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Summary: CFO Forum in Buenos Aires

Segal, Fiorillo, Gonzalez

(Image: Lucas Heavy)

August 30, 2016

Argentina is poised for an economic rebound under a new conservative government, but much-needed investment isn’t about to flood in. That was the consensus at the Council of the Americas CFO Forum in Buenos Aires, Argentina, on August 23.

“The uncertainty we all face here is Argentina,” said Daniel González, CFO of YPF, the state-run energy company. “What complicates our lives at YPF is not the price of oil or if a well comes up dry, but regulations that change every day. This makes it hard to plan for the long term.”

A bumpy road to a promising economic rebound

Argentina’s new president, Mauricio Marci, has been making it easier to do business in the country since taking office in December. He’s ended the capital and currency controls of his populist-left predecessors of 2003 to 2015, devalued the peso by more than 30 percent and pulled the nation out of a 15-year debt default.

Even so, the economy is shrinking, inflation and salaries are high, the fiscal and trade accounts are in deficit, and energy shortages are frequent.

Fernando Navajas, chief economist at the Fundación de Investigaciones Económicas Latinoamericanas (FIEL) said Macri’s challenges to reviving the economy are like navigating a meteoroid field.

Macri grazed one such collision in August, when the Supreme Court annulled his 400 percent hikes in residential gas tariffs. The decision delays a cut in energy subsidies, key to reducing the fiscal deficit and luring investment to shore up energy supplies and fuel longer-term economic growth.

Economic growth, inflation outlooks

Navajas expects the economy to contract 1 percent this year before rebounding by more than 3 points in 2017, helped by an expected influx of dollars from a tax amnesty and a boost to consumer spending from higher pensions and salaries. If Macri’s coalition can sustain power in the 2017 midterm elections, the economy should grow annually by 4 to 5 percent, Navajas said.

Macri also wants to chop the inflation rate to the single digits by 2019, a big challenge. Navajas expects inflation to recede to 21 percent in 2017 from 38 percent in 2016, but said it likely won’t dip below 15 percent before 2019.

CFOs should under promise, over deliver, and leverage technology

This lukewarm forecast means that the job of CFOs won’t get any easier just yet, even as investor confidence improves in the country’s prospects.

The economic reforms “are good for the long term, but they have created a level of expectations that are difficult to satisfy in the short term,” González said. “Part of our job as CFOs is to provide a framework of realism. You have to always shoot to under promise and over deliver, all without being negative.”

To sustain or boost profits even in hard times, innovation and technology are vital for finding growth opportunities, said Alejandro Scannapieco, CFO of Globant, a software developer. “CFOs must leverage technology. It’s there. You have to work with it. You have to take intelligent risks and optimize the use of scarce resources,” he said. “What’s important is how to convert information into something strategic to allow the company to accelerate its growth, make better decisions, and expand.”

Strategies for developing talent and diversity

To build the best team in a company, diversity is key, as is encouraging people to do their best by helping them climb in positions, such as through mentoring, said Ignacio Marseillan, a senior partner at Spencer Stuart, an executive search firm.

“When you hire a person, they have 70 to 80 percent of the competencies you need,” he said. With mentoring and training, he said, “You can help develop the rest when they are on the job.”

Francisco Scasserra, a director at PageGroup, another executive recruiting firm, said another key for team development is diversity, as it will enthuse a company with a wider range of ideas. Take age diversity, for example. Millennials are the leaders of the future, but to help them grow with the company, Scasserra recommends taking extra time to understand what they want, such as flexible working hours. “Listen to them and find out what they want and try to align them with the interests of the company,” he said.

This summary was prepared by Latin Trade