Business sources commented to Financial sphere that the loss of Argentine flag ships is deepening because it is not a profitable activity. An Argentine company has to pay Value Added Tax (VAT) for fuel, Gross Income Tax, as well as other property taxes, and also, the cost of local labor is higher than that of Paraguay.
The result of this is that today of every 100 ships that circulate through the Paraná River to Asunción, only 3 or 4 are units that display the blue and white flag. In other words, between 96% and 97% of all the merchandise that circulates through the Argentine river destined for international trade, is made with ships under the flag of another country. LThe majority are from Paraguay and Panama, states that offer more attractive conditions to companies for hiring personnel.
The Center of Patrons and Fluvial Cabotage Officials, the union that brings together hierarchical personnel who work on board ships, warned a few days ago that “a victim of bad policies, the lack of regulation of the Merchant Marine Law and the high tax pressure on Argentine flag vessels, plus the ineffective and high bureaucracy of the state, provincial, municipal, port, customs authorities and security police, the M / W PIRAY GUAZU is sailing towards Paraguay to proceed with the change of flag and then continue to carry out the same commercial traffic that it did with the Argentine flag until today ”. In a note addressed to its members, the union warns about the potential initiation of force measures.
The reality is that for several decades the Argentine cargo navy has been in a crisis that seems to be terminal, if no measures are taken in this regard. The companies demand that a chapter of the Merchant Marine Law approved in 2017 be put into operation, which was vetoed during the government of Mauricio Macri. This chapter contained a series of tax incentives for companies to offset the advantages of foreign companies.
For example, a ship with the Argentine flag pays VAT on fuel, while at the same pump, another foreign ship does not, because the sale of diesel is considered an export that does not pay that tax.
Among local businessmen, they also comment that the difference in pocket salary between a Paraguayan and an Argentine sea captain is not so different. What marks the advantage in favor of the Guarani is the tax burden that the local firm has to bear.
According to estimates by Argentine assembly companies, some US $ 5 billion a year are lost in freight. They also mention that according to an estimate made by the former Minister of Production Débora Giorgi a few years ago, that cost reached US $ 7 billion.
The doubts that arise from the private sector is that if instead of losing that amount of foreign currency per year to pay international freight to transport their own merchandise, the fiscal stimulus to the sector were invested, the loss would perhaps be less.
The coup de grace to the activity was constituted in 1997 by the privatization of the Argentine Marine Lines Company (ELMA), which ended with a tradition of strong state presence in the sector. Argentina needed to generate its own merchant fleet during World War II, because it had been isolated by the submarine battle in Europe. The country was forced to create its own transportation network. During Carlos Menem’s government, this was ended and the ships of the fleet were practically liquidated. The local private sector has not been able to fill this gap due to the very high costs. In some cases, it is cheaper to transport goods by truck than by ship in the national territory.