Spain is Argentina's second largest European trading partner and second largest foreign investor. Argentina is Spain's second largest Latin American investor and the main destination for Spaniards living abroad. Trade between the two countries has a long tradition and over the last 25 years, Argentina has only had a deficit on 7 occasions (1993-1999).
During the first half of 2024, trade between Spain and Argentina reached USD 1,409.6 million, with a balance of USD 234.54 million in favour of Argentina. Argentine exports include raw materials and non-industrialized products such as seafood, oils, rice and soy flour; while Spanish exports are industrialized products with added value such as machine parts, printed books (excluding dictionaries and encyclopaedias), tar, automobile parts and accessories and cork products.
“Spain is a very open economy to foreign trade. However, its natural market is the European Union,” says Leonardo Fraga, Lead Audit Partner at Grant Thornton Argentina and the firm’s representative at the Spanish Chamber of Commerce in the Argentine Republic (CECRA, for its acronym in Spanish). “In 2022, 63% of its exports and 45% of its imports were from and to EU member countries.”
The Spanish economy is highly internationalised and is not limited to goods, but also includes services and foreign direct investment (FDI). The trade balance in goods is structurally negative due to imports of high-value goods such as fuel. However, commercialization of services is usually in surplus, mainly thanks to tourism.
“Spain is a major importer of petroleum gas and hydrocarbon gas, and this product takes the largest share of the country's imports. In 2023, it imported energy products for 63,479.1 million euros, and although in monetary terms it meant a year-on-year decline of 30% due to the drop in the cost of raw materials, it continues to be the largest tariff item,” comments Gabriel Righini, Audit and Energy and Natural Resources spokesperson at Grant Thornton Argentina.
In 2023, Spain exported goods for USD 423 billion and imported USD 470 billion, marking a year-on-year variation of 1.9% and -4.8% respectively. On the other side, trade in services increased both in exports (19.9%) and imports (12.7%), marking a positive balance of 100 billion.
Spain is the second country that invests the most in Argentina through resident companies, and although it has been losing market in favour of other investors -such as the Netherlands -, it has historically remained in a leading position. More than 115 Spanish multinationals have established themselves in Argentina and offer their services from the country. At the same time, 16% of Latin American multinationals found in Spain are Argentine owned.
“The high levels of Spanish investment in Argentina are favoured by various commercial and extra-commercial factors such as the shared language, the numerous bilateral agreements and the promotion of migration by citizens of both countries,” says Fraga.
Spanish investments in Argentina and Argentinean investments in Spain are protected under international law by the agreement between the Argentine Republic and the Kingdom of Spain on the Reciprocal Promotion and Protection of Investments, which was signed in 1991 and entered into force in September 1992. Since 2013, a new agreement has been in force to avoid double taxation and prevent tax evasion in income and wealth taxes. In addition, both countries have a bilateral social security agreement and are signatories of the Ibero-American Multilateral Convention on Social Security.
“The agreement to avoid double taxation is of great importance for those legal entities or individuals who wish to do business across borders, as it covers taxes that include those on wealth, corporation, non-resident income, profits and personal assets,” says Fernando Fucci, Managing Partner of Grant Thornton Argentina and International Business Centre Director.
The main product that Argentina exports to Spain is soybean pellets (48% of the quota), followed by fish, shellfish and vegetable oils. The main good imported from Spain is the one corresponding to the chapter “parts of machines for classifying, screening, working, crushing, mixing, kneading, agglomerating or moulding earth, stone or other mineral materials” of the Mercosur export tariff list, followed by tar, books, brochures and printed (excluding dictionaries and encyclopaedias).
Argentina still has a long way to go in the Spanish market. It has the conditions to increase the quotas of existing exports and to open new markets.
In 2023, Spain imported €46,154 million in oil and its derivatives and €13,971.9 million in gas. “As a consequence of the Russian invasion of Ukraine and the sanctions imposed by the EU on Russia, the list of Spain's energy suppliers changed significantly, with American fuel acquiring greater relevance and participation,” highlights Righini.
“Currently Argentina has practically no share in the Spanish market. But, due to the advances that are being made in the extraction and commercialization of fossil fuels and that Brazil is one of the main suppliers of oil, paving the way for the other countries in the region, Argentina could become more important.”
In recent years, Argentina has lost market share in the supply of biofuels. In 2020, it led Spanish imports of biodiesel and during 2022 and 2023 it lost quota to the Netherlands, Italy and China. Last year, only 11.8% of demand was met by Argentina. “This market loss occurred largely due to the poor 2022/23 campaign as a result of the drought,” analyses Julia Adano, Lead Tax Partner and Agribusiness spokesperson at Grant Thornton Argentina.
“Production levels reached historic lows and idle biodiesel capacity reached historic highs. Although this year's campaign suffered because of the drought and had a lower-than-average production, but higher than in 2023, it is expected that, with an improvement in prices and commercial conditions, the export dynamic will be reactivated.”
But these are not the only products from the energy and natural resources industry in which Argentina can find a market. Spain is the second largest vehicle manufacturer in Europe and the ninth in the world, with more than 40 models, of which more than half have an electric version. Both copper and national lithium can become the perfect ally of the Spanish automotive industry, to drive together the energy transition in the sector and lead the production of electric cars with lithium-ion batteries.
Agriculture and mariculture are other economic sectors in which Argentina has a strong presence and potential for growth. In the last three years, exports of olive oil have increased by more than 312% and hake fillets by 81.77%. “These two products are not the only ones that have increased their share,” says Adano, “so have cuttlefish and squid, peanuts, beans and soy pellets.”
Fishing products are the second most imported by Spain within the 'food, beverages and tobacco' category of the customs tariff code. High domestic consumption resulting from eating habits and tourism, forces import to meet the unsatisfied demand by national production. In both shellfish and hake, Argentina is the second supplier and can increase its share and regain the leadership it once had.
“The export of pellets saw a situation similar to that of biodiesel,” says Adano. "Not so for soybean oil, which in the last three years grew more than 300% and positioned Argentina as Spain's main supplier with 85% of the import quota."
Until July 2024, Argentina exported soybean pellets to Spain for almost the same cumulative value as in 2023: USD 237.94 million in 2024 vs. USD 247.78 million in 2023. In 2021 and 2022, the cumulative value exceeded USD 700 million. However, Brazil, which currently holds the largest share, has never exported for amounts greater than USD 600 million, giving Argentina room to regain its leadership.