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From the magazine: In Argentina, import restrictions lead to black market

Published November 29, 2012

BUENOS AIRES, Argentina (BRAIN) — The Grinch stole Argentina’s bike market this year, but the industry hopes the spirit of Christmas softens the government’s stance and import laws are softened in time for the holidays, the traditional start of the Argentine bike season.

Argentina implemented new import requirements in February that virtually shut down all imports of bikes, as well as many other consumer products.

“Since February no one is importing complete bikes, with a few exceptions. The impact on our business is substantial,” said Fernando Ferreyra, Specialized Bicycle Components Argentina’s general manager.

Advanced Sports International’s Camel Zarzur says that each day the new restrictions remain in place makes his business harder to keep afloat.

“The quantity of imports has fallen to such a point that we will not have products for the 2013 model year. The customs regulations and restrictions make it practically impossible to import bikes or parts,” said Zarzur, ASI’s Argentinean importer.

What complicates the picture further for importers—and the situation affects imports of everything from cars to toys and food—is that many of the “rules” in place are not written into law.

Last year Argentina drafted new legislation requiring import licenses for certain product categories like bicycles, motorcycles and sporting goods to be issued non-automatically. Importers working in these product categories would have to renew their import license for each container of goods they brought in.

“Companies report that they have been told that their import license application will not be approved unless the company agrees to trade-balance requirements established by the Secretary of Domestic Trade,” said Josette Fiore, U.S. Commercial Service’s commercial specialist in the U.S. Embassy in Buenos Aires.

“So in order to obtain a license to import goods, they must show an increase in exports of the same dollar value of Argentina-originating goods. To import one dollar of goods they need to export one dollar. There is no legislation,” Fiore said.

The U.S. Department of Commerce reported that some companies began exporting olive oil and wine from Argentina to build up export credits so they could continue importing hard goods. But now even that is difficult, and the trade-balance requirement is crippling importers.

Trade with Argentina is so untenable that 14 World Trade Organization members, including Australia, the European Union, Japan, Taiwan and the U.S., drafted a letter in August requesting that Argentina eliminate its import restrictions. Argentina responded by detailing the manner in which many signatories wage unfair trade practices against its exports, so the dispute continues.

Argentina has a domestic bicycle assembly business but not large-scale bicycle manufacturing. But production of assembled-in-Argentina bikes also has ground to a halt.

“It is not easy to find parts. Shimano and SRAM have problems. Saddles, seatposts, bars, stems, spokes and other components have quotas. So you can have almost everything to complete a bike but you don’t have bars or saddles,” said Ferreyra.

Argentine bike consumers are finding other ways to get the latest bikes and parts, and a bicycle black market is growing.

“The only bikes to enter the country are those imported by people traveling to neighboring countries, and people have been bringing in products though online purchases,” said ASI’s Zarzur.

“But this has been reduced in the last month due to the limits on foreign purchases by credit card payment. But the black market business is significant,” he added.

Heightening the impact is last year’s record sales year, topping the previous few years of very strong growth in the market.

“The market was growing very fast in all categories and price points, and not only for imports of bicycles but also for local bikes—those assembled in Argentina with imported parts,” Ferreyra said. 

Ferreyra is optimistic that the government will do something to soften the rules by Christmas, noting that the current unavailability of toys and other traditional holiday gifts will put pressure to loosen its trade policies.

Zarzur also thinks the government could do something to liberalize its trade rules in the short run, but he does not see a quick return to the way things were in 2011.

Topics associated with this article: From the Magazine

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