Marcos Peña

Marcos Peña (Image: Andrés Carli)

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#CouncilARG Recap: Economic and Political Perspectives in Argentina

By Brian Harper and Holly K. Sonneland

Five cabinet members, two governors, a mayor, private sector leaders, and more gathered for AS/COA’s fifteenth annual conference in Buenos Aires.

Lea una versión del resumen en español.

Argentina is facing “a perfect storm,” said Jorge Luis Di Fiori, president of Argentina’s Chamber of Commerce, as he kicked off “Argentina: Economic and Political Perspectives,” AS/COA’s fifteenth annual Latin American Cities Conference in Buenos Aires. The conference coincided with news of a sharp decline in the Argentine peso’s value and a Central Bank interest rate hike to 60 percent. Di Fiori took a long-term view in his remarks. “A good captain, a good crew, and teamwork will give us the result we look for,” said Di Fiori, “and we’ll arrive at a good port.”

AS/COA President Susan Segal focused her comments on the opportunities for integration in Latin America. "In a region of 600 million people and $5 trillion in GDP, there's an enormous opportunity for connectivity," said Segal.

She also emphasized the importance of a long-term perspective. "A transformation does not happen in a day, a month, or a year. Transformations take time and require not just political leadership but leadership from the private sector."

Buenos Aires Mayor Horacio Rodríguez Larreta spoke next, touting good news from his city, including 15,000 technical jobs. “The Economist declared for four consecutive years that the city [of Buenos Aires] is the best place to live in Latin America. It is the first place students choose to study,” said Rodríguez Larreta. The mayor also endorsed President Mauricio Macri’s policies and reiterated Segal’s assertion that change takes time. “I have no doubt that the path chosen by the national government is the right path,” he said. “I have no doubt that structural changes take time. What is important is to accompany and continue the chosen course.”

Marcos Peña, chief of the president’s Cabinet of Ministers, warned against partial, short-term change, which is “fed by a cynical vision.” He said the present circumstance is unique in Argentina’s history in terms of how the government is confronting it. “We discuss the budget before sending it,” he said, as the administration prepares the national budget, due to Congress on September 15. Though Peña said he would not minimize the economic challenges facing the country, he recognized that the way forward requires honesty and maturity.

Argentina’s new minister of production, Dante Sica, pointed out that Argentina has more recessions every 10 years than any other Latin American country. “We need to break that vicious cycle,” he said, underscoring the need for macroeconomic stability and structural reforms to foster Argentina’s growth as an exporter while also strengthening its internal market. Sica outlined a plan to reduce the country’s fiscal deficit to 2.7 percent in 2018 and 1.3 percent in 2019, before eliminating it in 2020, in an effort to address structural inflation. Sica also laid out a plan to help entrepreneurs, whose efforts he said have been hampered by the state. That plan includes lowering taxes, reducing the cost of non-salaried labor, improving infrastructure, and strengthening institutions.

The day’s first panel, moderated by Greenberg Traurig’s Patricia Menéndez-Cambó, explored economic and investment perspectives from the private sector in Argentina. Gustavo Rincón of Kellogg Mercosur said he hoped stability in Brazil would improve prospects for Argentina. He pointed to the Southern Cone as one of Latin America’s chief economic prospects, noting that the region has lifted 10 million people into the middle class. Raúl Padilla of the bioenergy firm Bunge said a global trade war, in fact, could present an opportunity for Argentina and Brazil to position themselves as exporters of value-added products. He said he hoped that the raw materials sector, which was battered by a drought that affected 40 percent of the country’s crops, would recover in 2019. Carlos Zarlenga of General Motors had his eye on Brazil. “I’m concerned with the auto industry in Brazil, because it has an impact on the Argentine market,” he explained. He also said that he believed it was possible that, in 20 years, all cars on the road will be electric—an exciting prospect for Argentina, given its large lithium reserves.

Newly minted Energy Minister Javier Iguacel highlighted that there’d been no disruptions to the gas supply during the winter and talked about the potential for development of the shale-rich Vaca Muerta region. Andrés Ibarra, minister of modernization, gave an update on the country’s plans to close the digital divide as it prepares to host the G20 in November, and talked specifically about the goal of bringing 4G connections to 90 percent of the country’s 1,300 municipalities by the end of the next year. Half are currently online.

“This is a difficult day,” said a frank Interior Minister Rogelio Frigerio on a volatile, bearish Thursday that saw the Argentine peso fall to 40 to $1 USD for the first time ever. “It’s difficult because we are responsible politically…For many Argentines, things clearly aren’t going well.” But he noted that, also for the first time, the country was acknowledging head-on the cause of its economic ills, namely the fiscal deficit. “I’m convinced that we’re not going back,” he said in closing. “A majority of people decided to change. We will not go back to being a country isolated from the world.”

That said, reducing the deficit won’t be successful if the country’s competitive sectors come under fire, cautioned Salta Governor Juan Manuel Urtubey, in a discussion with his counterpart in Mendoza, Alfredo Cornejo. The discussion was moderated by CIPPEC Executive Director Julia Pomares. The state, said Urtubey, should be an accelerator for production, not a hindrance. Cornejo, for his part, stressed the need to move away from a populist mindset. “We need a cultural change,” he said. “We need to support [the president’s] project for a healthy and serious capitalism.”

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