4 63,6 60,7
66,1
60
50,2
64
50
60
43,6
37,8
40
44,4
40
74,6
70,3
+138%
70
77,7
80
80
29,4
37,1
30
20
20
10
0
0
I 02 II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04
II 04 III 04
I 02
II 02 III 02 IV 02 I 03
ACTIVITY
Fixed gross investment: level and composition
(at 1993 prices –in million of pesos)
Durable equipment / Fixed gross
investment (%)
39%
60.000
Construction
Durable equipment
37%
50.000
35%
40.000
33%
30.000
31%
20.000
29%
10.000
27%
25%
0
I 01
II 01
III 01
IV 01
I 02
II 02
III 02
IV 02
I 03
II 03
III 03
IV 03
I 04
II 04
I 01 II 01 III 01 IV 01 I 02 II 02 III 02 IV 02 I 03 II 03 III 03 IV 03 I 04 II 04
RECOVERY OF THE ECONOMIC ACTIVITY
Economic activity and imports
Source: Indec, BCRA, Ipeadata, Federl Reserve of St. Luois.
ACTIVITY
Imports of capital goods influenced by investment recovery.
Import of goods: level and composition
(in million of dollars CIF)
Imports of capital goods
in percent of total imports
26%
10000,00
Other
Consumer goods and vehicles
Capital goods
8000,00
24%
22%
20%
6000,00
18%
4000,00
16%
14%
2000,00
12%
10%
0,00
I 00
II 00 III 00 IV 00
I 01
II 01 III 01 IV 01 I 02
II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04
II 04 III 04
I 00
I I 00 I I I 00 I V 00
I 01
I I 01 I I I 01 I V 01
I 02
I I 02 I I I 02 I V 02
I 03
I I 03
I I I 03 I V 03
I 04
I I 04 I I I 04
PRICES
Since April 2002, fiscal and monetary policies led to lower
rates of inflation.
Wholesale prices
Consumer prices
Average MoM Change variation
Average MoM Change variation
13,57
14,00
14,00
12,00
12,00
10,43
10,00
10,00
8,00
8,00
6,00
6,00
6,00
4,00
4,00
4,00
3,13
2,30
2,00
1,07
0,39
0,03
0,50 0,77
1,17
2,00
0,30
0,83
0,13 0,33 0,37
0,73 0,47
0,00
0,00
-0,53
-2,00
I 02
II 02 III 02 IV 02 I 03
-0,13
-0,83
II 03 III 03 IV 03 I 04
-2,00
II 04 III 04
I 02
II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04
II 04 III 04
FOREIGN TRADE
Depreciation of the peso led to a significant surplus in Argentina´s foreign
trade, as a result of import substitution.
FOREIGN TRADE
Monthly averages
3.500
Imports
Exports
3.000
Trade Balance
In million of US$
2.500
2.000
1.500
1.000
500
0
I
02
II
02
III
02
IV
02
I
03
II
03
III
03
IV
03
I
04
II
04
III
04
EXTERNAL TRADE
External Trade (millions of US$)
36.000
Balance
Exports
Imports
31.000
26.000
21.000
16.000
11.000
6.000
1.000
-4.000
1999
2000
2001
2002
2003
en-sep 04
Source: IDEC
On september 2004, exports have experinced an increase of 25.3% with
respect to the same month on 2003, while imports increased a 57.2% during
the same period.
The balance acumulated during the firts nine months of 2004 raises to
9.541 millions of dollars.
CURRENT ACCOUNT
Exports and imports of goods, balance of goods and current account
balance (million of US$)
10.000
Exports
Imports
Balance of goods
Current Account
8.000
6.000
4.000
2.000
0
-2.000
-4.000
I 00
II 00 III 00 IV 00 I 01
II 01 III 01 IV 01 I 02
Source: Secretaria de Politica Economica, Ministerio de Economia.
II 02 III 02 IV 02 I 03
II 03 III 03 IV 03 I 04
II 04
IMPORTS AND EXCHANGE RATE
45.000
Evolution of imports and nominal exchange rate
(million U$S)
3,50
Imports
40.000
Nominal exchange rate
3,00
+ 206%
35.000
2,50
30.000
- 66%
25.000
20.000
2,00
1,50
15.000
1,00
10.000
0,50
5.000
0,00
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: Ministerio de economia y produccion.
EXTERNAL TRADE
Exports by type of good (millons of US$)
35000
30000
25000
20000
15000
10000
5000
0
1999
2000
2001
Primary products
2002
MAO
2003
MIO
en-s ep 04
Fuels and energy
Source: INDEC
Annual variations January-September 2004 (%)
Manufactured
Goods
21,82%
FUELS
11,82%
17,12%
MIO
26,11%
MAO
Primary products
0,00%
Source: INDEC
2,55%
5,00%
10,00%
15,00%
20,00%
25,00%
30,00%
EXTERNAL TRADE
Imports by type of goods (millons of US$)
30000
25000
20000
15000
10000
5000
Source: INDEC
Intermediate goods
Spare parts and pieces for capital goods
Passanger Vehicles
Annual variation January-September 2004 (%)
Total
69%
Other
122%
191%
Passanger Vehicles
53%
Consumer goods
66%
Spare parts and pieces for capital goods
92%
Fuels and energy
Intermediate goos
38%
141%
Capital goods
Source: INDEC
0%
20%
40%
60%
80%
100% 120% 140% 160% 180% 200%
en-sep 04
Capital goods
Fuels and energy
Consumer goods
Other
2003
2002
2001
2000
1999
0
EXTERNAL TRADE
Exports by Economic Area Jan-Sep
2004
Rest
14%
India
2%
Imports by Economic Area Jan-Sep
2004
Mercosur
19%
India
0,7%
Middle East
3%
Middle East
0,3%
Japon
2,8%
Rest
8,6%
Mercosur
37,1%
Rep. Korea
1,3%
Japon
1%
Rep. Korea
1%
China
9%
Chile
11%
Rest ALADI
5%
ASEAN
4%
European Union
18%
Source: INDEC
NAFTA
14%
China
5,8%
ASEAN
2,0%
Chile
1,8%
European Union
18,7%
NAFTA
19,4%
Rest ALADI
1,4%
EXTERNAL TRADE
External Trade by Economic Area
January-September 2004 (millions of US$)
7000
6000
Exports
5000
Imports
4000
3000
2000
1000
Source: INDEC
Rest
Middle
East
India
Japan
Rep. Korea
China
ASEAN
European
Union
NAFTA
Rest ALADI
Chile
Mercosur
0
MERCOSUR
Argentine exports to Mercosur
(million U$S)
12.000
Brasil
Paraguay
Uruguay
10.000
8.000
6.000
4.000
2.000
0
1990
1991
1992
1993
Source: Centro de Economia Internacinal
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
MERCOSUR
Evolution of argentine exports
-within the bloc and outside the bloc- (million U$S)
70%
58%
60%
50%
Within MERCOSUR
Initiation of
tariff reduction
Outside MERCOSUR
41%
40%
30%
30%
29%
21%
18%
20%
10%
17%
8%
19%
19%
15%
17%
12%
7%
6%
5%
1%
0%
-1%
-10%
-5%
-2%
-5%
-3%
-9%
-11%
-20%
-24%
-25%
-30%
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Source: Centro de Economia Internacinal
Between 1991 (initiation tariff reduction) and 2003 and, inspite of the
reduction of trade caused by the succesive macroeconomic crises in
the region in recent years, Argentine exports increased more speedily
within the bloc (14.5% and 11% y-o-y average, respectively)
MERCOSUR
Mercosur helped to reverse the structurally negative
balance with Brazil.
Period
Years with
surpluse
Years with
Accrued balance
negative balance
(U$S million)
1980-2003
11
13
4,245
1980-1994 (without Mercosur)
3
12
-4,27
1995-2003 (with Mercosur)
8
1
8,515
In the fifteen years before the Customs Union was
stablished, Argentina had a bilateral negative balance of
U$S 4.3 billion. In the subsequent nine years, this
imbalance became a surpluse of U$S 8.5 billion.
TRADE WITH BRAZIL
Brazilian participation in Argentina´s exports and imports
40%
Exports
35%
Imports
30%
25%
34 %
35%
20%
15%
10%
II-2004
I-2004
IV-2003
III-2003
II-2003
I-2003
IV-2002
III-2002
II-2002
I-2002
IV-2001
III-2001
II-2001
I-2001
IV-2000
III-2000
I-2000
0%
II-2000
5%
Source: INDEC
After the crisis of 2002, Argentina slowly recovered participation in
brazilian exports. During the second quarter of 2004, Argentina
recived 7.5% of brazilian total exports. (2001).
Argentina has diminished its participation in the brazilian market
during the last three years.
TRADE WITH BRAZIL
BALANCE OF TRADE WITH BRAZIL 2003-2004
Source: INDEC
TRADE WITH BRAZIL
190
External price index
Variation
january 2001 =100
Jan- aug 03/jan-Aug 04
Oil
Wheat
Corn
Soy
Maiz
170
150
Trigo
130
Soja
110
90
Petroleo
Source: INDEC
jul-04
abr-04
ene-04
oct-03
jul-03
abr-03
ene-03
oct-02
jul-02
abr-02
ene-02
oct-01
jul-01
abr-01
ene-01
oct-00
jul-00
abr-00
ene-00
70
-5,00%
5,00%
15,00%
25,00%
35,00%
TRADE WITH BRAZIL
Participation of Argentina and U.S. in
bazilian imports
40,00%
Origin
Argentina
EEUU
35,00%
30,00%
25,00%
20,00%
12%
15,00%
10%
10,00%
5,00%
2003
2002
2001
2000
1999
1998
1997
1996
1995
0,00%
2002
USA
10.725
ARGENTINA
5.020
GERMANY
4.673
JAPAN
2.452
CHINA
1.698
FRANCE
1.827
ITALY
1.836
NIGERIA
1.125
UNITED KINDOM 1.397
ARGELIA
1.055
KOREA
1.137
SPAIN
1.029
SWITZERLAND
915
SAUDI ARABIA
705
CHILE
701
CANADA
813
TOTAL
49.814
2003
Variation
10.001
4.950
4.375
2.634
2.331
1.839
1.824
1.524
1.251
1.162
1.150
1.019
961
915
849
835
50.824
-7%
-1%
-6%
7%
37%
1%
-1%
35%
-10%
10%
1%
-1%
5%
30%
21%
3%
2%
Participation
2003
19,7%
9,7%
8,6%
5,2%
4,6%
3,6%
3,6%
3,0%
2,5%
2,3%
2,3%
2,0%
1,9%
1,8%
1,7%
1,6%
100,0%
Source: INDEC and aliceweb
Despite the fall of Argentina`s participation in the brazilian market, Argentina
represents the second supplier to Brazil (the 9.7% of brazilian imports are from
Argentina), after U.S., wich represent the 20% of the total imports.
Both, Argentina and U.S. show a decreasing trend.
TRADE WITH BRAZIL
Bilateral real exchange rate with Brazil (2001=100)
300
250
200
150
100
IPM
IPC
jul-04
may-04
mar-04
ene-04
nov-03
sep-03
jul-03
may-03
mar-03
ene-03
nov-02
sep-02
jul-02
may-02
ene-02
0
mar-02
50
Source: Indec, BCRA, Ipeadata, Federl Reserve of St. Luois.
During the first months of 2002 the bilateral exchange rate strongly decreased, after the
devaluation of the peso and the revaluation of the real. The real exchange rate recoverd
on february 2003.
On july 2003, the peso kept a stable path, while the real expericed an apreciation of 3%.
The real exchange rate increased due to an increase of the price index in Brazil.
TRADE WITH CHILE
Trade balance Argentina-Chile
(million U$S)
4000
3500
Balance
Exports
3000
Imports
2500
2000
3,156
1500
1000
500
0
1990
1991
Source: INDEC
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
TRADE WITH CHILE
Chilean participation in Argentine exports and imports
12,00%
11,70%
11,50%
11,00%
Exports
Imports
10,70%
10,20%
10,00%
9,00%
8,00%
7,40%
7,00%
7,00%
6,00%
3,00%
2,00%
7,30%
7,10%
6,30%
4,70%
5,00%
4,00%
8,00%
4,50%
3,70%
4,10%
2,80%
2,30%
2,80%
2,70%
2,50% 2,60% 2,40% 2,30%2,30%2,50% 2,40%
2,50%
2,10%
2,00%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Source: INDEC
TRADE WITH CHILE
Argentine, Brazilian and U.S.
Participationin Chilean imports
25%
22%
21%
19%
20%
19%
20%
17%
21%
15%
17%
15%
14%
12%
10%
5%
7%
8%
9%
10%
Argentina
Brasil
EEUU
0%
1999
2000
2001
2002
2003
Origin (2002)
Argentina
U.S
Brazil
China
Germany
France
Japan
Mexico
Korea
Spain
Italy
Canada
Peru
Total
Mill U$S
3.036
2.549
1.612
1.101
718
619
534
475
438
416
352
319
252
15.383
%
19,7%
16,6%
10,5%
7,2%
4,7%
4,0%
3,5%
3,1%
2,8%
2,7%
2,3%
2,1%
1,6%
100,0%
During the last years Argentina gained participation in Chilean market.
TRADE WITH UNITED STATES
Real exchange rate –multilateral and bilateral with the U.S. (2001=100)
190
170
150
130
110
90
EEUU
Multilateral
70
Source: FMI, Worl bank, Federal Reserve of Saint Louis, Fundacion Julio Varga.
may-04
mar-04
ene-04
nov-03
sep-03
jul-03
may-03
mar-03
ene-03
nov-02
sep-02
jul-02
may-02
mar-02
ene-02
nov-01
sep-01
jul-01
may-01
mar-01
ene-01
50
RECOVERY OF THE ECONOMIC ACTIVITY
Imports by origin –Participation 2003/2004Jan03-Jan04
Jan-jul04/Jan-Jul04
-7%
Chile (2%)
+46%
+69%
+73%
Japón (3%)
+90%
China (5%)
+99%
+40%
NAFTA (19%)
+66%
+38%
UE (19%)
+61%
+65%
+73%
Mercosur (37%)
+55%
Total (100%)
-10%
Source: INDEC
+69%
10%
30%
50%
70%
90%
110%
RECOVERY OF THE ECONOMIC ACTIVITY
Trade balance –seven months 2003/2004 (million US$)
2.500
1.9 13
2.000
1.821
Jan-Jul 03
Jan-Jul 04
1.898
1.488
1.500
1.3 5 9
1.16 6
1.021
1.000
605
537 5 4 6
337
500
250
19 9
0
-500
-1.000
Chile
Source: INDEC
UE
China
Medio
Oriente
NAFTA
India
-901
Mercosur
During january-july 2004, our country registered positive trade balances
with most of its trade parteners. The only exeption was Brazil. The
balance o trade with MERCOSUR was - 901million dollars.
RECOVERY OF THE ECONOMIC ACTIVITY
Multilateral real exchange rate and bilateral
real exchange rate with Brazil and U.S.
2001=100
The stability of the
nominal exchange rate
and domestic prices, after
the apreciation of the
dollar, determined that
the real exchange rate
stabilizes in levels higher
than the ones registered
before the devaluation
Competitivty with the U.S.
is falling since the first
moths of 2003, due to the
apreciation of the euro.
Source: FMI, Worl bank, Federal Reserve of Saint Louis, Fundacion Julio Varga.
LABOUR COST
• Unit labor cost:
This index represent the total labour cost needed to produce one
unit of output.
ULC =
wtLt
etQt
w : Medium nominal wage (including taxes)
L: Number of workers or number of hours worked
Q:Total output
e: Nominal exchange rate
• A fall in the wage- exchange rate relation (w/e) has a positive
impact in the ULC, therefore the cost decreases.
• When productivity (Q/L) rises the ULC falls, since the incidence of
wages will be lower, therefore competitiviness increases.
LABOUR COST
• Relative Competitiviness Index:
In oder to compare the evolution of the ULC between two coutries,
we use the Relative Competitiviness Index (RCI)
RCI =
ULC i
ULC j
• Index relates the ULC of country i respect the ULC of country j.
• Rises in the RCI imply that country i is less competitive than country j.
UNIT LABOUR COST
Unit labour cost index (1993=100)
160
140
120
100
80
60
ULC-Argentina
ULC-Brazil
40
ULC-United Sates
ULC-Mexico
20
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
Source: LA COMPETITIVIDAD DEL MERCOSUR FRENTE AL ALCA, Jorge Lucangeli
• The rise in th UCL between 1990-1995 is explained by 50%
increase in nominal wages.
• Since 1995 prouctivity rose and wages stabilized, therefore the
ULC fell, increasing competitiviness respect the rest of the
countries analized.
Relative Competitiviness
Relative competitiviness index
(1993=100)
250%
Argentina-Brazil
Argentina-US
200%
Argentina-Mexico
150%
- 70%
- 60%
100%
50%
0%
1990
1991
1992
1993
1994
1995
Source: LA COMPETITIVIDAD DEL MERCOSUR FRENTE AL ALCA, Jorge Lucangeli
1996
1997
1998
1999
2000
2001
2002
PRODUCTIVITY AND WAGES
Evolution of productivity and wages
(1990=100)
250
+ 90,1%
200
- 8%
150
+ 91,3%
- 63%
100
Wages (w /e)
50
productivity (Q/L)
0
1990
1991
1992
1993
1994
1995
1996
Source: LA COMPETITIVIDAD DEL MERCOSUR FRENTE AL ALCA, Jorge Lucangeli
1997
1998
1999
2000
2001
2002
PRODUCTIVITY AND WAGES
Evolution of productivity, wages and ULC
(1990=100)
250
wage growth rate > Productivity growth rate
=> UNIT LABOUR COST RISES
wage growth rate < Productivity growth rate
=> UNIT LABOUR COST FALLS
200
150
+ 43%
100
- 72%
50
Wages (w/e)
productivity (Q/L)
ULC-Argentina
0
1990
1991
1992
1993
1994
1995
1996
Source: LA COMPETITIVIDAD DEL MERCOSUR FRENTE AL ALCA, Jorge Lucangeli
1997
1998
1999
2000
2001
2002