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The industry looks forward amid the resurgence of services

The reindustrialization of Argentina is a major government raising flags to mark the differences between this stage and what was happening in the 90s. But some analysts portray this as a flimsy shell that hides in the same production system that dominated the currency.

A CIPPEC document provides that between 1996 and 2012, the relative importance of manufacturing in GDP, in real terms, increased from a minimum of 15.4% in 2002 to a high of 16.8% in 2004 (see infographics). Eduardo Levy Yeyati Economist reveals that “Argentina continues the productive structure, as in the 90s, dominated by services and construction.” Thus, between 2003 and 2012, the activities of the primary sector (agriculture, livestock, fisheries, mining and electricity, gas and water) and to a lesser extent, manufacturing, reduced their relative weight.

From FIEL, Abel Viglione says that this is not a new phenomenon. “The share of industry in GDP always ranges between 16 and 18%,” he says. But emphasizes that “one thing is 18% in 1999 and another in 2012, when GDP is much larger absolute and, therefore, the industrial GDP so is”.

In Argentina’s productive structure, 66% are services and the remaining 34% of assets. This is not a local phenomenon, since services gaining ground worldwide. At this point, the economist Diego Coatz, secretary of the Society for International Development (SIDBaires), notes that “it is reductionist take the debate to whether the industry involved 1 or 2% more or less in GDP. With the process of outsourcing of production globally, much of the industrial GDP today is recorded under services. ” With similar logic, Viglione provides that “no one can say that all productive activity that smokes better than those related to services.”

From SIDBaires, his vice president, Fernando Grasso argues that the situation in the manufacturing sector is much better today than in the 90s. “The industry accounts for more than 75% of the tradable sector of the economy, 2 percentage points higher than at the beginning of convertibility and well above the floor of 65% reached in 2002.”

Deputy Claudio Lozano brings a different view on this growth: “What was actually increased the productive pattern inherited from the 90”. The Economist notes that there were no major changes with respect to the previous scheme and the re-industrialization process occurred “without any explicit policy reorientation of the surplus by way of investment.” This implies that investment is low compared to the rate of expansion that had Argentina in recent years. And, for Lozano investment quality is questionable: “5 of 10 dollars are bricks and only 3 out of 10 are reproductive machinery or capital. There is a very high component of speculative investment and a lack of industrial policy. “

The discussion about whether the merits reindustrialization qualified with a pass or a deferral remains open. Grasso believes that “having maintained or slightly increased participation on the total product in a context where the major industrialized economies, particularly in Latin America, the reduced substantially, reflecting the extent of Argentine industrial growth.”

The controversy adds new edges when Coatz puts the focus on industrial employment. He claims that he created more than 450,000 formal jobs with an average salary of $ 1,087 spent in 2002 to $ 6,452 in 2011, which shows that the role of industry in reducing unemployment was decisive. “Otherwise, how do you explain that the 90 had engineers driving taxis and today is obviously limited and technical deficit in its various specialties?” Asks Grasso.

For Lucio Castro, the CIPPEC, the manufacturing sector’s contribution to job creation record was limited. “Between 2003 and 2012, the main sources of employment generation were recorded and construction services, with a rising share of the public sector from 2008 (and especially in 2009), when it weakened the private job”.

One of the peculiarities of the industry is characterized as a sector where the use is more capital intensive than labor, although there are items such as textile, in which the demand for jobs is intense. To Viglione, the contrast between capital intensive and labor intensive is obsolete. “When asked about capital to labor, the more profit you get is the employee, because it has more productivity and wage charges more,” he says.

Are there chances that local industry has a strong expansion from now on? Levy Yeyati is pessimistic. “Today, despite the efforts and funds invested in industrial protection, Argentina would be converging on the declining path common to other commodity producers, in line with the increase in the relative prices of commodities and industry regarding manufacturing and continuous appreciation that elevates the dollar costs of local production, “he concludes.

CIPPEC also warns that, in a context of strong global competition in manufacturing, with low-wage countries like China and its neighbors, “the nature of the labor supply Argentina, higher wages and productivity modest means, questions the possibilities success of a developmental model based industrialization in tariff protection and import substitution. ” And note that the key to increasing development involves “integrating global networks through the development of competitive segments in some specific links”.

Viglione emphasizes industrial policy should be implemented to promote the expansion. “We need stability in the tax rule in the tariff and also avoid the restrictions on imports and exports of goods and supplies, along with a friendly business climate. And if the company is foreign, must also be freedom for the movement of capital and profit transfers and dividends. In the past 50 years, Argentina has shown that many of these rules are broken. “

For Claudio Lozano, the focus of the discussion “should not be the level of GDP expansion, but the composition of growth.”

Source: iEco Clarín

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