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Argentinia´s relations with the European Union

Macri´s visit success to EU capitals may be hindered by national business practices

Argentina´s President Mauricio Macri is in Europe this week (France, Brussels, Germany) to express optimism for his country´s relations with the European Union and to spur trade, even with the referendum results that signal the departure of the United Kingdom from the EU.

Macri met with EU Council President Donald Tusk today, but not with the European Commission President, Jean-Claude Juncker.

Macri’s EU tour visit has two main objectives: relaunching Mercosur – EU negotiations and ensure that Argentina is considered again in the International economy after some difficult years under former President Cristina Kirchner. He also hopes to join the OECD as a member.

Macri recently called for increased ties with the Pacific Alliance to revitalise exports. He said:

“We believe in and working toward integration, to dynamize the Mercosur, to converge with the Pacific Alliance, so that process with the European Union progresses, because we believe that the future lies in the creation of new networks and not by raising walls”.

Macri pushed for a deal between the two largest trading blocs in Latin America, proposing a free-trade agreement between the Mercosur and Pacific Alliance regional trading blocs at a summit in Chile.

“We have to boost the Mercosur bloc and take it to the 21st century and to do that we have to integrate with the Pacific Alliance”.

The Argentinian President also defended his economic record and the prospects for the economy in the coming months. Argentines should expect to do better in the second half of the year, Macri said, but admitted the country will not have “all its problems resolved” by that time. “I said the second half of the year was going to go better than the first one, I did not say Argentina was going to have all its problems resolved in the second semester. This is a long way, things cannot happen overnight but by taking small steps every day. And we are making small steps every day,” Macri told the DPA news agency before the beginning of his European tour.

So on paper, all is good and perfect and Argentina is moving on the right path to become a leader in the region, specifically considering the difficulties Brazil is having at the moment. But may be when he will be in Brussels, some European officials will question a specific point where he has not exactly  open a market very relevant for Argentina’s future: The digital market.

The digital market and competition

Indeed, on 29 December 2015, the new administration in Argentina passed a Presidential Decree where the Argentina’s Media Law of 2009 and the Telecommunications Law (2014) were amended. Both of these laws were already considered problematic and protectionist as they were forbidding convergence between different services, with the aim of blocking the development of the Argentinian group Grupo Clarin. Stakeholders in Argentina were hoping, with the arrival of Macri, for important changes to push the sector forward, and most importantly for a new regulatory framework that would allow free and fair competition practices.

Unfortunately, the new Presidential decree had significant provisions intended to undermine the perceived dominance of the Clarin Group (which owns the largest cable operator, as well as print, TV and other media assets), but applied to all ICT and TV operators present in the market. Indeed, this new law –

  • bans Mobile and Fixed Telephone companies from entering theCable Pay-TV Market untilJanuary 1st, 2018 (extendable for 1 additional year);
  • fails to lift the pre-existing ban in the Telecom Law on Mobile and Fixed Telephone companies from entering the Satellite Pay-TV Market; and
  • bans Satellite providers (not Cable) from: (1) providing broadband or any other telecommunication service, (2) providing Video on Demand, and (3) offering their Pay-TV service in bundle with any other telecommunication service;
  • establishes an asymmetric regulatory framework that exemptsCable providers, but notSatellite providers, from complying with burdensome Media Law obligations (e.g., offerings for low-income customers; self-produced channel with local production and content quotas).

While the Decree’s stated purpose is to promote competition and investment, it actually protects Argentine‐owned Cable TV operators from competition by exempting all cable operations (including Clarin) from the application of Media Law. In particular, it discriminates against European operatorTelefonica which is the main competitor of Clarin in the market. It also clearly limits opportunities to invest and compete for all the main (foreign) competitors in the market.

The stated purpose of the Decree to promote competition and investment is laudable, but industry experts suggest that the implementation is flawed. The Decree has a discriminatory effect that restricts competition and investment by some sectors of the industry.  However, experts say that the problems are correctable by extending elements of the Decree to all market participants in an equitable manner.  This would promote private sector investor confidence, and would increase consumer benefits.

From the European Union perspective, officials could put this as a pre-condition before talking of free trade between the regions.

Will President Macri and his government deliver on this? if he does not this would send a concerning signal about the regulatory and investment environment in Argentina, adjusting legislation in a discriminatory manner that discourages foreign investment.


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