Argentina is trying to export its way out of the economic crisis

The Argentine government claims it could double exports in the next five years, despite the faltering economy and the suspension last month of one of its major exports – beef.

Argentina is one of the countries most affected by the Corona virus, which has exacerbated the economic crisis that struck three years ago. Inflation rate reached 49 percent and negotiations with International Monetary Fund A $44 billion loan defaulted, causing concern among investors.

However, Production Minister Matias Colvas insists the economy is turning a corner.

“This is a defining moment when many investments mature which will allow a huge jump in exports,” Colvas told the Financial Times.

Colvas argues that new projects in sectors such as mining, energy, manufacturing and the auto industry could lead to a doubling of exports from about $65 billion over the next five years.

Economists and private analysts dismiss these forecasts as overly rosy. While the International Monetary Fund expects 5.8 percent growth this year as agricultural strength benefits from higher commodity prices, the economy shrank by 10 percent last year — nowhere close to returning to where it was before the pandemic.

Colvas noted investment announcements worth about $20 billion since President Alberto Fernandez took office in December 2019. He said new mining projects alone could add about $12 billion to exports, while Argentina’s booming knowledge economy is expected to bring in $4 billion. additional dollars in the coming years. .

The truth is that the potential is there and so is the international demand. this is the truth. Then we will see how successful we are [ensuring that all these projects] “Actually moving forward,” Colvas said, stressing that a lot also depends on how quickly the projects progress.

Although many would agree that boosting exports is the clearest path to ensuring sustainable economic growth in a country with a chronic foreign exchange shortage, Argentina has consistently struggled to do so. Since 1950, the economy has been hit by frequent crises leaving the country stagnating more than any other country except the Democratic Republic of the Congo.

“At the rate they’re going, I don’t see Argentina anywhere nearby [to doubling exports in the next five years]said Martin Rabetti, a local economist.

Rabbitty agrees, however, that the government is focusing on the right sectors. “What I don’t see are signs that they will implement the policies until that happens,” he added, fearing that other, more radical leaders in the diverse governing coalition would undermine Colvas’ efforts.

Last month, beef exports were suspended for 30 days after domestic prices doubled over the past year, hurting domestic consumption of one of the country’s most popular products. Many officials were concerned that this could hurt the government’s popularity ahead of the major midterm elections in November.

One local producer mocked Kulfas’ hopes of doubling beef exports in the current conditions: “It won’t happen with [export taxes] A controlled exchange rate. . . We lose clients every day, and it will be difficult to get some back.”

The government’s tendency to interfere in all sectors of the economy – from price and currency controls and tariff freezes to threats of nationalization – has led many to fear that the private investment needed to boost exports may not be forthcoming. Compounding these concerns is the growing influence of the vice president, the former leader Cristina Fernandez, who is famous for his constant interference in the economy.

Colvas agreed that predictability in policies is essential to investing. “It is an important part of what enables investments to continue over time. Unfortunately, our starting point was very negative,” he said, noting the need to restructure Argentina’s public debt “which generates a lot of uncertainty” as well as ballooning fiscal deficits and depleting foreign exchange reserves .

As the government tries to fix these problems, Colvas insists that investments have continued to come in, and that the economy is recovering. He notes that the industrial sector is already producing more than it was in 2019 before the coronavirus hit.

“We have an economy that is moving today at different speeds. There are sectors such as industry, construction and agricultural industry that are growing, and in some cases they are growing a lot, while other sectors [such as tourism] Colvas said.

He denied that there had been a mass exodus of foreign companies from Argentina since Fernandez took power. He said Walmart’s departure last year was due to an international restructuring plan, and that the local company that bought the company continued to invest.

We see the opposite [of an exodus]Many sectors are positioning themselves because they see Argentina at a turning point.”

However, Emily Hirsch, managing partner of DCDB Group, a financial advisory firm with offices in Buenos Aires, is skeptical: “Not much money is willing to pour serious money into Argentina at the moment.”

Whether or not Argentina’s initial and erratic economic recovery this year will last longer depends largely on the country’s ability to modernize its economy, says Colvas, who is focused on developing new sectors such as lithium, renewable energy and medical cannabis.

Many people ask me, do you really think it’s time for a digitization program. . .[or]To talk about the green revolution? I say yes. it’s snowing. Because with every passing year, we will fall further behind the changes that are taking place in the world. . . You miss the train.”

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