With 2017 having passed the halfway mark, the Argentinian government is keen to demonstrate that its policies have been on the right track. Primary term elections are scheduled for 22 October and the opposition’s main arguments and criticism will focus on the slow economic recovery.

Private consultancy companies and official government statistics agree that the oil and automotive sector dominate foreign investments, while the service sector is the most important in creating new employment opportunities.

The economy has slowed since early 2016 and does not seem to have recovered despite the government’s sincere efforts to adopt a more liberal economic model. The construction sector has been stimulated by enormous direct federal funds — in the best Keynesian model — in order to persuade private capital to continue the trend. So far, however, no favourable response has been received from Argentina’s domestic companies.

Despite the major efforts — to repay the so-called holdout owners of government debt; liberalise the exchange market; and adopt the necessary free market language — the government has not yet recovered the trust of the international financial community. The recent decision by the ratings agencies — not to redefine Argentina as an emergent economy — was unwelcome. It is also being used by leftist politicians as an argument against a free market economy.

As for local investors, Tecpetrol is sufficiently encouraged to put into operation its largest investment project (U$S2.3 billion) at Vaca Muerta’s Fortín de Piedra concession to explore for shale gas. Tecpetrol has obtained a guaranteed price of U$S7.50 per million BTU for 2018, US$7.0 for 2019, and a final U$$6.0 by 2021. This assured internal price justifies any investment in the sector because these prices are well above the international market average prices.   … [article continues] …

This is an excerpt from an article in this month’s Argentina Strategic Brief – for more information please contact us at info@menas.co.uk.

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