Argentina's economy is back on track

Optimism grows as the recession seems to be finally over

Argentina's economy is back on track

Leer en Español: Argentina inicia la recuperación económica

Argentina’s darkest hours seem to have ended. The most recent measurement of the synthetic regional activity indicator ISAP showed that the South American economy expanded 1.7% in the second quarter of 2017. The leading provinces behind said growth are Tucuman and Catamarca, which grew above 5% while Buenos Aires, La Rioja, Chaco, Corrientes, and Santiago del Estero rose beyond 4%.

Professor Federico Muñoz and the Universidad Argentina de la Empresa identified that the country’s growth is spreading from north to south, as the farming and food productions are re-activating as well as the infrastructure sector is booming.

The main cause of the crisis that started back in the second quarter of 2015, which lasted until 2016, was the drop in the nation’s private investment and private consumption. Foreign expenditure fell since 2011 when the former president Cristina Fernandez de Kirchner fined $10,000 dollars to the consulting agencies that challenged her official inflation score of 10% to 25%.

The Argentine republic’s perception to the world was not good as economic uncertainty and lack of accurate information pushed away potential investors. As a result of the official mismanagement of economic data, investments in the South American nation fell to 64%, according to the Cepal, on the driving force behind 17% of its total GDP. The international oil shock was the last element that dragged Argentina into recession.

2016’s outcome for the Latin American economy was of a 2.2% contraction in the overall GDP, which required disruptive action from Mauricio Macri’s government who established negotiation pathways to foster governance. As a result of the joint efforts of the public and private sector, the national Finance Minister Luis Caputo announced a $26-billion-dollar investment over the next 3.5 years in infrastructure to kick-start an overall renewal of the economy.

Another catalyst for Argentina’s comeback comes from its oil industry. The 2015 crude shock detonated the deep tensions between oil producers and unions which led to the oil production slowdown in Santa Cruz. Mauricio Macri’s government has implemented negotiation systems that proved useful as the strike has concluded.

According to the Institute of International Finances, Argentina is making a fine effort to regain international trust while receiving attention from investors. One billion dollars are expected to enter the South American economy as a result of the international direct investment, something that didn’t occur since 2014.

 

Latin American Post | David Eduardo Rodríguez Acevedo

Copy edited by Susana Cicchetto

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