Unlikely to see all or part of the Rs 25 lakh owed him by an Argentine company, Chokhani rues the lack of cover for exports to Latin America Kishore Chokhani, CEO, Euroasia Trans Continental

Adiós arrabal porteño
Yo fui tu esclavo y tu dueño
Y te doy mi último adiós.

(Good-bye suburb of Buenos Aires
I was your slave and your master
And I bid you my final farewell)
From Adios Arrabal, an Argentine tango

That could well be the lament of Indian exporters. It certainly is for Manmohan Mahajan, a partner in the Moradabad-based Paramount Exports. Five years ago, he was ecstatic as he shipped brass items and silverware to a land half a world away and raked in $50,000 (Rs 24 lakh). The good times continued to roll. Today, talk to him at his brass factory in dusty Moradabad in UP's badlands, and Mahajan rues the passing of a market that was once touted as an exporter's fantasy. Argentina, that exotic land of Pampas, Maradona, the tango and an ultra-chic population known for its obsession with high fashion, once seemed ready to join the First World. Today, a forlorn Mahajan says the Argentinian dream has turned into a nightmare: his exports to that country have all but dried up.

Someone looking at Argentina today would see a country caught in a bind over balance of payment crisis, debt repayments, currency devaluation, and political turmoil. That wasn't always the case: in the 1990s it was an alternative to the highly competitive export markets of the US and the European Union.

So, when the government of India decided, in 1997, that it was time to improve the country's stagnating marketshare of global trade (0.6 per cent), it launched Focus LAC (Latin American Countries)-a strategy described ''as a paradigm shift from the past,'' by Rajiv Pratap Rudy, Minister of State for Commerce and Industry.

That it was: in the 1990s, Latin America boasted the second-fastest growing regional economy in the world and accounted for nearly 5 per cent of the world trade.

The strategy worked: India's exports to the region shot up eight times in nine years, up from $124.4 million (Rs 373.2 crore) in 1991-92 to around $981.79 million (Rs 4,785.62 crore) in 2000-01, an average annual growth of nearly 25.80 per cent. Brazil accounted for the single-biggest chunk of exports (Rs 1,090.7 crore in 2000-01), but Argentina was no slacker-it came in fourth with Rs 476.7 crore.

Aurobindo has nearly Rs 6 crore stuck in Argentina, but Reddy hopes to recover most of the amount Ram Prasad Reddy, Chairman, Aurobindo Pharma

The LAC success (and, to a lesser extent, the Argentine one) spanned sectors: engineering goods, textiles and garments, chemicals and pharmaceuticals, dyes, even carpets and handicrafts. Then, in January 2002, the good times just upped and vanished. That was the unkindest cut of all in a year that hadn't been that great for Indian exports for a variety of reasons including the global and the US recession.

Then, the Argentine economy went belly up. The decision to peg the peso to the dollar-something that reeked of good sense when it was done in 1991 (by the Menem administration)-suddenly turned counter-productive. The strengthening of the dollar against other currencies made Argentine goods uncompetitive in most global markets, creating an adverse balance of payments situation. Once Brazil, Argentina's main competitor in the global markets, devalued its currency, things went rapidly downhill. Argentina put stringent conditions on dollar repatriation, and was forced to devalue its currency. And the economy was spiralling out of control.

The Death Of A Dream

To cut a long story short, Indian exporters suddenly found that the money they had kept in local Argentine banks or that was owed them by various business establishments was no longer safe. Dollars could not be expatriated; worse, few knew when things would change for the better.

For instance, the Hyderabad-based Aurobindo Pharma, which exports bulk drugs to Argentina, found $1.2 million (Rs 5.8 crore) stuck in various entities in Argentina because of the freeze on repatriation. The company's Chairman Ram Prasad Reddy is quite optimistic about Aurobindo's chances of recovering this money. ''I don't expect losses to exceed 10 to 20 per cent,'' he says, citing the fact that the normal credit period offered to trade partners hasn't yet expired for some of the orders that make up the $1.2 million.

Argentina wasn't the end of the bad news. In early March, another Latin American country, Venezuela (it ranks after Brazil in terms of relevance to Indian exporters), devalued its currency in an effort to shore up its sagging economy. Things could turn nasty for Indian exporters if Venezuela were to follow in Argentina's footsteps-an event some analysts consider remote, given the former's oil resources.

He has a ready order from Argentina, but with banks refusing to honour the letter of credit he doesn't want to export to the country T.R. Kathuria, President, Globe Enterprises

The problem is exacerbated by the fact that exports to Argentina, or any other Latin American country, are not fully covered by the Export Credit Guarantee Corporation, a government organisation that provides insurance cover of sorts to exporters. So, Kishore Chokhani, the Chairman of the Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council of India (chemxcil), who runs his own company Euroasia Trans Continental, is unlikely to see the Rs 25 lakh of his that has been stuck with some buyers in Argentina since November 2001.

That amount-Rs 25 lakh-may seem like chump change, but fact is small and medium enterprises that often trade in lots valued in a few crores of rupees (if not lakhs) form the superstructure of India's exports (Rs 2,16,098 crore in 2000-01). Chokhani says that eight chemicals exportershave been hit by the Argentine crisis, their losses varying from a few lakhs to several crores of rupees.

The Last Tango In Latin A

If things don't look up, say some exporters, they may have to ignore a market that is growing at over 20 per cent a year. Even if the crisis were to suddenly go away though, it is unlikely Indian exports will enjoy the run they had in the late 1990s in Argentina. Reason? A devalued peso has made imports from India of even low-priced items far too expensive for the local market. Another problem with devaluation, according to Virender Uppal, Chairman, Apparel Export Promotion Council, is that it puts both the buyer and the seller in a quandary. The buyer does not know how much to charge and the seller does not know at what price to sell. ''This only complicates matters and results in a huge wastage of time.''

Already, some exporters are unwilling to export to Argentina, even in the face of ready orders. T.R. Kathuria, 66, President of the Delhi-based Globe Enterprises, has goods ready and waiting against an order from a big departmental store worth $59,000 (Rs 28 lakh). He is not willing to ship his goods till a letter of credit issued to him by a South American bank is guaranteed by a reputed American or European bank. But most European and American banks refuse to acknowledge letters of credit issued to Indian exporters by Argentinian companies.

Exporters fault the government for not warning them in time about the crisis. S.K. Agarwal, President, Delhi Exporters Association, says that instead of the annual ritual of having the commerce minister release the export-import (EXIM) policy, the ministry needs to provide exporters with a risk-benefit analysis of various regions.

''And what about some contingency plans to bail out exporters who find themselves caught in a bind for no fault of their own?'' asks Agarwal.

Sharad Mathur is one such. His Mumbai-based Essential Clothing Company shipped goods worth $66,000 (Rs 31 lakh) to one of Argentina's largest departmental stores last September. Apart from the initial advance of 15 per cent of the export amount, Mathur has thus far not received any payment from the department store, which has now gone bankrupt.

Worse, the South American Bank is refusing to honour the letter of credit citing some discrepancies in it. The store has offered to return the goods, but Mathur has to shell out $20,000 (Rs 9 lakh) to ship them back. And he is unlikely to find another buyer.

There are some exporters who managed to side-step the crisis. For instance, Dabur India, which exports anti-cancer bulk drugs to Argentina, escaped unhurt because it has long-term contracts with Argentine companies. Says V.C. Burman, Chairman, Dabur India Limited: ''Our company has not been impacted by the current devaluation because most of our contracts were signed between April and September last year and most payments made in advance.''

This, and the fact that Argentina imports virtually no gems and jewellery from India (these constitute almost 16.5 per cent of India's total exports), are perhaps the only notes of cheer for Indian exports in what is otherwise a threnody. Y te doy mi último adiós.