Argentina Economy and Energy

Argentina Economy and Energy


A country to which the large production of meat and cereals once seemed to guarantee a rich future and which has accentuated its industrial profile since the mid-twentieth century, Argentina has gone through sudden economic changes, losing various positions in the ranking over the The model centered on protected and dirigiste industrialization, which prevailed in the central decades of the twentieth century, has been replaced by a neoliberal development model since the 1970s, and with particular rigor in the 1990s. The latter, unlike other cases in the same region, however, did not bear the hoped-for results, and at the beginning of the 21st century the Peronist governments returned to certain measures typical of economic nationalism, finding ample legitimacy in the collapse that struck in 2001. the national economic and financial system. These measures have led in some cases to new nationalizations, where previously privatizations had been carried out, and to increasing regulatory intervention by the state, both in commercial and financial matters. The crisis of 2001 was mostly blamed by public opinion precisely on the failure of the neoliberal model, of which Argentina had been a zealous disciple, and on the lack of interest shown then in its destiny by international financial organizations. In the following decade the Argentine economy returned to growth at a rapid pace (with rates above 8-9%), emerging rapidly, and with relatively limited damage, from the financial crisis that began in the USA in 2008. Various factors have fueled the recovery: among these the effect of Chinese demand on Argentine exports and in general on the prices of raw materials stands out, the economy of which still relies on export to a large extent.

Cyclically, the country is hit by high inflation – according to government statistics this would grow by around 14%, while for the IMF it would be close to 16.8% – which slows down its development. Following lower growth than in the recent past – in 2014, GDP growth was negative by -1.7% while for 2015, stagnation is expected to continue with 0.5% – and poor competitiveness on the markets international markets, with consequent reductions in the trade surplus, the performance of the Argentine economy in recent years has been very disappointing. The situation was also handicapped by unpopular monetary policies, such as currency restrictions to curb the flight of capital from the country. The combined action of these factors has caused, on the one hand, a strong loss of purchasing power on wages; on the other hand, restrictions and controls on foreign currency transactions, bringing the country into a situation of ‘ selective default ‘. For Argentina business, please check

Thirteen years after the 2001 crisis, the new crack was born following the failure to agree on the payment of 539 million dollars of interest due in July 2014 to two US hedge funds that had not accepted the debt restructuring like the other creditors. international. Negotiations between the Argentine delegation and the mediator representing the interests of the holdouts have gone on for several months without a minimum settlement on the payment, thus forcing the government to immediately compensate the investment funds in question as established by the favorable ruling of the New York District Court in November 2012. Between 2014 and 2015 the country had to repay foreign currency debts of over $ 20 billion, against reserves currently estimated at around $ 30 billion – equal to about 4 months of imports.

The new president Macri has promised a change of course with the adoption of more liberal policies and a reduced role of state intervention in the management of the national economy. Among the first measures Macri expects are the replacement of Central Bank leaders, economists politically linked to Kirchnerism, with more independent technicians, as well as a freer fluctuation of the exchange rate, which could devalue to reflect a more real picture of the level. competitiveness (although there is a risk that such a move could further increase inflation).

Energy and environment

The energy sector has followed the often erratic path of foreign policy. The state monopoly on hydrocarbons, of which Argentina is the fourth largest producer in South America, was a dogma of economic nationalism that prevailed for much of the twentieth century. In the 1990s, with the aim of rationalizing the sector and boosting investments, President Carlos Menem promoted the privatization of the state-owned Ypf, which passed into the hands of the Spanish multinational Repsol.

Since 2004, however, with the creation of the national public company Enarsa, the Argentine state has recovered a central role in the entire energy sector, in particular in the field of oil and natural gas which cover almost 90% of the national energy needs. In May 2012, Buenos Aires therefore renationalized the YPF, denouncing the lack of investment by the previous owner and the high cost of energy for the country. The recent discovery of important shale gas and shale oil fields (equal to 802,000 billion cubic feet) could open a new season of investments in the sector, also useful for reviving the national economy.

As in the past, the management of this strategic area is the subject of heated controversy. The government boasts the self-sufficiency that Argentina has almost achieved and the gradual differentiation of the energy mix (in which hydrocarbons dominate anyway) while critics observe that the recovery of the state in the energy sector has inhibited investments and slowed down research. of new sources, putting at risk the very self-sufficiency that the opening policies had made it possible to achieve.

Something similar applies to environmental policies. In this sector, Argentina is among the countries with the greatest potential in the world for renewable energies, especially wind power. The country is taking concrete steps forward to increase production, which is expected to increase at rates of over 10% in the years to come. At the same time, public authorities are often criticized for the absence of a real environmental policy and for the high degree of carbon dioxide emissions from the national production system and the transport sector. In this sense, there is no doubt that Argentina’s energy matrix is ​​much more polluting and much less differentiated than that of neighboring Brazil.

Argentina Economy and Energy