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Protectionism remains high
Vietnam's Deputy Minister of Industry and Trade, Do Thang Hai, has acknowledged that while exports to South America displayed promise last year, the absolute value of trade with the region is still limited and requires greater focus and attention.
Analysis conducted by Vietnamese trade representatives in South America revealed that the region offers ample opportunities for collaboration rather than direct competition, owing to the differing production priorities and strengths of Vietnam and the countries in the region. Furthermore, it is a market that does not rigidly adhere to commodity standards, with consumer preferences and tastes varying widely. Key Vietnamese exports to South America encompass mobile phones and components, computers, electronics, textiles, leather, and shoes.
However, companies looking to increase their exports to South America are faced with several obstacles. For example, Head of Vietnam Trade Office in Argentina (concurrently Uruguay, Paraguay) Ngo Manh Khoi pointed to that country's protectionism as among the most stringent globally, imposing multiple trade barriers, including tariffs and non-tariffs that hamper Vietnamese exports. Furthermore, Argentina's 2022 inflation rate of 94.8 percent has significantly impacted local purchasing power and consumption. The scarcity of foreign currency has led Argentine importers to be more cautious in signing new contracts, also affecting exports from Vietnam.
Similarly, in Brazil, the government is reportedly contemplating implementing trade defense measures against products that adversely impact the domestic market, according to Ngo Xuan Ty, Head of Vietnam Trade Office in Brazil (concurrently Bolovia, Guyana and Suriname). Long distances, linguistic barriers, high shipping fees and import duties due to the absence of trade agreements between Vietnam and the region all make exporting to South America a challenging undertaking. Vietnamese textile and leather shoe imports into Brazil, for example, are subject to a 35 percent tariff.
Trade agreements needed
The Vietnamese Trade Representatives in Argentina and Brazil have suggested that the Government start negotiations for trade agreements with the Southern Common Market (MERCOSUR) in order to expand trade opportunities with these two countries and provide Vietnamese goods access to neighboring markets in the region.
Vietnamese enterprises are being urged to take part in various trade promotion activities, such as exhibitions and trade fairs, to promote their products directly in export target countries. Additionally, attending online and live seminars can supplement their knowledge of the market and trade policies in the region. During contract negotiations, it is important to have a clear understanding of their partners and payment terms. Vietnamese products, goods, and the country itself can be promoted on local media channels, including television and commercial centers, during economic, cultural, trade, and investment events. Collaboration with associations, state federations, and cities can also help to promote their products.
Deputy Minister of Industry and Trade Do Thang Hai agrees with the proposal and highlights two main factors to increase exports to the South American market. Overcoming language barriers and geographical distances is the first challenge, while the second is finding a suitable response to support Vietnamese goods in this market amid growing trade defense measures. To create the best conditions and a competitive advantage for Vietnamese export enterprises, the Ministry of Industry and Trade will collaborate with relevant ministries and sectors to research, review negotiations and conclude free trade agreements and trade deals with South American countries.
| In the first 10 months of 2022, Vietnam exported some US$10.2 billion worth of products to Latin America, while importing US$8.6 billion worth of products from the region, an increase of 10.5 percent and 17.3 percent year-on-year, respectively. |
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