ARGENTINA’S POLICY OF ‘BUY LOCAL’

         Argentina is branded as the country with the most protectionist measures and this comes with its disadvantaged and advantages. Argentina is a country when you will find no more “made in China” goods or cheap imported goods. The supermarkets are full of local produce with a ban on gourmet food products. The government supports a policy of ‘buy local’ committing itself to a closed economy.

         There are many advantages for the domestic producer due to the restrictions on import. One of the major reasons for Argentina to propose this policy is that it will help the domestic market grow. Restrictions of imports force the consumers to buy domestic goods and in turn increase the profitability of domestic producers. It forces the domestic producers to become more efficient helping in the development of the country overall. The competition provided by the international market will be a great incentive for the domestic producers to be more efficient and innovative. This is very important if Argentina wants to achieve a better economy in the long term. Import substitution also helps improve the balance of payments as a restriction means that there are more exports than imports. This would result in the demand for Argentina’s currency, improving the currency of the country. The aim of the country is not to protect itself by these measures, but to increase domestic consumption so that the government revenue through taxes increases and it is able to function more efficiently and able to pay off debts.

         There are a lot of disadvantages that come with this decision for Argentina. The consumers are at a loss as Argentina has imposed a 15% tax on the use of credit cards in foreign countries making it very difficult for its citizens to import products, forcing them to buy domestic products only. The middle and upper class of Argentina suffer the most from this policy of prohibition of foreign exchange. Also, many companies that require technology machinery that can only be imported have started shutting down due to lack of availability. The most harmful effect of this policy is the price increase all over Argentina due to lack of credit sources. Argentina’s annual inflation rate exceeds 25%. This type of policy also results in protection of many inefficient firms. The companies know that they are going to be protected under that policy so it serves as a lack of incentive to work. These policies promote capital intensive work but what the country fails to realize is that small companies have to stick to labor intensive work due to lack of credit sources. Although these policies will help Argentina boost its economy in the short run, in the long run it will stop growing, as the domestic producers will be inefficient compared to the international producers. And high government intervention, there are always chances of corruption, with companies bribing the government for their own benefit.

            In conclusion, Argentina should follow this policy only for a short term to promote the domestic industry and increase exports to gain more revenue. In the long run it can be harmful due to misallocation of resources and the consumers will not be happy due to lack of choice. This policy will prove to be helpful in boosting Argentina’s economy, but only in the short term.