São Paulo – Since January 1st, Algerian importers may choose how to pay for their imports out of two different options, either “documentary credit” or “documentary charge”. The choice, however, is given only to companies importing finished goods, importers of raw materials are not eligible. The measure was developed by the Algerian government to help purchases from abroad.
Documentary credit is a letter of credit through which the importer’s bank is committed to paying the exporter for the goods. In practice, this form of payment did not work before because Algerian importers had little access to import credit and had to pay for their purchases in advance.
With the documentary charge, in turn, the exporter’s bank sends the importer’s bank all the documentation for the goods. This bank then shows the documents to their clients, who verifies and accepts them based on what was agreed with the sellers. The importer has to show these documents at customs in order to clear the goods. In this case, payment is made according to what was negotiated with the exporter.
Barrier
In 2009, the government of Algeria determined that all imports were to be paid using documentary credit. It would be a way of reducing the North Africa’s country’s imports. According to the Brazilian embassy in Algiers, however, the measure didn’t have the desired result and actually damaged importers.
“In practice, the decision didn’t stop the increase in foreign purchases and caused much protest in the importing business sector. Since the local banks couldn’t offer lines of credit for imports, companies had to fully pay up front for their imports, as well as pay high rates for banking mediation,” stated the Brazilian embassy spokesperson.
According to information from the Algerian National Customs Information and Statistics and Center (CNIS), the Algerian trade balance surplus between January and November 2013 was of US$ 10.22 billion, a decrease by 49.95% in relation to the US$ 20.42 billion achieved during the same period in 2012. Between January and November last year, Algerian exports reached US$ 59.88 billion, a decrease by 9.44% in comparison to the previous year. In the 2013 accumulated sum until November, imports added up to US$ 49.66 billion, 8.65% higher than that in the same period of the previous year.
*Translated by Silvia Lindsey
