New competitiveness measures proposed for Argentine pome fruit
With an annual revenue of around US$1 billion, Argentina's pome fruit industry employs more than 60,000 people and exports to more than 60 countries, but the sector is at risk. In a recent report,the Argentine Chamber of Integrated Fruit Growers (CAFI) says the industry is reporting lower foreign exchange earnings and faces competitiveness problems. At www.freshfruitportal.com we take a look at the report and the chamber's recommendations.
To read the full report click here (in Spanish).
The CAFI highlights several fronts where the country's pome fruit sector is not just challenged financially but is also at a disadvantage compared to its competitors.
"Costs are increasing more than incomes: while international prices have been rising, with an exchange rate with little variation, the sector has lost profitability with cost rises in the order of 20-25% annually," the report said.
"Our direct competitors improved their competitiveness, fundamentally Chile which adjusted its currency by 12%, is without inflation, does not pay Export Rights, doesn't have import tariffs and has much lower labor costs."
The report also points to demand issues, looking at the effects of high existing Northern Hemisphere stocks and recessionary conditions in Europe and Russia. In Poland, 2011 stocks were up 187% year-on-year, helping drive Europe's stocks up by 27.1%.
It is also worth noting the side effects of this stock in markets outside Europe.
"Brazil, the best market in recent years, runs serious risks of being oversupplied once Chilean and Argentine exports are re-directed from Europe and Russia to this destination, aggravated by the fact that a record apple production is expected in Brazil (1.2 million metric tons)."
The report says there are several risks involved in the current situation for growers, including higher losses and disinvestment acrosss the supply chain, job losses, default, a fall in regional economic activity and a loss of market position internationally.
The CAFI proposals
While the current situation is not promising at least in the short term, the CAFI proposes severals ways that the industry can pull its way out of a potential crisis:
- Increasing export refunds from 5% to 10.
- Reducing Export Retention rates to zero.
- Streamlining the return of refunds.
- Increasing VAT (Value Added Tax) compensation with employer contributions.
- Postponing employer contribution payment by 180 days.
- Support for strengthening competitiveness: direct resources for all production, for every kilogram of exported fruit.
- Domestic consumption promotion campaign.
CAFI says it is necessary to begin these measures before February, as this is the month when expenses are most concentrated and that can determine the outcome of the year.
Related story: Pome fruit production to fall in key Argentine regions