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Argentina forcing carmakers to export agricultural products

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Sphairon Posted: Fri, Nov 4 2011 4:33 PM

Full Story.

What kind of intervention is this? What are the premises behind it? Selling stuff to Argentinians is bad and needs a commensurate amount of exports to be offset?


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Kakugo replied on Sat, Nov 5 2011 8:43 AM

Years ago, when Morocco bought a batch of the F16 fighter planes, part of the agreement was for General Dynamics (now taken over by Lockheed) to buy about ten million dollars worth of palm oil. GD was a defense company, it had no interest in buying or selling palm oil, so they refused to take delivery and opted for paying the penal written in the contract. In the end this penal was paid with spare parts for the aforementioned fighter jets.

Another example were the F4 Phantom fighter-bombers bought by the Royal Navy in the '60s, which had to have Rolls-Royce Spey engines instead of the original (and highly satisfactory) GE J79. On the paper it should have been a win-win situation, mating the superb Phantom airframe to the excellent Spey while keeping R-R workers busy. In reality the resulting aircraft proved to be so troublesome the Navy had to bite the bullet and buy another batch of Phantoms, exactly the same as used by the US Navy, which proved to be trouble free and completely satisfactory.

Defense contracts have all these sorts of crazy "local content" or "export compensation" clauses written in them, which often end up costing the purchasing governments tons of money but, hey, it's not their cash, right? The important thing is "keeping the economy rolling" and "keeping jobs in the country", no matter what the end cost is.

South American governments are notorious for such practices, to the point even Chinese companies have to assemble the end products in, say, Brazil just to be able to sell there. Of course prices will be higher but tariff barriers (there's a commercial war between Brazil and China brewing) impose this choice. I wouldn't be too surprised if this choice by the Argentine government is an attempt at "sticking one" to its giant northern neighbor: Brazil is more or less THE car hub of South America and manufacturers are much more likely to invest money there than in Argentina, Uruguay or Chile. "If they aren't coming here, we'll drag them here".

Together we go unsung... together we go down with our people
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