Major Economic Indicators

Recent Developments 

• Under the twin bite of the current global economic crisis and the worst drought in 70 years, the Argentine economy is forecast to shrink by 1.5% in 2009, compared with a 7% growth in 2008. Continuing weak commodity exports and slowdown in agricultural and industrial production keep dampening employment and business activities, while the subsequent deterioration of business and consumption sentiment, coupled with the nation's fragile banking system, contributes significantly to consumption and investment squeeze.
• Hong Kong's total exports to Argentina decreased by 37% to US$69 million in the first four months of 2009, while its imports from Argentina rose by less than 1% to US$74million.

Current Economic Situation

Hit hard by the global recession and the worst drought in 70 years, the Argentine economy has demonstrated a slower growth in 2008, and is forecast to record a contraction in 2009. Continuing weak commodity prices, coupled with the severe drop in grain production and death of hundreds of thousands of cattle have been striking the Argentine economy, while rising unemployment as a result of falling industrial production and business activities has dragged down consumption and investment sentiment. Externally, the global recession and the subsequent decrease in demand for commodities, industrial manufactures, vehicles and transport equipment have significantly checked Argentina's exports.

Looking ahead, though the world economy is showing signs of a nascent recovery and public spending has been ramped up ahead of the June election, the Argentine economy is expected to stay weak in the rest of 2009 as commodity demand, industrial production and business investment are likely to remain sluggish in near term. On the other hand, while it will take time for the country's fragile banking system to unfreeze credit, consumption and investment will remain bleak on the back of rising unemployment and tight credit. On the whole, the Argentine economy is forecast to contract by 1.5% in 2009.

Trade Policies

According to Argentina's Customs Code, importers and exporters must be listed in the registry of importers and exporters at the Argentine Customs (Dirección General de Aduanas (DGA)). Argentina applies import duties and a range of indirect taxes on import and local transactions. Products imported for consumption are generally subject to import duties, statistical tax, value-added tax, excise duties and anticipated profits tax. As a Mercosur member, Argentina utilises the Mercosur Common Nomenclature (NCM) classification, which is consistent with the Harmonised System (HS) classification. In general, the customs value of goods is determined on a CIF (cost, insurance and freight) basis. Most imports from non-Mercosur members are subject to Mercosur's Common External Tariff (CET) which ranges from zero to 35%. In addition, Argentina applies minimum specific import duties (DIEMs) on a range of imports from all destinations apart from Mercosur countries. DIEMs are applied only when the duty that results from their application is greater than that resulting from ad valorem tariff. Products currently subject to DIEMs include textile, apparel, footwear and certain toys.

Argentina has two types of import licences - automatic and non-automatic. The LAPI (Licencia Automática de Importación) is a general system of automatic pre-importation licensing. Non-automatic licences, on the other hand, must be obtained before the importation can take place. Licence validity periods range from 60 to 360 days. In addition, imports of certain products require prior authorisation for sanitary or phytosanitary reasons or have to show conformity with technical regulations, while pre-shipment inspection certificate requirements were abolished in 2001.

In recent months, Argentina has developed an extensive web of non-automatic licensing requirements that covers a broad spectrum of products, ranging from clothing and footwear to toys, bicycles and household products. These licences apply to imports from all sources and must be obtained before the importation can take place. Argentina's licensing requirements are very fluid in the sense that Argentine authorities often include additional products or otherwise amend the existing provisions without much warning, placing a compliance burden on importers and foreign suppliers while contributing to import delays.

In August 2005, the DGA established a system whereby imports of textiles, apparel, footwear and toys for consumption would be processed by certain "specialised" customs ports. The range of products covered by this system was expanded on 24 August 2007 to include such items as tableware and kitchenware, luggage and bags, leather apparel, glassware, imitation jewellery, certain appliances, tools, electrical machinery and equipment, certain automotive parts, bicycles, motorcycles, watches and lamps. In addition, the number of customs ports authorised to process textile and apparel merchandise was reduced from 13 to 11 (reflecting the exclusion of La Plata and Mendoza), while the number of ports authorised to process footwear was cut from eight to seven (reflecting the exclusion of La Plata).

Additionally, Argentine authorities have committed themselves to process merchandise from "high-risk importers" through so-called red channels, which require physical and document inspection. To this end, the DGA's Risk Analysis Laboratory will send "on-line alerts" to the ports with the importer's tax background before the merchandise is entered. In addition, in light of growing concerns regarding the safety of goods produced on the Chinese mainland, on-line alerts will be issued to alert ports about merchandise and brands that may pose a threat to the health or safety of the population, and safety certificates will be more closely scrutinised.

The DGA has established criterion values as a means of combating the under-invoicing of imports. Imports with a declared value lower than the criterion value require payment of a guarantee equivalent to the difference in duties to be paid on the declared value and the criterion value. Moreover, in instances where the declared FOB value of certain products is less than 80% of the criterion value established by the DGA, the advance VAT is assessed at a rate of 21% in the case of goods subject to a 21% VAT rate and 10.5% for goods subject to a 10.5% rate. The list of products subject to criterion values is frequently modified, and applies to imports from a range of suppliers, including Hong Kong and the Chinese mainland. As of mid-August 2007, the list included items falling under HS chapters 16, 36, 38, 39, 40, 42, 44, 48, 52, 54, 55, 58 to 65, 69, 70, 73, 83 to 85, 87, 90, 92 and 94 to 96.

In November 2004, Argentina signed an agreement with China which committed it to granting market economy status to the mainland for purposes of anti-dumping (AD) and countervailing (CV) duty investigations. However, it appears that Argentina has not amended its legislation to treat China as a full market economy country. As of 22 October 2007, Argentina applied several AD measures on imports from the Chinese mainland, including bicycles, microwave ovens, air-conditioning equipment, sunglasses and tyres. As of that date, Argentina did not apply any AD measures on imports from Hong Kong or CV measures on imports from both Hong Kong and the Chinese mainland.

Argentina, Brazil, Paraguay and Uruguay formed the Southern Common Market (Mercosur) customs union in 1991, with Venezuela joining on 4 July 2006. Tariffs on intra-Mercosur trade are to be eliminated gradually in order to stimulate trade among the five countries. On 1 January 1995, Argentina, along with other Mercosur members, implemented the Common External Tariff (CET). The CET is now 0-20% for most products. Venezuela became a member of Mercosur in July 2006, and Argentina has committed itself to granting duty-free treatment to imports from Venezuela by 1 January 2010, with the possibility of extending this deadline with respect to sensitive products until 1 January 2014. Apart from free trade agreements with a range of countries, including Bolivia, Chile, Colombia, Cuba, Ecuador, Mexico and Peru under Mercosur, Argentina also provides certain duty breaks to members of the Latin American Integration Association (ALADI) for goods not covered under the aforementioned agreements. Meanwhile, Mercosur is conducting FTA negotiations with the European Union (EU), India, the Southern African Customs Union (SACU), the Gulf Cooperation Council (GCC), Morocco and Israel.

Regarding product standards and regulations, all goods - domestic or imported - must be marked with the name and description of the product, the country of origin, the quality, purity or blending description, and the net weight on the label. In addition, there are separate labelling requirements for perishable goods, inflammables and other selected products. Since 1998, technical regulations governing safety and mandatory certification have been adopted in Argentina for electrical equipment, toys, footwear, gas appliances and products, construction steel, elevators and personal protective equipment, among others. According to the mandatory safety requirements, most electrical and electronic equipment that fall within the range of 50-1,000 volts AC or 50-1,500 volts DC, including household appliances, audio/video equipment, lighting fixtures and information technology equipment (e.g., printers, scanners, monitors, etc.) must bear the national certification mark, known as the "S" Mark, as well as the mark of the certification organisations that are accredited by the Argentine Accreditation Organisation.

Furthermore, Argentina also has specific labelling requirements for a range of products, regulated by various agencies. For instance, Mercosur has recently issued final technical regulations establishing labelling requirements for textile and apparel products produced in or imported for consumption into a Mercosur member country. These regulations have to be incorporated by member countries into their national legislation by 1 July 2008. Under the new labelling regulations, subject merchandise will have to include the following information in a label, stamp, decal, print or similar means that is permanent, indelible, legible and clearly visible: (i) name or registered brand and tax identification of the domestic producer or importer; (ii) country of origin; (iii) fibre content (fibres accounting for less than 10% of the total may be listed as "other fibre(s)"); (iv) care labelling instructions; and (v) size or dimensions, as applicable. This information will have to be presented in the language of the country of consumption but could also be presented in another language(s).

Free trade zones have been established in Argentina since 2004. However, most of them only carry out storage and service activities. So far, the only special free trade zone is located in Rio Grande, Province of Tierra del Fuego. Against the Free Trade Zone standing, imports of parts and components into Tierra del Fuego Free Trade Zone are free of import duties, while goods produced in the Free Trade Zone can be imported duty-free into the rest of the Argentine territory. By receiving the "Made in Argentina" origin qualification, goods produced in the Tierra del Fuego Free Trade Zone will also be granted a preference margin within Mercosur.

Most recently, the Argentine government has announced the implementation of a prohibition on paints, lacquers and varnishes with a lead content higher than 0.06 percent by weight of the total non-volatile content of the product. The ban will enter into force on 24 August for imports, 18 November for domestic production and on or about 29 June 2010 for the commercialisation of subject merchandise.

Hong Kong's Trade with Argentina^

Argentina is currently Hong Kong's 49^th largest export market. Hong Kong's total exports to Argentina decreased by 37% in the first four months of 2009, after a 1% decrease in 2008. Major exports to Argentina included telecommunications equipment and parts (shared 25% of total); toys, games and sporting goods (10%); watches and clocks (8%); footwear (6%), and travel goods and handbags (5%).

On the other hand, Argentina is Hong Kong's 40^th largest source of imports, with total imports from Argentina increasing by less than 1% in the first four months of 2009, up from a drop of the same magnitude in 2008. Leading import items included meat and edible meat offal (shared 43% of total); leather (37%); meat of bovine animals (7%); fixed vegetable fats and oils (2%); and polymers of Ethylene (2%).