By on November 4, 2011

With a 35% import tax on new cars, Argentina is already a touch market for foreign brands seeking to bring cars into the country. But the Argentinean government has just made it  little bit harder by demanding that importers export an equal amount of Argentina-made goods for every car imported. As a result, Bloomberg reports that Porsche’s importer is exporting Malbec wines and olives, Mitsubishi’s importer is getting into the peanut export game, and Subaru’s representative is shipping chicken feed to Chile. BMW, which has had recent difficulties importing into Argentina, is focusing on its core business, exporting auto parts and upholstery… and a little processed rice to make up the difference. But why are these major manufacturers getting into all kinds of strange side businesses just because Argentina wants to improve its trade balance and foreign currency reserves? Simple: Argentina is South America’s second-largest economy, and it’s been growing at over 5% per year since 2007 (i.e. when other markets were shrinking). So if the government wants imports balanced with exports, well, Porsche’s importer is just going to have to get into the wine business, isn’t he?

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32 Comments on “Argentina: Want To Sell Porsches? Export Our Wine And Olives...”

  • avatar

    This seems inefficient to ask car companies to sell wine and farm products. Can’t the Argentinian companies sell their own products themselves?

  • avatar

    This has been a pretty big deal here, BMW had to stop imports for 8 months and they had hundreds of cars waiting at customs. A few dealers even had to close their doors, although most of them just resorted to selling used cars.

    Audi made huge inroads in the luxury market during that time, but it has yet to be seen how that will change now that BMW has finally gotten a deal inked with the government.

    It’s a smart move by the government to help balance the trade deficit. For the most part though, GM (Chevrolet), VW, Fiat, Renault, Peugeot and Mercedes Vans all have plants here so it’s easier for them to balance their imports without having to set up separate businesses.

    There isn’t a national car brand, although there is a project to build a small hybrid crossover and sell it for around $10.000

  • avatar

    Throwback to the olden days. Way, way back, Volkswagen had huge haciendas, and humongous herds of beef for the same reason. Back when, they could not get the money out, but getting beef out was no problem …

  • avatar

    Argentinian Malbec is quite nice and very drinkable, even at the cheap end of the spectrum.

  • avatar
    dvp cars

    ……importing Porsches and exporting wines…….how do I go about getting a job in that warehouse……I have a vast store of experience in both fields, but am still willing to start out sweeping floors, especially if a demo is part of the benefits program.

  • avatar

    Coincidentally one of the family members of VW’s (and Porsche’s, SEAT’s, Skoda’s etc) importer to the Netherlands (the Pon family) has a vineyard and sells wine somewhere in California.

    They’re one of the richest Dutch families by the way and there’s a pretty cool story about how Ye Olde Pon started up the business right after WWII. Apparently he went into Germany right after the war (that precious little window of oppertunity between the fall of the old rulers and the establishment of the new ones) dressed as an english officer and somehow used that to his advantage to get a screaming deal (steal?) on 12 new KDF (kraft durch freude) wagens (otherwise known as Beetles) and a train ride for these cars to the Netherlands.

    Apparently the anti-German sentiments didn’t stop him from moving the metal here. Then again I heard once Beetles were sold in Israel under the pretense that they were build in Belgium so who knows…

    Bottom line, if there’s money to be made people and/or businesses are often willing to jump through some hoops to get a piece of the action (which is fine IMO as long as it doesn’t go ‘too far’).

  • avatar

    Interesting coincidence. I just put up a story on Peronist Argentina’s attempts to create a home-grown car and aviation industry for essentially the same reasons. Wild stuff!

    • 0 avatar

      There’s still some properly interesting cars being built in Argentina- the Pur Sang (‘thoroughbred’, as Ettiore Buggati described his cars) firm handbuilds true replicas of the classic Bugattis. Very reasonable prices- only in the $300,000 US range for a used one.

  • avatar
    dvp cars

    …….with all the endless hand-wringing over a potential Greek government bankrupcy, it’s worth noting that Argentina defaulted on it’s international debts about 10 years ago, but is doing relatively well today. This import/export dance sounds like a large scale barter system designed to thwart the liens and garnishees that disgruntled bodholders are still trying to collect on…….if so, it looks like it’s working quite nicely.

    • 0 avatar
      Robert Schwartz

      Argentina paid a price for its default. They had about 5 years of very severe recession. It is not something you want to go through.

      Did you know that the Argentine government confiscated all private pension plan assets last year?

      • 0 avatar

        I’m not sure this is correct. Argentina – under IMF rules privatized a lot of public programs and when foreign capitol fled due to an international recession they were bankrupt.

        The IMFs neocon response was that they should further cut social programs even though poverty was rising and inflation was rampant.

        It was because of this that Argentina defaulted on the loan. They invested in health care, education and other social programs along with progressive taxes. Lo and behold the economy turned around and has been growing ever since.

        As per usual nothing was learned from this. And as we watch the US descend to developing nation status you just wonder.

      • 0 avatar
        dvp cars

        Argentina was, and Greece is, a doomed economic state. Greece, by virtue of it’s fortunate EU status is being propped up by (somewhat) stronger neighbors. Isolated Argentina, on the other hand, fought, and lost, it’s own battles, and, as you indicate, is still paying the price……I’ve been there a couple of times, and love the place and the people……if a complicated bartering scheme helps them dig their way out of financial disgrace, good luck to them.
        Besides, any country that gave us 5 time World Champion Juan Fangio, Carlos Reutemann, Diego Maradona, Viggo Mortensen, AND Che Guevara, needs a break………so keep buying that Malbec.

      • 0 avatar

        Actually, this is a tremendously inefficient barter system because it puts people into the position of having to buy and sell things they have no clue about.

        A scheme fairly close to this, where exporters would receive salable licenses to import things to a country equal to the value of their exports might have some chance of working.

      • 0 avatar

        Buying the Malbec is a sacrifice I’m willing to make! :)

    • 0 avatar

      Argentina *was* the world’s 5th largest economy in the mid-20th century, having prospered while the rest of the world was at war. Then in the post-war era they became hyper-protectionist, slapped huge duties on imports, pushed a “Buy Argentinian” agenda, and… the world stopped buying their goods. The unintended consequence was economic collapse.

      There are lessons to be learned for those who pay attention.

      • 0 avatar

        Same thing happened to Sri Lanka. In the 60s it was richer than Korea. But they also chose the protectionist route while the latter didn’t. And we all know global Korean brands now that’s kicking the traditional global giants’ ass. Closed systems will always experience entropy.

        I find it pathetically funny when USA received the most FDIs of any nation just several years ago and no one bat an eyelash. But when their pots and pans manufacturing was threatened they all raised hell.

      • 0 avatar

        Argentina is a case study in economic illiteracy. They have a competitive agricultural sector thanks to great land, great farmers, and climate. I think their Malbecs are terrific. But most other parts of their economy are uncompetitive unless propped up by rent seeking government policies.

        For those of you who “care” about progressive Argentina, feel free to invest 1/2 your 401K in that country’s debt and businesses. But if they stiff you in 5 or 10 years, please don’t bleat to taxpayers.

      • 0 avatar

        No country ever got rich by being a banana republic. You have to be highly industrialized. Like Japan or Germany.

    • 0 avatar

      This import/export dance sounds like a large scale barter system designed to thwart the liens and garnishees that disgruntled bondholders

      I don’t follow this at all.

      The last Argentine crisis was caused when the country pegged the peso to the US dollar. This artificially inflated the value of the peso, giving excess buying power to domestic users of the peso. The strong currency created an economic bubble fed by imports (since imports were a relative bargain), while simultaneously constraining exports (because exports were too expensive to foreign buyers due to the excessive exchange rate). When this artificial currency value no longer became sustainable, the currency was devalued and debt default became inevitable.

      It sounds as if Argentina now wants to maintain a trade balance, rather than a deficit. That’s actually a good idea, especially given how badly the country has fared when it maintained trade deficits. It’s debatable that this sort of direct quid pro quo is the best way to achieve that, but the goal in of itself is worthwhile (and completely capitalistic, to those who understand what capitalism is.)

  • avatar

    I wonder how this squares up with WTO rules?

    • 0 avatar
      Augie the Argie

      The peronists know no rules and this government will not accept to be bound by them. The government is making doing business farsical at best and confronting everyday life a gruesome task. Friends, mate, the country’s ideosincracy and land bounty make up for all of this though (if the dough is still enough…)

  • avatar

    5% growth is great, if it’s coming from actual productivity gains. However, the Argentinian government has managed to cause inflation at barely sub Mugabean levels- they admit to 10%, while suing independent economists that point to the reality of levels at least two and a half times that.

    This in a country that was one of the ten richest per capita in the early 20th century, even better off than pre-Castro Cuba.

  • avatar

    Talk about being slow, this is old news. This is the kind of surreal rules that are common in Argentina. The idea is to restrict the amount of import cars, only that instead of using import quotas, they made up this. One thing that must be pointed out is that a lot of these companies importing cars in Argentina are just huge conglomerates dealing in all kinds of stuff. Porsche’s importer in Argentina (not related to Volkswagen) was already making olive oil and wines for years, they even made a special edition wine called Cayenne, which was sold with the Porsche Cayenne.

    The people at the government are hoping someone will eventually set up a factory in Argentina, but that is very unlikely, except maybe for some of the desperate Chinese companies.

  • avatar

    What’s a touch market?

  • avatar

    “We were buying BMWs from the Germans and selling them tomatoes.” –Greek author

  • avatar
    John Horner

    Argentina is being smart. No economy can be healthy in the long term if it imports more than it exports.

    The US should be so smart visa-vis trade policy.

    • 0 avatar

      No, they’re not. What if the exporters can’t sell their stuff? Are they willing to dump it on the market for a lower price? What other products can they sell to compensate then? You cannot force capitalism.

  • avatar

    Well, this makes no worse sense than Toshiba, Hitachi and the gang getting sugar beat import quotas from MITI 40 years ago to offset their losses abroad as they dumped televisions onto the North American market.
    Look at how it worked out for them? (Hint: whatever happened to Zenith, Admiral, RCA and the gang?)

    To our American cousins, who are used to running a current account deficit, your northern cousins may be soon joining you at the bread line. We’re running 9 consecutive quarters of current account deficit, mostly thanks to increased imports of finished goods from Korea and China.
    Argentina is in good company. Canada does not have enough lumber and fish to sell to Korea to offset Canadian’s recent obsession with Kia and Hyundai.
    This could be an interesting betting pool. Who go down first, after Greece?

    • 0 avatar

      So instead of concentrating on selling to someone with the cash and purchasing power (i.e. China), you’d rather sell to a dying neighbor? No wonder Australia got you beat. lolz

  • avatar

    Whether you agree with it or not, you can understand the plight of the Argentines. Plus, there are some great opportunities in Argentina right now, anything that is domestically grown there, or anything that requires skilled labor/value-add, etc.

    In regards to shipping/exporting, etc – these guys can help –

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