Argentina's big debt leaves firms nervous Leo John

RALEIGH ­ With a full-fledged financial crisis enveloping Argentina, companies in North Carolina who export to that country are growing increasingly nervous as millions of dollars in future contracts remain at stake.

The debt dilemma in Argentina is expected drastically to reduce exports from North Carolina companies, a trade that had gradually grown to $138 million in 2000.

Until April, 2001 exports to Argentina had totaled $47 million, a 24 percent increase over the same period last year. But exports have slowed to a crawl in recent weeks.

"We are very concerned about possible contagions and are watching it (Argentina) closely," says Peter Cunningham, director of international trade at the state Department of Commerce.

Chemicals and machinery accounted for about 47 percent of the commodities exported last year.

SAS Institute, BellSouth, Burlington Industries and Duke Energy are among the companies that have recently conducted business with the Argentinean government and private firms.

"We've seen exports to Argentina fall 25 percent," says Delores Sides, a spokeswoman for Burlington Industries. The Greensboro-based textile manufacturer sells about $1 million in goods and services to Argentina concerns each year.

Although Argentina is a small consumer of North Carolina's total exports, forming less than 1 percent of total trade from the state, exports to Argentina were showing an upward trend when the debt crisis struck. The South American nation was the state's 23rd largest trade partner for the first quarter of 2001 after ranking 26th for the year 2000.

Melinda Pierson, spokeswoman for the state's Department of Commerce, says it is not possible to track whether the goods were manufactured in North Carolina or merely were exported from the state.

Nonetheless, a continued financial crisis would affect the employees, offices and investments of several Triangle and North Carolina businesses.

Eduardo Garcia who works at the international division of Newton Grove-based hog equipment manufacturer Hog Slat, was expecting to close a $1.5 million sale of machinery to a client in Argentina when the financial crisis threw a wrench in the plans. "Due to the current situation, the project has been kept on hold," he says.

David Saelzer, at Interforest Corp. in Greensboro, says his company sells about $250,000 worth of veneer and lumber every year to Argentina-based clients. He was in Argentina a week ago, and he says business is still going strong.

"We have very select customers, so business has not been hit," he says.

Argentina owes about $130 billion in government debt and is in danger of defaulting on its payments.

While its stock market has plunged, a 3-year recession has caused the unemployment rate to climb to more than 16 percent. The government's plan to fight the debt by reducing state-worker salaries and pensions by $1.5 billion is expected to face wide opposition among legislators.

Jeff Battcher, a spokesman at Bell South, says the company's first foray in the Latin American market was in Argentina in 1989. The company now has four licenses for the country servicing about 1.7 million customers. "We know there are going to be ups and downs as the economies develop," he says.

Despite the crisis in Argentina, North Carolina companies are doing more business than ever globally.

Overall exports from North Carolina grew rapidly last year, increasing 19.5 percent to $17.9 billion.

Exports to Mexico rose 26 percent to almost $2 billion, accounting for about 11 percent of total foreign trade from the state. Mexico is North Carolina's second largest trading partner after Canada, which bought $4.9 billion in goods and services from the Tar Heel state.

Leo John can be reached at ljohn@bizjournals.com.

http://triangle.bcentral.com/triangle/stories/2001/07/23/story3.html

-- Martin Thompson (mthom1927@aol.com), July 23, 2001