Argentina's polymers imports may not return to pre-pandemic levels until at least 2025 because of the country's harsh political and macroeconomic conditions, including the world's third-highest inflation rate.
As a net importer of polymers, Argentina relies on plastic resins like polyethylene (PE), polypropylene (PP) and polyvinyl chloride (PVC). But domestic importers have been grappling with challenges in obtaining these resins since the last quarter of the previous year. The government's restrictions on import licenses, aimed at retaining US dollars within the country, have led to unintended consequences for polymer importers.
Restrictions on import licenses have further aggravated challenges faced by the plastic resin import sector, which was already suffering from the impact of the Covid-19 pandemic, a trader acting in Argentina told Argus. Imports of plastic resins have significantly declined, with the trader reporting a drop from approximately 20,000t in 2019 to 12,000t in 2022. Although the first quarter of 2023 saw a slight increase, uncertainties persist because of the upcoming presidential elections and the country's polarization, exacerbated by high inflation and increased poverty levels, the trader said.
While importers struggle, domestic producers of plastic resins have taken advantage of the situation by becoming the primary suppliers for the country's plastic production. But this has resulted in higher prices compared to imported materials, hurting small and medium-sized businesses. Among the domestic producers, PVC manufacturers have benefited the most, followed by PP and PE producers, experiencing increased sales and substantial gains in resin volumes.
Argentina's shortage of dollars has brought additional concerns to the situation. To address this, Argentina is exploring an agreement with neighboring Brazil to ease trade using the Argentinian peso and the Brazilian real. In the meantime, Argentina has turned to China as an alternative trading partner.
Argentina also closed an agreement with China providing for the payment of imports from that nation in Chinese yuan as a way of maintaining trade with the Asian country and at the same time protecting Argentine reserves in US dollars, which are currently very low.
The plan aims to increase trade between the countries — including of polymers — by $4bn. Plastic resin traders operating in Argentina expect some positive impact from the agreement, which includes Argentina's commitment to release delayed licenses to import products from China but not from other countries.
Argentina is facing surging inflation and stagnant growth as it approaches general elections in October. In April, inflation reached 8.4pc, bringing the total for the first four months of the year to 32pc and an annualized rate of 108pc through April.
With the third-highest inflation rate globally, the country's central bank raised the benchmark to 97pc in an attempt to curb inflation. The Argentinian peso depreciated by 28pc against the US dollar, and the central bank predicts a further depreciation of 125pc this year and 116pc in 2024.
The country experienced a slowdown in economic expansion, with growth at just above zero in the first two months of this year, and the World Bank forecasts zero growth for the current year. Argentina's debt stands at nearly 80pc of GDP, and the government attributes the crisis to a severe drought, impacting biofuel crops, and the consequences of Russia's war in Ukraine. Polymers traders have said that late 2024 is the earliest they expect any economic recovery.
