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President Macri met in late April with President Trump, in a clear signal to the markets that Argentina has the support of the US Government, one more of the multiple indications which underline the work done for the full recovery of the confidence of international investors.
Already last year, President Obama had made a state visit to Argentina. That visit, when the new government had just assumed power, was a great support, and showed confidence in the new administration, which is reflected in the many projects underway in Argentina today.
Among the many meetings attended by President Macri in the United States were a meeting with the Chamber of Commerce in Washington and another with oil owners in Houston. The agenda included the areas of trade, energy, and investment.
In 1917, Argentina was the richest country in South America and was among the ten richest countries on the planet. There are sectors of Buenos Aires that preserve beautiful buildings of that time, then called the Paris of South America.
However, successive governments were unable to advance the country, resulting in impoverishment, and what is even worse, without a national program that would allow long-term development. During the 20th century, Argentina lived with dictatorships, populist caudillos and many other governments that offered little light and zero vision of the future.
Over the past decade, Argentina has experienced one of the world’s largest inflation rates and a bank failure, ending with a default, which left the country outside international markets, isolated and without the contribution of foreign investment.
This resulted in a completely neglected road and energy infrastructure, i.e. lack of energy, roads in poor condition, insufficient capacity for the increase of automotive park, and railways in terrible condition. All this was coupled with a feeling of absolute distrust towards the country and its government, both internally and externally.
Argentina 2016 – Argentina 2017
Since the beginning of his administration, President Macri has adopted a series of guidelines for the projection of sustainable economic growth, an investment agenda and the creation of jobs in order to reduce poverty.
Within these guidelines, with just over a year in government, Macri has implemented a series of reforms, sometimes with caution, because he has suffered a series of obstructions by the opposition, which have promoted strikes and public demonstrations. These have been particularly in the face of cuts and/or decreases in subsidies for energy consumption and transportation. Undoubtedly these have been very unpopular measures, although essential in an economy in the stage of a clean-up.
On other occasions, the president has managed to carry out projects with great boldness, using legal resources, which has prevented the denouncement of Congress, since he does not have the majority to carry out his projects.
To date, the greatest achievement, considered to be the great beginning of the recovery of Argentina, is the $16 billion negotiation that Argentina undertook with bondholders. The government has paid a total of $9.3 billion to all creditors who reached an agreement. Elliott, one of the creditors, received $2.4 billion, a yield of 392% on the original value of the bonds.
Argentina from the perspective of the European Community
“For a number of years, Argentina imposed significant barriers on imports, exports and capital flows. As a result, the trade and investment climate deteriorated significantly. Since late 2015, however, the situation has substantially improved as the current Argentine Government has taken important steps to improve the business climate and eliminated a significant number of the barriers to trade and investment, which had built up over the years. This includes removing a number of non-automatic import licenses, exchange controls and the scaling back of export duties.”
The opinion above, published on the official website of the European Community, clearly reflects the favorable change of opinion on the part of the international community. The details of the MERCOSUR Treaty with the European Community are currently being negotiated. Apparently, the great obstacle is Venezuela’s attitude within the pact.
Therefore, although there is widespread acceptance by the countries of the region and MERCOSUR in particular, the end of the negotiations and the signatures on paper are not in sight while Venezuela continues its position of non-compliance with respect to its international obligations.
For its part, the BBVA has issued a very favorable report regarding the situation in Argentina: “In Argentina, the indicators of recent quarters show a surprising rise and point to a recovery of growth in line with what we anticipated. Our growth forecasts remain unchanged, at 2.8% and 3.0% in 2017-18, supported by public and private investment, which already showed signs of growth in the first quarter of the year.”
Internal situation in Argentina
In October, President Macri will face a test of fire in the local elections. So far, the new government has performed very efficiently in the international context. However, it has not been so successful in internal public relations. It shows a lack of communication, perhaps because it has been more efficient in work and reforms, than in sharing the process with the people.
President Macri, referring to the coalition government says: “Cambiemos is not a force trying to impose change on Argentine society, but, rather, a representation of a change that has already occurred and continues to consolidate in society itself. The changes that the global society has undergone in the last couple of decades – globalization, new forms of communication and production, to name a few – have also taken place in Argentina. Our society looks at our past of cyclical crises and at the examples of countries that have been able to develop sustainably, and sees that we can achieve much more if we come together and try to implement not only economic and political change, but also changes in values.”
Careful observation of the achievements of Argentina can lead to widespread acclaim, yet Argentina’s citizens are ill-accustomed to that, being often misled by populist and deceptive public relations. Now that there is serious work underway, nothing populist, but at a very good level, the people cannot yet see the real progress.
In short, the evaluation by the people, that is, the votes that the government achieves in the October elections will be the milestone that will mark the future of the government and of Argentina in the coming years.
English Editor: Audrey van Ryn
Writer & Translator: Mª Verónica Brain
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