For Argentine export companies that sell to Russia, the impact of the war between that country and Ukraine was direct. They are 400 companies that export mostly food, to which the effects of economic sanctions imposed by Western countries forced them to renegotiate contracts, accumulate outstanding payments and face cost overruns due to logistics problems.
“The daily problems that we had been having now deepened with the conflict, and new ones appeared, much more worrying,” explained Matías García Tuñón, coordinator of the Argentine-Russian Chamber of Commerce and Industry in dialogue with PageI12.
There are 400 companies on the list, although 200 with significant and sustained exports over time. The first 20 companies concentrate 50 percent of exports to Russia. Among the large companies that have traded for years with Russia, the following stand out: Aceitera General Deheza, Mastellone, Molinos, Productores Argentinos Integrados, Offtal, Frigorífico Gorina, Migror, Patagonian Fruits, Jbs Argentina, Cosur, Sideraca, Madeka, Trevisur, Oleaginosa Moreno and Olega, among others.
The main exported products are lard, peanuts, pears, bovine livers, remains of oilseeds, cheeses, fish and lemons. Although many of them are exported by the large companies mentioned, they also have weight in local economies that they have less financial back to face business difficulties arising from the conflict.
In 2021, exports to Russia were 680 million dollars and imports 650 million. In 2020, sales had reached 612 million dollars while imports were substantially lower. They barely reached 166 million dollars. Argentine purchases increased mainly due to the purchase of vaccines, fertilizers and price increases in general.
Main difficulties
The main points of conflict indicated by the Argentine-Russian Chamber of Commerce and Industry are:
– Renegotiation of contracts due to devaluation of the ruble: the devaluation of more than 50 percent of the Russian currency against the dollar changed the terms and conditions of the contracts signed between Argentine companies and Russian importers. In general, Russian importers pay 30 percent in advance for the purchase of merchandise and the rest once the shipping documentation is presented. Many of the contracts already signed were in one of these stages at the start of the war and the consequent devaluation of the ruble, which is why Russia is asking Argentine exporters to renegotiate the contracts so as not to absorb all the losses.
– Blocked Payments: However, the real problem is in the impossibility of charging for sales already made due to the SWIFT blockade of the main Russian banks. Having disconnected the main actors of the financial system to make international payments, Russian importers have no possibility to make transfers to other countries to pay their contract obligations.
– Cost increases due to logistical problems: The main international shipping companies diverted goods that were destined for Russian ports to other ports. This implies the payment of additional costs for relocation to other ports and for refrigeration of products waiting for them to arrive at a Russian port. The blockade of the air space also generated expenses in this sense, since the cancellation of flights of products that require special treatments, such as the cold of vaccines or some perishable foods, force to pay the extra cost of preserving them until bilateral trade is released. .
Added to these problems is a factor that trade between Russia and Argentina had been facing since 2021, when Russia decided eliminate discounts of up to 25 percent on import duties that the Russians paid for Argentine products. Last year Russia unilaterally decided to eliminate preferences for 72 developing countries, including Argentina and Brazil.
Advice
With the diagnosis made, the Chamber issued a statement with precautions to be taken by the Argentine private sector commercially related directly or indirectly with Russia:
- Avoid sending cargo by air / sea until there is a clear definition and positioning of the transport companies.
- That merchandise in transit to Russia, contact your logistics operator as soon as possible for relocation.
- Given the difficulty of charging for exports due to the disconnection of SWIFT, not all banks are affected, so it is important to identify the Russian bank that is involved.
- Due to the Russian blockade of airspace, major European airlines do not operate flights to Moscow and St. Petersburg. There are alternatives to move via connection with Air Serbia (Europe), Qatar Airways, Turkish, Emirates (Brazil).