Algeria: Diversifying economic relationships
With export demand slowing in European markets, Algeria is expanding its trade relationships with a number of emerging economies, including Brazil, Russia, India and China (BRIC). The North African country has been moving to increasingly diversify its economy, both in terms of output and trade, and with demand – particularly for commodities – still strong in emerging markets despite more modest growth revisions, the prospects for increased trade revenues is encouraging.
Exports to Asia reached $2.03bn in the first quarter of 2012, almost double the level recorded in the same period in 2011, according to the Ministry of Finance. Asia accounted for one-tenth of all Algerian exports in early 2012, making it the third-largest regional export market.
Algeria’s trade volume with India, for example, while still comprising a small percentage of overall trade, has expanded rapidly in the past few years. India is Algeria’s 11th-largest trade partner, and both countries have expressed an interest in augmenting the volume of exchange. A recent report from the Indian embassy in Algeria indicated that total bilateral trade between Algeria and India reached €2.7bn in 2011, up from €1.9bn in 2010, due in large part to the rising price of petroleum products.
Algerian exports, consisting mainly of oil and gas, increased by nearly 50% from 2010 to 2011 and account for two-thirds of the total bilateral exchange. Indian exports to Algeria include a variety of industrial products, such as motor vehicles and pipes for oil and gas transport, as well as meat and other agricultural products.
The country’s trade relationship with Brazil has also grown exponentially in recent years. The value of Algeria’s energy exports to Brazil expanded from roughly €797m in 2001 to €1.9bn in 2010. Algeria is also becoming a larger export market for Brazil, particularly for food products. The value of imports from Brazil expanded from roughly $200m in 2001 to nearly $850m in 2010.
Brazil was ranked the eighth-largest importer to Algeria in 2011, sending goods such as frozen meat, input for animal feed, cooking oils and sugar. The total volume of exchange increased significantly to reach almost $5bn in 2011, and this stands to increase further, as Algeria concluded a free trade agreement (FTA) with Brazil in February 2012.
As elsewhere in Africa, however, it has been China that has risen through the ranks the fastest. The Asian giant has played a key role in sustaining Algeria’s exports in recent years. According to the Ministry of Finance’s 2011 foreign trade statistics, China was the country’s second-largest source of imports in 2011, at a value of $4.74bn, and it imported $2.18bn from Algeria in 2011, an 85% year-on-year increase from 2010. Provisional figures for the first half of 2012 show that these levels may rise even higher.
Algeria has also taken steps to maximise the potential of its relationship with Russia, a fellow hydrocarbons exporter. While the two energy producers have limited trade relations, Algeria and Russia have engaged in strategic joint projects in the past to share best practices in petroleum product extraction and transport. However, the most recent partnership agreement between Sonatrach and Russian gas monopoly Gazprom expired in 2007 and was not renewed, due to a lack of common projects on the horizon.
This may change with the announcement in June 2012 of a tentative agreement between Sonatrach and Gazprom to conduct a “swap exchange”, a system of regular financial flows that will allow each country to optimise sales in the other’s key markets. Under the agreement, Sonatrach will distribute liquefied natural gas (LNG) to Gazprom’s European clients using its network, and Gazprom will supply Sonatrach’s clients in Asia. The partnership with Gazprom should significantly increase Sonatrach’s access to clients in the growing Asian market, and may serve as a basis for future collaboration between the two national operators.
While the bulk of Algeria’s economic exchange continues to be oriented toward Europe, growing economic partnerships with BRIC countries that go beyond commercial exchange stand to boost the Algerian economy and build local capacity in the medium term.