Argentina: breathing room? | Global financial magazine

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“Foreign direct investment [FDI] has always been very small relative to the size of the Argentine economy and the flow of capital in general,” notes economist Pablo Besmedrisnik, partner and director at VDC Consulting. “While the cepo [currency controls] there is, this will not change. But we will likely have good news for the stronger economic sectors, which are expected to see greater growth.”

The government’s currency control regime, CPO, severely limits the amount of money that can be taken out of Argentina. It also dampens foreign and business interest in investments. While most analysts now expect the CEPO to be repealed within the year, corporate and foreign investment in Argentina is still largely limited to the reinvestment of surpluses that cannot be extracted from the country.


The largest foreign investments in Argentina remain largely in mining – lithium, copper, gold and silver – and projects in the hydrocarbon sector, according to Besmedrisnik. Chinese giant Ganfeng Lithium, Fortuna Silver Mines and Abrasilver are among the major players in the mining sector. In the energy field, Argentina’s Aconcagua group has announced and initiated several renewable, oil and gas projects. Meanwhile, state-owned YPF and Malaysia’s Petronas group have announced a $50 billion joint project.

“The mining projects are not very important for the sector – between 30 and 70 million dollars – but they speak to the investment trend not only in lithium mining, but also in other minerals, says Besmedrisnik. “Aconcagua has announced an approximately $200 million project to expand energy production capacity. But it is the Petronas-YPF project that is truly disruptive and massive.”

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The mega project, which was approved in 2022, aims to build a large liquefied natural gas (LNG) plant in Bahía Blanca. Petronas’ announcement in January that it would spend $180 million on site engineering gave the project more traction.

Once completed, the plant will double Argentina’s LNG production capacity with investments of $20 billion at the plant before 2031, plus another $10 billion in engineering projects and another $20 billion in new fields at the country’s other mega-project in Vaca Muerta in the Neuquén basin.

The Bahía Blanca project could begin exporting six million cubic meters of LNG daily by 2027 and generate $16 billion in annual exports upon completion.

“Argentina has one of the largest unconventional shale oil and gas reserves in the world, and these are only just being exploited,” said Ramiro Ferrari, CEO of Brazil’s Gulf Oil and former Transformation Lead for Downstream, Gas and Energy at YPF. “The country also has the fourth largest lithium reserves in the world, and there is a huge global need for the mineral in the technology industry.”

Milei’s ambitious privatization agenda puts YPF in a unique position to benefit from the Vaca Muerta oil and gas field.

“YPF could become the main player,” he says, “but the sheer size of the field and the fact that investment in exploration and transportation in the region has extremely slowed down also creates many opportunities for players in other sectors.”

Thanks to the Vaca Muerta formation, Argentina has the potential to become the world’s largest gas exporter, but billions of dollars in investments will be needed.

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Some victories for an ‘outsider’ president

Attracting the necessary capital will also depend on Argentina’s success in reducing inflation, accumulating international reserves and taming its currency and monetary problems.

Milei has scored some victories early in his administration, said Patricia Krause, Latin American economist at French credit insurer and risk management company Coface. Monthly inflation fell from 25.5% in December to 13.2% in February.

“The economy will still contract by 2.5% or more this year, but Milei has managed to achieve two budget surpluses in 2024 and improve Argentina’s international reserves by $10 billion,” Krause said.

Milei is a self-proclaimed ‘anarcho-capitalist’ political outsider. He won office, promising to close the central bank, dollarize the economy and end what he called “the orgy of government spending.”

The 53-year-old politician wasted little time after his December inauguration, proposing more than 664 economic and political reforms, most of which are in the hands of a hostile Congress.

Nevertheless, he cut government spending and, most importantly, helped devalue the Argentine peso by 54% against the dollar. Until then, the peso had an artificial official exchange rate, which, when combined with the cepo, created a large number of black market exchange rates with spreads as high as 145%.

“This created enormous uncertainty for companies, making operations extremely complex or sometimes downright impossible,” says VDC’s Besmedrisnik.

These measures have brought greater stability to the peso, resulting in an official rate that is lower but closer to market rates, giving companies breathing room for more reliable planning.

According to a recent survey by analyst firm BMI, annual inflation is still growing and is expected to peak mid-year, but should start to decline sharply in July. It is expected to reach double-digit levels in the first quarter of 2025. In the fourth quarter of 2023, the interest rate fluctuated around 150% and at the beginning of this year it was 272%.

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Argentina has a highly skilled workforce, and Ferrari and Besmedrisnik agree the human component is there to support growth. If Milei’s steps are successful, traditional sectors can increase exports and generate the reserves needed to further support the economy.

“There should be a quick recovery in meat exports,” Besmedrisnik predicts, “but also in soybeans, wheat and corn, which suffered from weather-related problems in 2023. attractive.”

The promise of mining

That said, the mining sector is underdeveloped and offers plenty of room for growth, argues Pablo Haddad, CEO and COO of Minera Santa Rita, the country’s largest non-metallic borate mining company.

“Investments in mining projects were postponed for more than a decade,” he says. “There is a lot of room for new projects – world-class mines that could make Argentina a world power in this sector. Various projects are currently in development. Of course, the economic reforms are not yet complete, but the fact that there is now a horizon is very positive for the mining industry.”

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