Argentina Could Implement a National Cargo Reserve Regime Against Paraguay

On January 25, 2021, the Ministry of Transportation issued Resolution No. 21/2021 by which it authorized the Undersecretariat of Ports, Waterways and Merchant Navy to implement measures to reserve national cargo for Argentine-flagged vessels to ensure reciprocity with respect to the cargo reservation regime in force in Paraguay.

The regulation’s recitals state that basic principles of equity and reciprocity impose the need to ensure equality in the enforcement of the rules on how cargo will be treated under the 1992 Paraguay-Parana Waterway Transportation Agreement between Argentina, Bolivia, Brazil, Paraguay and Uruguay.

According to the background stated in the resolution, a report submitted in September 2020 by the Coordination Directorate of the International Commissions on the current Paraguayan cargo reservation regime affecting the La Plata Basin found Paraguayan vessels are given preferential treatment when transporting export or import goods to or from that country, which results in detriment to the Argentine merchant navy and prevents full participation in river transportation under equal conditions.

The report mentions that Argentine cargo may be transported by river vessels equally under the Argentine or Paraguayan flags, but Paraguayan cargo is reserved for Paraguayan vessels. The Directorate pointed out that Argentine government representatives have been asking the Paraguayan government for years to eliminate the cargo reservation regime affecting Argentine-flagged vessels.

For its part, the Ministry of Transportation deemed that, to restore equal conditions for the development of the national merchant navy, exceptional and temporary measures must be adopted for Argentine production to remain competitive and prevent the increase of freight charges on domestic cargo.

The cargo reservation regime in the resolution will apply exclusively to Paraguayan-flagged vessels (meaning vessels of other nationalities will be excluded) pursuant to the terms of the River Transportation Agreement. Furthermore, the regime will be in force as long as the restrictive measures by Paraguay on Argentine-flagged vessels persist.

In that vein, Paraguayan vessels and/or shipowners may have to apply for a special cargo permit. The Undersecretariat of Ports, Waterways and Merchant Marine, prior to authorizing the request, may consult whether Argentine-flagged vessels and/or Argentine-owned vessels are available to attend to the cargo at the ports indicated in the request for the special cargo permit.

At the same time, the Undersecretariat is tasked with ensuring that the measures adopted do not generate a substantial increase in the cost of freight. 

Lastly, the Resolution urges the Ministry of Foreign Affairs, International Trade, and Worship to continue ongoing negotiations with the government of Paraguay to lift the cargo reservation regime in that country.

So far, the Undersecretariat of Ports, Waterways and Merchant Marine has not established the cargo reservation regime authorized by this regulation; thus, its potential scope is unknown. In any case, what is clear is that this could result in complex legal debates.