Investing in Argentina? Large fertile and arable lands, prolific industrial areas, significant reserves of natural resources, a vast network of educational resources (including 63 private and 66 public universities), qualified human resources (including five Nobel prizes awarded), good health records, railroads, seaports, a large coastal line, navigable rivers, a deep and broad middle class (eager to consume), a growing tourism industry and one of the highest human development indexes in Latin America. Argentina has all of this and more, but nevertheless, the country struggles to reach and maintain a sustainable economic growth and development rate throughout the years. In the following lines I will briefly explain why you should consider investing in Argentina, although a risk-seeking attitude is needed.

Consider investing in Argentina. Issues to keep in mind:

  • Economic Indicators

The Federal Government is highly oriented towards pro-market reforms and that is leading towards a better business environment as the country returned to international financial markets. Notwithstanding any of the aforementioned, Argentina still has a weak and shallow (undercapitalized) financial sector, insufficient investments in electric supply, vulnerability toward commodity prices (particularly soybean and wheat), and top of the list: High inflation and a vulnerable institutional framework. According to data available in Thomson Reuters, the country shows some of the worst economic indicators of the region, as referred in the chart below:

 

Country

Currency depreciation
(2018)
Market Capitalization
(% GDP)
International Reserves
(% of foreing debt)
Current Account Balance
(%GDP)
Inflation
(2018)

Interest rate in local currency

Argentina

100,7% 17,1% 20,0% -4,8% 44,8% 73%

Bolivia

0,0% 16,4% 91,0% -6,3% 6,1%

5%

Brasil

13,2% 46,5% 67,0% -0,5% 3,8%

7%

Chile

11,2% 106,4% 44,0% -1,5% 4,7%

3%

Colombia

3,3% 39,3% 38,0% -3,4% 4,8% 4%

Ecuador

N/A 4,1% 12,0% -0,3% 1,5% 8%

México

-2,6% 36,3% 42,0% -1,7% 6,1%

8%

Perú 2,8% 46,9% 89,0% -1,3% 3,9%

4%

Uruguay 13,8% 1,4% 72,0% 1,7% 4,0%

9%

 

  • Business climate

The country still suffers from the picture of the economic crisis of the late 1990s and early 2000s. According to the World Bank’s 2018 Doing Business report, the business climate has still room for improvement in Argentina, ranking at the 117th place out of 190 countries. Nevertheless, recent fiscal policy adjustments and negotiation with international financial entities (particularly the IMF) are showing strong signals of the international community towards supporting and focusing in the development of Argentina in the long run.  

Understanding local culture and the way business are conducted will not be a challenge. All the same, if you seriously consider investing in Argentina, getting local advisors (or even partners) will surely boost your returns and speed-up any business process (particularly when dealing with the local authorities and suppliers).

 

  • Most attractive sectors

The national authorities are seeking today to attract significant investment in key areas such as infrastructure and transportation, power and renewable energy, mining, oil and gas, agriculture and cattle business, telecommunications, information technology and tourism. The National Agency for International Investment and Trade has clearly identified opportunities for approximately USD 300 Bn across multiple sectors, both at the federal and provincial levels, with opportunities in the financing, engineering, development and operation of these projects.

The main opportunities are found in the energy sectors where investment tickets add up to more than USD 240 Bn and comprise the development of the vast Vaca Muerta hydrocarbon reserves. The resources are located in the Neuquén Basin, the country most prolific oil and gas field. There are rich unexplored mining areas, as well as tenders for thermal, hydro and renewable energy projects. Following energy comes an ambitious infrastructure plan, offering more than USD 50 Bn investment projects in roads, railways, water, sanitation, irrigation, sea and river ports, airports, urban mobility, telecommunications and public housing.

 

Finally, the country offers a wide potential for other areas ranging from agribusiness to real estate and tourism- which comprise more than USD 10 Bn in investment opportunities.

Some additional advice for you to consider investing in Argentina: Low risk aversion and emerging market experience is required. A local business partner is highly recommended. Rewards are not assured, but potential for profits in the long run is large and the country is willing to prosper and develop.  Argentina is a country that overall is open, welcoming, and wanting foreign direct investment.

 

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