5 REASONS TO INVEST IN ARGENTINA
The Investor Argentina 2018 I Briefing I Introduction
“ECONOMIC ACTIVITY IS PROJECTED TO REBOUND AND GROWTH IS EXPECTED AT 2% IN 2018 AND 2.6% IN 2019.”
One of the largest economies in Latin America, Argentina is currently undergoing an economic transformation that promotes sustainable economic development with social inclusion and integration into the global economy. President Mauricio Macri, from the center-right Republican Proposal, was elected in 2015 on a reformist agenda. Since his election, the Government has been facing economic issues left by his predecessors, reducing red tape and improving the economic environment to improve the country’s attractiveness.
After Argentina’s economy boomed in 2017 and market-friendly President Macri’s coalition triumphed at legislative elections last October, there were very positive expectations at the beginning of this year. In consideration of the more adverse international market conditions, the run on the peso currency is another challenge in the country’s history of financial volatility and is still a reality challenging to overcome. The currency devaluation has been a consequence of a stronger US dollar and lower appetite from investors in emerging markets. The Government is working together with the IMF through a $50 billion credit line that will make sure most of Argentina’s external-financing requirements are covered until 2020.
Monetary policy was tightened substantially to moderate the volatility of the exchange rate and the acceleration of inflation. The drop in rates will be very gradual and more volatile following the decision to complement the monetary policy rate scheme with the monitoring of monetary aggregates. Higher inflation and tighter economic policies will take a toll on the economy in the first and second quarters of 2018, but growth is expected growth to bounce back in the fourth quarter and from 2019. Economic activity is projected to rebound and growth is expected at 2% in 2018 and 2.6% in 2019. The gradual reduction of the high fiscal deficit is being accelerated to restore confidence. Recent structural reforms, such as a tax and capital market reforms, a new competition law, improvements in administrative procedures and lower trade barriers in selected sectors were steps in the right direction to strengthen inclusive growth.
Further reforms to foster the integration into the global economy, enhance competition and improve access to quality education will build on this progress. The potential of Argentina as an FDI destination not only depends on its endowment of natural resources and the size of its market, but legal and institutional stability is also a key variable when determining the attractiveness of an economy for long-term investors.
FIVE KEY REASONS TO INVEST IN ARGENTINA
1) STRATEGIC LOCATION TO REGIONAL MARKETS
Argentina is one of the largest and wealthiest economies in Latin America. It is the 3rd largest economy in the region with a GDP of $586 billion (after Brazil and Mexico), it has the 2nd highest GDP per capita in the region in PPP terms, following Chile ($22,600) and is the 4th country in the region in terms of population. Located in the Southern Cone, Argentina is bordered by the Andes in the west and the South Atlantic Ocean to the east, neighboring countries are Chile to the west, Bolivia and Paraguay to the north, and Brazil and Uruguay to the northeast. Argentina is part of Mercosur, making it a gateway to a potential market of 400 million consumers and economic output in a substantial expansion.
2) ABUNDANT NATURAL RESOURCES
Argentina is one of the wealthiest countries in Latin America concerning natural resources. It is the 8th largest country in the world with 2.8 million km2, 53% of agricultural land and an extensive coastline of 4,700 km. Its energy sector involves eight prolific oil & gas basins (five conventional, three unconventional, large offshore potential), the 2nd largest shale gas reserves, 4th largest shale oil play in the world and optimal conditions for renewable energy, especially wind and solar. The Argentine Northwest is one of the world’s four places with the highest potential for solar power generation. The country untapped metals and minerals reserves are recognized internationally, having the 7th largest silver and copper reserves, lithium (4th), gold (9th) and potassium.
3) PRO-BUSINESS ENVIRONMENT
Following the December 2015 election of President Mauricio Macri, the government launched a bold economic program to strengthen the economy and improve the investment climate. Recent measures include lifting capital controls, moving to a floating currency, removing export taxes and reducing subsidies on utility tariffs. The government is also committed to eliminating the fiscal deficit and reaching low single-digit inflation over the next four years. The end of the dispute with holdout creditors and the successful $16.5 billion bond issue marked a significant milestone. These measures, coupled with the fact that Argentina is open for investment and has a good business climate, have improved investors’ perceptions and encouraged FDI.
4) QUALITY OF LIFE
Argentina is a top destination for expatriates from around the world. In its 2018 Quality of Living index, Mercer, the world’s largest human resources consulting firm, included Buenos Aires as one of the best cities in the world to live in, only topped by Montevideo (Uruguay) in the Latam region. A pleasant climate, amazing natural landscapes, friendly culture, more than 400 theatres only in the City of Buenos Aires and the freedom to innovate have seduced the over 2 million foreign people that are now living in Argentina.
5) TALENTED HUMAN RESOURCES
With 57% of the population in working age with an average of 30 years old, Argentine workers are among the most highly educated in Latin America. With a literacy rate of 98%, nearly 16% of the population has higher education levels. The country ranked 1st in Latin America in Human Development Index, is also the first place in the Education Index. Argentina has also been recognized as having the highest English language proficiency in Latin America as its mandatory at state schools in the City of Buenos Aires and in the Province of Buenos Aires. Besides, the country offers world-class science and technology institutes.