Argentina can play a global role based on new productive sectors

RIO DE JANEIRO, BRAZIL – Argentina can find a new productive role in the reconfiguration of global value chains and locally integrate more activities as a regional supplier to consolidate its industrial transformation process, analyzed the director of the Interdisciplinary Institute of Political Economy of Buenos Aires (IIEP), Andrés López.

This is the result of his work as compiler of the book “Nuevos Sectores Productivos en la Economía Argentina” (New Productive Sectors in the Argentine Economy), published by Eudeba.

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The work investigates the impacts on development and public policies in nine sectors: unconventional hydrocarbons, lithium, biofuels, precision agriculture and livestock, knowledge services, software, data economy, nanotechnology, and the space sector.

None of them can be considered a “silver bullet” to solve Argentina’s challenges. Still, they are the ones that reveal the greatest export potential, possibilities for value addition, productivity and innovation, generation of direct and indirect employment, and strengthening of value chains, with inclusion in global markets.

The works presented were carried out by researchers and scholarship holders of the IIEP -part of UBA and Conicet – and seek to remove obstacles that delay the growth of these sectors and limit the potential spillovers and linkages to the rest of the economy.

“The initial motivation was to explore some issues that had to do with the changes that have been taking place in Argentina’s productive structure in the last two decades, with the idea of exploring these relevant transformations from the point of view of the potential for economic development,” explained López in a conversation with Télam.

The study highlights that “part of the development process consists of productive transformation, with new sectors emerging in the countries due to the accumulation of capabilities and the emergence of new actors and new technological possibilities,” the analysis of which allows for the appropriate design of public policies.

Thus, the book states that while until the beginning of the century, the debate was based on the industrialization versus natural resources axis, today the scenario is more complex due to the growing importance of the service sector and the fact that in a world dominated by global value chains, the analysis turns to the place of a country in the various links.

From this perspective, the nine productive sectors analyzed in the book reflect the diverse characteristics of the different development processes. Still, it highlights determinants of competitiveness in some dimensions that are relatively new for the local economy.

In this context of conceptualization of the productive sectors, López states that “Argentina and Latin America, in general, have certain chances of locating some activities that today are carried out in Asia or other regions due to very different situations, in which the country will have to see what role it will be able to play.”

In the first place, he analyzed that U.S. companies warn that “they cannot rely only on inputs coming from Asia or remote regions, and they are considering having closer suppliers, even if they are not so economically efficient.”

“The disputes between the United States and China -although they are now more moderate- may escalate and force the exit of some activities developed in Asia,” the economist pointed out, taking into account the more moderate tone that the Biden administration seems to be giving to its relationship with the Asian giant.

For López, it is particularly noteworthy that “a more important motivation for companies is the carbon footprint of their activities and products.”

Part of this aspect that dominates efforts to contain climate change is linked to global cargo transportation, “and this is what will help shorten the chains, travel less, and generate more regional suppliers, which opens up a new opportunity for Argentina.”

“If a reconfiguration of the global productive geography moves forward, Argentina can find spaces to locally integrate more activities to the extent that we understand how value chains work and how they are being reconfigured,” added the academic.

López clarified that from the current discussion on the disruption of the value chain not only because of the pandemic but also because of geopolitical disputes, “nobody will go back to doing what they did before; that will not happen because there are technological and productive changes associated with the fragmentation of production.”

But the challenge behind closed doors is to reverse the country’s lag in export complexity, the low level of diversification that has remained stable over the last two decades, the low level of extra-regional exports, and the low level of integration into global value chains.

In the search for cross-cutting responses to these problems, López highlighted “the high instability of the rules of the game, which is reflected in the lack of continuity of most of the policies with sectoral impact due to changes in the visions and strategies of different governments as well as budgetary restrictions.”

“It is also a matter of achieving an agenda for improving institutional quality and capacities for the design, implementation, and follow-up of public policies at the different levels of the state apparatus,” he concluded.