Argentina tries to escape the economic crisis through exports
The Argentine government insists on its widely ridiculed statement that despite the economic downturn and one of its major exports suspended last month, it can double exports in the next five years- beef.
Argentina is one of the countries hardest hit by the coronavirus, which exacerbated the economic crisis that broke out three years ago.The inflation rate reached 49%, and International Monetary Fund The issue of repayment of the $44 billion loan has stalled, making investors uneasy.
Even so, Production Minister Matias Kulfas insisted that the economy is turning for the better.
“This is a critical moment, and many investments are about to expire, which will make a major leap in exports,” Kurfas told the Financial Times.
Kurfas believes that new projects in the mining, energy, manufacturing, and automotive industries may double exports from around US$65 billion in the next five years.
Private economists and analysts believe that the forecast is too optimistic. Although the International Monetary Fund predicts that the economy will grow by 5.8% this year because the agricultural powerhouse has benefited from rising commodity prices, the economy shrank by 10% last year-far from returning to pre-pandemic levels.
Kurfas cited investment announcements worth about US$20 billion since President Alberto Fernandez took office in December 2019. He stated that new mining projects alone can increase exports by approximately US$12 billion, and Argentina’s booming knowledge economy is expected to add another US$4 billion in the next few years.
“The fact is that there is potential and so are international needs. This is the reality. Then we will see how successful we have been [ensuring that all these projects] Actually keep going,” Kulfas said, emphasizing that it also depends to a large extent on the speed of the project.
Although many people believe that in a country with a shortage of foreign exchange, promoting exports is the clearest way to ensure sustained economic growth, but Argentina has been working hard to achieve this. Since 1950, the economy has been hit by repeated crises, putting the country into recession for more time than any other country except the Democratic Republic of the Congo.
“At their speed, I can’t see Argentina nearby [to doubling exports in the next five years],” local economist Martin Rapetti said.
However, Lapeti agrees that the government is focusing on the right industry. He added: “I don’t see any signs that they will implement policies to achieve this goal,” he worried that other more radical leaders in the diversified ruling coalition might undermine Kulfas’ efforts.
Last month, after local prices doubled in the past year, beef exports were suspended for 30 days, hitting domestic consumption of one of the country’s most iconic products. Many officials worry that this may damage the government’s reputation before the crucial mid-term elections in November.
A local producer laughed at Kulfas’ hope of doubling beef exports under the current circumstances: “This will not happen. [export taxes] And controlled exchange rates. .. We are losing customers every day, and some of them will be difficult to get back. “
The government’s tendency to intervene in all sectors of the economy—from price and currency controls, tariff freezes to the threat of nationalization—causes many to worry that the private investment needed to promote exports may not come.Adding to these fears is the growing influence of the vice president and former leader Christina Fernandez, He is notorious for his continuous intervention in the economy.
Kurfas agreed that the predictability of policies is essential for investment. “This is an important part of enabling investment to continue over time. Unfortunately, our starting point is very negative,” he said, noting that Argentina’s public debt needs to be restructured. “This creates a lot of uncertainty. “As well as the inflation of the fiscal deficit and the depletion of foreign exchange reserves.
Although the government tried to solve these problems, Kulfas insisted that investment continues and the economy is recovering. He pointed out that the output of the industrial sector has exceeded 2019 before the coronavirus outbreak.
“Our economy is developing at a different rate today. Sectors such as industry, construction, and agro-industry are growing, in some cases a lot, while other sectors [such as tourism] It’s been a big blow,” Kulfas said.
He denies that since Fernández took power, there has been a massive outflow of foreign companies from Argentina. He said that Wal-Mart’s departure last year was due to an international restructuring plan, and the local company that acquired the business continued to invest.
“We saw the opposite [of an exodus], Many industries are positioning themselves because they see that Argentina is at a turning point,” he said.
Even so, Emily Hersh, managing partner of the DCDB Group, a financial consulting firm with offices in Buenos Aires, is still skeptical: “There are not many people with deep pockets who want to make big Funds are invested in Argentina.”
Kurfas said that whether Argentina’s incomplete economic recovery at the beginning of this year can last longer depends largely on the country’s ability to modernize its economy. He is focusing on the development of lithium, renewable energy and pharmaceuticals. New industries such as cannabis.
“A lot of people ask me, do you really think it’s time to implement a digital plan?..[or]Talking about the green revolution? I say yes. Snowing. Because year after year, we will be further behind the changes that are taking place in the world. .. Missed the train. ”