New business opportunities in Argentina: Opening the economy to foreign investment
Argentina is experiencing many political and economic changes by opening its economy to foreign investment. Let’s look closely at how Argentina’s economy is making changes for the better and what will be the next opportunities for foreign investors.
Argentina will be the first South American country to host the WTO biennial Summit (World Trade Organization) in December 2017, before hosting the G20 summit in 2018. This is not a surprise, as Argentina has made an irreversible turn towards globalization.
After the financial crisis of 2008, Argentina adopted protectionist policies, excluding of world trade. However, Argentina is changing its strategy. “We see trade as a source of opportunity and not as a threat,” said Nicolás Dujovne, Argentine Minister of Finance, in response to President Donald J. Trump’s protectionist policies. Its reform is clear: Argentina’s economy is finally heading towards globalization.
Argentina’s growing free trade agreements (FTA)
Argentina will inevitably attract foreign investors and globalized economies in Buenos Aires at the G20 summit in 2018. Meanwhile, it remains a strong member of the subregional trade bloc Mercosur (Southern Common Market). This offers strong FTA with Brazil, Paraguay, Uruguay, Chile and Venezuela. This organization also offers very beneficial secondary trade agreements with Peru, Mexico, India, Egypt and Israel. Therefore, Argentina is in the middle of a very prosperous CFZ (free trade zone).
In addition to these great economic ties, Argentina is also trying to join the most elite and developed intergovernmental institution, i.e. the OECD (Organisation for Economic Cooperation and development). Seeing the current political and economic transformations, there is great hope that it will join this prestigious organization.
In addition, negotiations are underway to intensify trade agreements with India and the EU. The President of the European Commission Jean-Claude Juncker insisted on the importance of intensifying trade with MERCOSUR in a speech in Strasbourg. He then held bilateral conversations with Argentina confirming his interest.
Massive investment plans in infrastructure improvement:
1 Main policy, 2 Big plans:
In addition to the encouraging effort to build stronger trade agreements, President Mauricio MACRI’s government has launched many plans to develop the country’s infrastructure. The PPP (Public-private partnership) reinforced in November 2016 will revolutionize the investment in infrastructure. Partnership contracts between the public and private sectors can now be signed between the national public sector and private companies or investors in order to boost investment in infrastructure. These are essential since the Argentine public sector does not have sufficient funds to restore the infrastructure as needed. The private sector can fill this funding gap, which will be very beneficial for the economy.
The national transport Plan is an investment of 33.2 billion dollars destined to improve transport. The money will be spent on the construction of new roads and tunnels under the Andes. This plan also includes airport improvement in order to increase air transport, business and tourism. This project is intended to be achieved in 2019. It is very promising news, as many foreign investors turned their backs on Argentina because of their bad transport connections.
Plan Belgrano: This is also a great investment in transportation. An investment of $16 billion destined solely to the interconnection of cities in Argentina. The objective is to connect the previously excluded northern areas of Argentina with the more developed areas of the south. This plan will restore and develop degraded roads and tunnels linking north and south.
So Argentina is on the road to success. Having increased their competitiveness through measures that include freeing capital control and reducing subsidies to curb inflation and reducing the fiscal deficit, it is developing its infrastructure to become an attractive economy. The last problem you have to face is corruption.
The campaign Anti-Corruption in Argentina:
Despite these promising advances in infrastructure and investment, corruption remains a real threat to Argentina’s improvement. It is still classified as the world’s 107 most corrupt economy, which shows how much work there is to do. However, President Macri is very aware of this. His government is actively fighting corruption. He has signed three major international anti-corruption conventions. These include agreements with the OECD and the United Nations. Argentina would not want to stop complying with these agreements.
Many anti-corruption laws have also been applied, broadening the influence of the Argentine Penal code on the Argentine economy. Corruption is also the main reason why the OECD remains sceptical about Argentina’s membership. However, it seems that it is only a matter of time until Argentina’s corruption lessens.
The liberalization of its economy, the increase of free trade, the development of infrastructure… These multiple factors are already attracting an increasing amount of FDI (foreign direct investment), and this trend is growing every year.
Source: Biz Latin Hub