Southeast Asia is now central to Argentina’s foreign policy. Interest in Southeast Asia came about when Argentina’s exports to Indonesia and Vietnam grew in size. This was stated by Dr. Maria Florencia Rubiolo, guest speaker in the Institute’s Mabini Dialogue held on 25 April 2017 at the Ambassador Benedicto Room of the Carlos P. Romulo Library.
Dr. Rubiolo, a researcher at the National Scientific and Technical Research Council in Argentina, said that there is a growing concern over Argentina’s current economic model. As a consequence, Argentina aims to diversify its exports, increase trade with other low-income and middle-income economies, and integrate its market to regional and international value chains.
Argentina is a main exporter of raw materials and this has generated dependency on a few products and on big partners. The same goes for South America with most of its trade focused on markets such as China, the United States, and Germany. Argentina’s exports are still very much concentrated on low value-added agricultural products, minerals, especially gold, and hydrocarbons such as crude oil. Argentina’s industrial manufactures such as vehicles and automotive parts are mainly directed to other markets in South America. Likewise, other economies in South America intend to diversify their export baskets particularly on industrial manufactures. For instance, South America’s exports to China consist mostly of commodities such as soybean, crude oil, copper, and iron; while its imports from China are primarily manufactured goods.
South America aspires to better articulate its regional integration schemes through sub-regional blocs such as Mercosur (Mercado Comun del Sur), an economic and political bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Venezuela, and Pacific Alliance, a trade bloc with Chile, Colombia, Mexico, and Peru as members. However, Dr. Rubiolo argued that it will be difficult for South America to integrate with international value chains since local industries lack competitiveness. Dr. Rubiolo also said that entering into free trade agreements (FTAs) has met strong opposition from local industries in Argentina as they stand to lose from intense competition with foreign entrants.
Trade expansion proves difficult for Argentina as it faces challenges in terms of transport, logistics, and protectionism, to name a few. The Pacific Alliance fosters an open regionalism integration process, which allows its members to independently sign FTAs with other countries. Chile, for example, has signed 22 FTAs so far. Mercosur, on the other hand, only allows members to sign FTAs as a bloc. Thus, it failed to sign an FTA with the People’s Republic of China because Paraguay recognizes Taiwan as the sole and legitimate government of China.
Southeast Asia now receives about 70 percent of Argentina’s total oil residues export as well as about 11 percent of its corn export. Trade with Southeast Asia has also served to offset Argentina’s enormous trade deficit with China, which now stands at negative USD 6 billion. In 2015, Argentina’s total trade surplus with all Southeast Asian economies, except Thailand, was worth USD 2.5 billion.
To address the challenge of diversifying markets and products, Dr. Rubiolo proposed that South America expand its knowledge of Southeast Asia to overcome cultural differences. She added that maintaining constant links on the political, diplomatic, and academic levels will improve bilateral and inter-regional links. Argentina, for its part, is taking action to strengthen its relationship with Asia. Its Foreign Ministry relaunched the National Committee for Asia and the Pacific (CONAPAC) in November 2016 in recognition of the region’s strategic importance to Argentina.