Financial Times: Government, Not Pandemic, Drives Businesses Away From Argentina

RIO DE JANEIRO, BRAZIL – The Financial Times reported on the growing wave of foreign companies leaving Argentina, alarmed by the interventionist measures.

“A growing number of companies are cutting back on investment in Argentina or fleeing altogether, for fear of increasingly interventionist government measures,” says the first sentence of the article, which defines Alberto Fernandez’s administration as “leftist”.

The article from the FT correspondent in Buenos Aires exposed the paradox that while the Minister of Economy Martín Guzmán presented the 2021 budget with optimistic projections (inflation of 29 percent, growth of 5.5 percent), the Chilean company Falabella announced its departure from the country and the government announced even stricter capital controls to protect its dwindling international reserves.

The highly influential British newspaper recalls that the president achieved a “great victory” with the recent debt restructuring, but that his initial effort to rebuild investor confidence slowed down from March, with the coronavirus pandemic.

“It’s an exaggeration to say that there is a mass exodus, but companies are dealing with a policy that has an increasingly interventionist direction that can worsen economic conditions,” says Keziz McKeague, an advisor to McLarty Associates, a lobbying and business firm founded by Thomas “Mack” McLarty, a friend and ex-advisor to former US President Bill Clinton, of whom he was also “special envoy for the Americas”.

Those who left

The FT points out that recent departures include Axalta auto parts, BASF German chemicals, and French companies Saint-Gobain Sekurit and Pierre Fabre. LATAM, the largest Latin American airline, said it had already decided to leave the country in July.

The article continues by mentioning that the coronavirus was a severe blow to the Argentine economy, “which is still under one of the world’s strictest and longest quarantines”, but it clarifies that according to analysts and investors the main cause for foreign companies to turn their backs on the country is state interventionism that -they say- “is unseen in other parts of the region”.

McKeague, McLarty’s executive, clarifies that after the failed official attempt to intervene and expropriate Vicentin, it is unlikely that there will be new large-scale nationalizations, but he adds that the “tremendous challenges” that the government itself imposes on companies with “draconian” capital controls, import restrictions and price freezes are making business in some sectors, like those of mass consumption, “increasingly unsustainable”.

Another multinational executive, not mentioned by name, says, “with everything that is happening now, forget about a foreign company making any investments”. And Alejandro Diaz, executive director of the North American Chamber of Commerce in Argentina says that exchange, price, and import controls “are deepening concerns and raising doubts about the development of business plans”.

The only company mentioned that has decided to remain and fight for its place in the Argentine market is the low-cost Fly Bondi, unlike airlines such as Qatar Airways, Emirates, and Air New Zealand, which have already decided to leave the country. “If, as we have been assured, the government creates a healthy and fair regulatory environment, we will continue to invest in Argentina,” says Peter Yu, managing director of Cartesian Capital Group, Fly Bondi’s parent company.

Finally, the article recalls the projections of the 2021 budget, but contrasts it with the opinions of economists who consider that the 29 percent inflation estimated for 2021 is too optimistic given the massive currency issue in recent months, which makes them fear that the tightening of capital controls “will only delay the potential depreciation”. In this respect, he concludes, quoting the economist Luis Secco: “they are only buying time.”

Source: infobae

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