Report Summary

A long dispute between farmers and the government over export taxes led to considerable disruption of transport systems across the country through most of Q208 and part of Q308. In March, the government of President Cristina Fernández imposed new, higher taxes on farm exports, setting off four months of farmers’ protests, including the blocking of roads, a boycott of meat sales, and a self-imposed ban on exports. Under a sliding scale system linked to the value of shipments, the export tax on soya beans was raised to 45% versus 35% previously. The government said the extra revenue would be used to fund health, housing, and road projects. Farmers reacted angrily and food deliveries to urban centres were sporadically interrupted as a result of the conflict. Truck drivers led their own two-week stoppage, as a protest against the failure of the farmers and the government to settle their differences. Fernández used a confrontational style during her disagreement with the farmers, accusing them of being ‘coup-mongers’ and of seeking to overthrow her democratically elected government. Despite this, public support eventually began to swing against her. Her approval rating dropped from 56% in December 2007 to only 20% in mid-2008. In June, in what was intended as a conciliatory move, she sent the tax measures to Congress for approval. The strategy backfired however, with the Senate ending up deadlocked on the measure, with a decision only occurring when her own Vice-President, Julio Cobos, used his tie-breaking vote to reject the bill, saying he was voting in favour of ‘political and social consensus.’ Having lost popularity, the administration now faces a series of economic and political challenges, not least finding a way through an emerging fiscal crisis that is likely to force a reduction in public spending, especially in areas such as transport infrastructure. Initial estimates suggested that as a result of the dispute Argentina’s 2008/09 season wheat exports were likely to be 1mn tonnes lower than the previous season. A report by German commodity analyst FO Licht in early August said, ‘the government’s policy on grain and oilseed exports, including the temporary closure of export registries, has certainly prevented the country from quickly becoming an even bigger exporter on the world market and harmed its position as a reliable supplier.’ As a result of these problems we have trimmed our 2008 forecasts for freight carried, with growth now expected at a lower figure of 5.4%. For the 2008-2012 period, our core forecast is for average annual freight carried growth of 4.1%.

Various factors support the core prediction. Across our 2008-2012 forecast period, we now expect average annual GDP growth of 3.9%, significantly lower than the 8.8% registered in the preceding fiveyear period. The government of President Cristina Fernández de Kirchner will find it more difficult to keep the growth rates up in a less supportive international economic climate, and the transport sector will remain constrained by a somewhat patchy infrastructure.

The outlook for the overall freight industry is that it will keep pace with, rather than lead the general rate of economic expansion in the country. Road haulage will continue to be the dominant freight transport mode. Growth will be somewhat constrained by capacity limits, with investment needed in both the highways network and truck fleets. Nevertheless, over the forecast period annual average growth in road freight carried will be 4.1%, down from the preceding five years, when growth was 10.7% a year. BMI now forecasts 4.7% annual growth in rail freight over the next five years, with new investments helping to lift capacity. We are forecasting maritime traffic to grow by an annual average of 3.7%, with strike action in 2008 weighing down the average across the 2008-2012 period. We see airfreight registering satisfactory, but not spectacular, growth rates – partly because much of Argentina’s international trade remains in the relatively higher bulk/low value pattern and is therefore not particularly suited for transport by air. While we take LAN’s entry to the Argentine market as a positive sign, the recent re-nationalisation of Aerolineas Argentinas may herald a period of uncertainty. We are now forecasting average annual airfreight growth of 5.1% during the forecast period.

We have awarded Argentina a freight transport rating of 61.9 (out of a theoretical maximum of 100.0), which places at the upper end of the range of key Latin American markets that BMI monitors. The positives include the country’s long-term economic and political risk and infrastructure growth.

The total value of transport and communications GDP will rise to US$41.1bn in nominal terms by 2012, representing 9.8% of Argentina’s GDP. The transport and communications sector employed around 660,000 people, or 7.1% of the labour force, in 2007. We see the figure rising to 693,000 by 2012, although as a proportion of the labour force it will remain unchanged at 7.1%.