Argentina Trade Comes to a Standstill
By CHRIS CZIBORR
Argentina’s economic woes have ground business there to a virtual halt, Orange County companies trading with the South American nation say.
“Over the past four months, our business in Argentina has shrunk to zero,everything with our customers there is on hold,” said Jim Goodwin, chief executive at Anaheim-based electric vehicle maker Taylor-Dunn Corp. “We would do $500,000 to $750,000 a year of business in Buenos Aires.”
Argentina’s troubles aren’t going to hurt a lot of OC companies since it isn’t a large market for the county’s exporters. Based on state export figures, local companies send about $30 million worth of goods to Argentina each year.
Still, that’s enough to make Argentina OC’s third largest Latin American market after Mexico and Brazil. Companies such as Fullerton-based Beckman Coulter Inc. and Irvine-based Allergan Inc. also do business within Argentina.
For Huntington Beach-based Cambro Manufacturing Co., a maker of trays and other food service products, sales in Argentina are at a standstill, according to Ken French, the company’s southern hemisphere sales manager based in neighboring Brazil. The company ships $700,000 to $800,000 in goods to Argentina each year, he said.
“At the moment things are obviously very, very tight,” French said. “As we moved into 2000, the recession (in Argentina) started affecting us. And right now I’ve got money that I can’t get out. Argentina in the past had been one of our best markets in South America.”
Last week, Argentina said it plans to abandon its 10-year policy of keeping the peso on par with the dollar and devalue its currency by 30%. The new policy was tested for the first time Friday after weeks of curbs on bank deposits and currency exchanges. A three-year recession, government overspending and default on Argentina’s $155 billion debt have fueled the country’s crisis.
“People who have imported product into the country are hanging onto their products until the markets determine the new peso exchange rate”, Cambro’s French said. “You don’t want to sell something at 1.50 pesos per dollar when the real rate is going to be around 1.70.”
Argentina’s currency, after an official devaluation to 1.40 pesos per dollar, dropped to about 1.65 to the dollar in early trading Friday.
The extent of Argentina’s paralysis is far reaching, according to French.
“I shipped a container in at the end of last year and our distributor there to this point can’t even clear it out of the port because of the new currency exchange laws,” he said. “They’ve basically shut down any importation of goods until payments are established.”
Cambro makes nearly all of its products in Huntington Beach and exports to more than 100 countries. The company recently landed a Colombia prison contract, French said.
Taylor-Dunn’s Goodwin said Argentina’s troubles have been long in coming. Banks started growing wary of issuing letters of credit last year, he said.
“The peso was starting to drift and the banks grew apprehensive,” Goodwin said. “They knew more than I did.”
A spokesman for a publicly traded Irvine computer products maker who asked that he and his company not be named said the company sold $600,000 worth of goods to Argentina in the 12 months ended March 2001. The official said he was skeptical his company would repeat that in fiscal 2002.
“Our business there is not moving,Argentina is now in a holding pattern,” he said. “We do normally have a good amount of business in Argentina,it used to be very good. But Brazil last year gave us twice as much in sales as Argentina.”
“If someone wants to do business there right now they simply can’t,” the spokesman said. “It’s going to be bad because the 30% to 40% devaluation means the price of goods we sell there increases by that amount.”
Irvine computer security products maker Rainbow Technologies Inc. has exported to Argentina for the past couple of years, with its distributors there growing sales 30% last year, a trend unlikely to be repeated this year, according to spokesman Dan Chmielewski.
“We’ve had a couple of delays in government-related orders there,nothing that’s going to shut anything down,” Chmielewski said. “We’re going to wait until things stabilize before deciding on anything further for Argentina.”
Placentia modem maker ZyXel Inc. also has adopted a wait-and-see stance for its Argentina business.
“Considering the current economy there, I doubt we would be entering into any high volume commitments,” said ZyXel sales consultant Tomas Corsini. “So it’s a matter of waiting for the country to recover.”
ZyXel, a unit of Taiwan’s ZyXEL Communications Co., typically sells a couple hundred modems into the country each year, Corsini said.
Some big companies, such as General Motors Corp. and Clorox Co., warned investors last week about the impact of Argentina’s crisis on their businesses. But officials at OC’s larger companies say their exposure there is minimal.
“We have a very tiny amount of business there so the situation there is not affecting us,” said Steve Shattuck, a spokesman at Lake Forest disk drive maker Western Digital Corp.
Healthcare companies such as diagnostics product maker Beckman Coulter and drug maker Allergan said they see little fallout from Argentina.
“It’s a small market for us,” Allergan spokeswoman Suki Shattuck said. “The peso devaluation certainly will have some impact. But we don’t think it’s going to be a big factor.”
Allergan sells into Argentina and has its Latin American manufacturing center in Brazil.
So far, Argentina’s troubles haven’t spilled over to Brazil, a bigger market for OC companies. The stock market in Mexico,OC’s largest export market,has been rattled by Argentina’s crisis. But so far the country is stable.
Donald Straszheim, who heads up Westwood-based Straszheim Global Advisors and is a former head of the Milken Institute and former chief economist with Merrill Lynch & Co., said there is a risk that Argentina’s woes “could infect the rest of South America.”
Taylor-Dunn’s Goodwin said he shares that concern.
“The situation in Argentina more than likely will hurt the other South American countries we ship to,” he said. “Things have gotten tight in a couple of places down there, including Brazil. Most of South America has gotten real tight.”
