Almost wherever you turned at Argentina’s blockbuster conference on foreign investment this week, you heard the same refrain from many of the global CEOs attending along with almost 2,000 potential investors from 67 countries: ‘Argentina is set up to win if it can change its game, and fix itself.’
Those the words of Andrew Liveris, Chairman and CEO of Dow Chemical, who came with an instant promise of further investment totalling half a billion dollars, declaring : “we’re upping our investment because of the enormous potential here, and the promise of real change.”
He was followed, quickly, by James Scriven, CEO of the Inter-American Investment Corporation, revealing a 5 billion dollar bet on Argentina over the next few years. The came Toyota with an immediate, 800 million dollar expansion plan. ‘Our focus is on taking our plants to full capacity as soon as possible, we believe in this new government,’ to quote Latin American CEO Steve St Angelo.
The UK’s Sir Martin Sorrell, CEO of WPP, was effusive about Argentine President Mauricio Macri, who opened proceedings telling the 2,000 delegates : ‘you’re in the right place at the perfect moment for investment.’
Sorrell praised Macri for leading ‘ a remarkable revival of Argentina,’ and then made the case powerfully for following his lead in doubling down on WPP’s bet on Argentina. ‘There’s immense talent here, and yes there are fantastic natural resources, the combination makes for incredible opportunity, and Argentina being open for business under this leadership is critical.’
Macri’s government went into this conference hoping to see tens of billions of dollars of investment from abroad, in the medium-term, and in the short-term a political boost at home. Rather extraordinarily, they listed a target of 175 billion in total, with ‘target’ investment numbers for the sectors bringing such attention to Buenos Aires this week : 76 billion dollars for energy and mining, 75 billion for infrastructure, 15 billion for the agricultural industry, and so on.
Such numbers, such hopes hinge on the confluence of economic policy and political popularity that confronts the Macri Government. As the President himself outlined in his opening address, following it up with a personal lunch with CEOs attending, he has taken bold decisions to break with the the country’s Peronist past, of debt, deficits and rampant inflation.
So the Macri team has settled with creditors holding out on debts from the country’s 2001 default, paving the way for a return to capital markets. So the peso now floats freely, after years in which it was held artificially high by draining central reserves. So inflation is coming down, likewise the budget deficit.
‘The question is whether Macri retains the confidence of his own people and country, less important that of the world of investors outside,’ according to one Argentina’s leading pollsters, marveling at the spectacle of Fortune 100 CEOs drinking coffee and tasting medialunas, the small, sweet croissants that are the pride of Argentina. ‘All these CEOs are betting on Macri as much as Argentina.’
So far the President’s approval numbers remain solid, although the percentage of those who question the country’s economic direction is rising notably in the face of higher unemployment and lower government subsidies for household energy bills. The key test comes next year, when his Government faces midterm elections.
“I’m optimistic, Macri has put us on our new road, and he is determined to see it through,’ to quote Gustavo Grobocopatel, President of one of Argentina’s biggest agro-companies and
a visionary who sees biotechnology as the key to the next phase in transforming the country’s enormous farming potential and making it once again a prime source of food for the world.
‘And Macri knows that we have to confront the issue of being competitive, he’s the first President of his kind, understanding that the Peronists made us simply uncompetitive.’
Similarly, this President and his Government seem to understand the need for making friends out of foes. Significantly, the UK sent a Government team here, headed by Sir Alan Duncan, Minister at the Foreign Office. ‘The world right now is looking at Argentina, and saying wonderful, sensible policies that prevent the country from going over the edge,’ he noted, carefully avoiding mention of the Falklands conflict or the fact that Britain needs trading partners post Brexit. ‘We have every intention of working with Argentina closely on developing trade, and commerce, so that we both benefit.’
To which Sir Martin Sorrell added : ‘Argentina represents a very important bilateral relationship now, rich with opportunity, on a par with Brazil, and not just for Britain.’
David Smith.OMFIF Advisory Board member, represented the UN Secretary-General in the Americas for a decade.