01 February 2007

Curious Argentine exports

Argentina is doing extremely well in the field of international trade since the end of the fixed peso-dollar exchange era (we might as well call it "Post-Convertibility Era", or PCE, as opposed to "Convertibility Era", or CE). This is due to several factors, first of all to the high exchange rate, with an extremely devalued peso that the monetary authority (the Central Bank) struggles to keep that way (as I explained in an earlier post). The second factor is the ever-increasing demand of commodities from the monstruous Chinese economy, whose GDP is growing at an annual rate of 10% (that means about 7 years to double its size).* China demands precisely one of the things we're best prepared to produce in large amounts: soybean. Other developing countries are doing well and buying our stuff, again, especially soybean (one quarter of our foreign trade by value is made up of that!), so that's the second reason.

The third reason is that Argentine producers and exporters have made an effort to upgrade their facilities and processes, to meet international regulations, and in general to increase their quality. Of course, they're doing it now because it pays to do so, unlike before. Also it's not like quality is less important than price — it's just that, without a good price, nobody will buy your products no matter how well made.

The above is not surprising. What I found interesting is that Argentina is in fact exporting other stuff. We all know about the wine, made possible by the special climate of Mendoza. The small cities in the fertile plains of southern-central Santa Fe (places like Armstrong and Las Parejas) have succeeded in finding a foreign market for agricultural machines. When someone lives in a sea of cereal crops, you tend to pay attention to how they take advantage of that. The north-eastern provinces (especially Misiones), of course, export yerba mate not only to places where Argentinians (and Uruguayans, Paraguayans and Brazilians) may abound, but to the Far East. I heard of a small shop in Buenos Aires Province that exports frozen medialunas (not croissants, but Argentine-style medialunas) to the United States.

The weirdest things are the ones not paid for in foreign currency, the ones that are not commodities or manufactured goods, but services and ideas. Argentina was the initiator of the Cascos Blancos ("White Helmets"), a humanitarian force that works with the UN. Our country has always exported and promoted initiatives about human rights, peacekeeping, and international conflict resolution... Ironically it seems we exported so much of it that we left none of that for ourselves, but that's another matter. Recently I learned that the government of Argentina is about to send economic experts to Ecuador, to help that poor country refinance its external debt, using the experience gained by Argentina. (I refer to Ecuador as "poor country" not condescendingly but with sympathetic pity — they went through problems similar to ours, and their president was a Carlos Menem clone who actually got his way.) The idea is that Ecuador can be empowered to reject part of its debt as usurary and unpayable, like we did. With a new president that is not a Harvard-trained puppet, things may be better for them.

And there's no need to tell about Argentina's copious exports of young brains, which end up often discovering or inventing really interesting stuff, turning into honoured scientists, and even getting Nobel Prizes. Ah well...

* In case you want to know how I calculated this: GDP growth accumulates over the growth of each year, much in the way your savings grow if you add the interest you get from them to the main account. This growth is expressed by the mathematical formula of compound interest: r = (1 + i)^n, where r is the number you have to multiply the initial amount by, i is the interest rate (expressed as e.g. 0.03 = 3%), and n is the number of periods you count (if the period is in years, the rate should be an annual rate, of course). We want to find n, the number of years for a given amount to grow by a certain factor. Since it's a power exponent, we have to use logarithms and apply one of its common properties:

log(r) = log((1 + i)^n)
log(r) = n * log(1 + i)
n = log(r) / log(1 + i)

Now, since we want to find out the time it takes for the amount to double (r = 2) under a rate of 10% (i = 0.1), we can get this immediately (using a calculator for the logarithms):

n = log(2) / log(1.1) = 7.27

1 comment:

  1. Pablo I enjoyed reading your blogs. I have been living in Rosario for two years and now can have a better understanding of a few things. Please do me a favor, address the air pollution in the city and the stench that comes from the paper mill up stream. Today the 9th of Feb there is a toxic smell in the city...don't people care that they are being poisened?


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