Taste of Argentina

By Bai Yunyi in Argentina Source:Global Times Published: 2018/12/18 17:38:39

South American country offers huge trade potential for China

A soybean field is fumigated near Urdinarrain, Entre Rios Province, in Argentina in February Photo: VCG

Argentina made products were wildly popular during the "double-11" shopping festival falling on November 11 this year. About 10,000 servings of imported Argentine veal were sold in just one minute, and 1.52 million tons of Argentine red shrimp were snapped up within an hour.

The sales numbers came amid growing bilateral ties between China and Argentina, as well as China's efforts to diversify its food imports.

Dubbed the "world's granary," Argentina is rich in grain and oilseed crops such as soybeans, corn and wheat, and is regarded as an important alternative source of agricultural products for China.

On January 17, the Argentine government announced on its official website that Argentina had agreed with China's General Administration of Quality Supervision, Inspection and Quarantine on protocols to set sanitary standards for export authorization, allowing Argentine chilled or frozen beef with bones into the Chinese market.

Previously, Argentina only exported frozen boneless beef to China.

From January to July 2018, China doubled its purchases of Argentine beef to 96,500 tons, representing half of the 184,000 tons of beef shipped in the same period from Argentina, worth a total of $1.027 billion, according to a Reuters report.

In early December this year, the two countries also finalized a soy oil import agreement and agreed that China would import 300,000 to 400,000 tons of processed soy oil from Argentina after the harvest starting in August next year.

Hamburg-based Oil World estimated in September that Argentina's soybean shipments to China may reach 1.8 million tons between September 2018 and February 2019, compared to zero a year ago.

Argentina reached a deal with China at the G20 to export cherries earlier in December, and media reports said that the country was also in the process of obtaining sanitary protocols to export honey and pork to China.

Ernesto Fernández Taboada, executive director of the Argentine-China Chamber of Production, Industry and Commerce in Buenos Aires, told the Global Times in a recent interview that the quality of Argentine cherries is good, and many of them are organic.

Since the harvest season for Argentine cherries is during China's winter, the fruit can satisfy the growing appetite of the Chinese middle class for year-round produce, according to Taboada.

 "Currently, US cherries are on the tariff list imposed by China, which also provides an opportunity for Argentine cherries," Taboada said. "Argentine cherries have high yields, but due to the relative saturation of European and American markets, the access to the Chinese market is of great significance to us. For China's growing middle class, Argentine cherries will also be a favorable complement to Chilean cherries."

More cooperation opportunities

The South American country's ambitions in the Chinese market encompass more than just grains and other bulk goods.

During the first ever China International Import Expo (CIIE) held in Shanghai in November, Argentina showcased its wines, beef, bottled water, dairy items and olive oil, eyeing the vast consumption potential of the growing Chinese market.

In addition to attending the expo, Argentina is taking other steps to boost exports, such as setting up a logistical platform in Shanghai to import and warehouse products so they can be distributed more quickly to buyers, according to a report from Xinhua News Agency.

Meanwhile, China has vast potential to explore exports to Argentina. For example, with the expansion of agricultural industrialization in the South American country, demand for Chinese mechanical support is rising. Many farming machinery manufacturers in Argentina have shown increased interest in importing Computer Numerical Control machine tools from China.

In the future, the two emerging major economies could cooperate by forming joint ventures, and export agricultural equipment to other parts of the world, which will be of great help to the internationalization of companies from both sides.

Apart from trade exchange, some Chinese companies have already adopted a merger and acquisition method for agricultural investment in Argentina.

Zou Yesheng, deputy manager of the Argentine branch of the China Oil & Foodstuffs Corporation (COFCO), told the Global Times that COFCO has acquired some equity in international agricultural companies including Noble Agriculture and Nidela in Argentina in recent years.

Zou said that in the field of grain and oilseed crops, Chinese companies could consider carrying out contract farming in the country in the future, meaning farmers would grow crops based on buyer demand, including specific demands on the quantity, quality and kinds of agricultural goods.

This highly commercial approach is a good way to improve efficiency and modernization in agricultural cooperation, both for China, with its enormous food needs, and the South America country, which has huge agricultural development capacity.

Investment risks

However, when doing business in Argentina, some risks need to be considered.

First is currency instability. The value of the Argentine peso has been fluctuating. It has depreciated by more than 100 percent against the US dollar this year, and even suffered a 15-percent plunge in a single day.

This is undoubtedly a huge uncertainty for Chinese companies operating in Argentina.

In terms of legal risks, Argentina's judicial system is relatively complete, and structural risks are controllable. However, the Argentine legal system is very complex, and it is necessary for law firms familiar with local operations to check legal documents to avoid potential legal loopholes.

Argentine unions pose another risk that is often overlooked. Argentine trade unions are strong and often involved in political struggles, and employee strikes are very common. Therefore, companies might suffer a possible increase in labor costs.

The unions also sometimes require reductions of foreign employees.

"To do business in Argentina, you have to learn to negotiate with Argentine trade unions," Taboada told the Global Times.

"We strongly recommend that every company that wants to do business with Argentina should send an investigation team before investing in the country, meet with local regulators, chambers of commerce and other institutions, and have an Argentine partner to facilitate communication with representatives of various interests," Taboada said.

blog comments powered by Disqus