Argentina’s future is under the spotlight by new investors looking for change
Argentina’s future is in the spotlight by investors. For more than a decade, Argentina was a financial pariah. It had more commercial disputes in the Hague than all the other countries put together. A long-running dispute with a Vulture Funds which purchased some of its defaulted debt left it shut out of global credit markets and shattered its reputation as a safe place for business. Regardless of the rights and wrongs of this action the earlier Kirchner Government had negotiated this agreement and then reneged on it. Similarly, nearly all the other commercial disputes have been settled offshore. The only remaining dispute is political, the Malvinas or Falklands as the English call them, but even that might be settled going forward too.
Argentina’s new President, Mauricio Macri’s decision to pay $9.3 billion to the creditors resolved the first problem. However, the flood of foreign investment that he promised would follow has so far proved not more than a trickle. Last week the government organised a “Mini Davos” in Buenos Aires, hosting executives from around the world.
The proactive approach is bearing fruit: today the Export-Import Bank of the United States will resume offering financing in Argentina after a 15-year absence. But more needs to be done. Although foreign firms have announced $30 billion of investments since December, only $1.3 billion materialised in the first half of the year.
What foreigners do not know is that Argentina has little to no private debt. Mortgages are rare and have only recently been reintroduced meaning that its economy will recover much more quickly than it would otherwise.
The other boost is that the new government has introduced a tax amnesty that is expected to bring in over 100 Billion Dollars US of fresh funds due to its low tax penalties and the fact that inter-data tax information swapping between countries is now so sophisticated that hiding money offshore is no longer an option.
Rehabilitating Argentina’s image may be taking longer than Mr Macri and the Argentines’s had hoped, but every day it looks more promising than in any time in its recent history.
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