Latin America
by Charles W. Thurston
Latin America Correspondent
thurstoncw@rodmanmedia.com
Argentina’s new president, Mauricio Macri has ended four years of curren- cy restrictions, devalued its currency,
and unshackled its import and export trade,
opening the door to substantial growth in the
oil and gas-rich country. On the first day of
the new currency float system in December,
the peso was down about 40 percent against
the dollar, boding well for exports, and blocking many imports.
The International Monetary Fund has commented that the Macri administration “has
initiated an important transition to correct
macro-economic imbalances and micro-eco-nomic distortions,” to improve growth prospects in the mid-term. While short-term growth
may be barely positive, as the economy adjusts
to the relaxed currency regulations, growth
should recover.
HSBC predicts that potential growth in GDP
for 2017 could reach 3. 5 percent. The bank also
noted, just prior to the November election, that
their “Trade Confidence Score in Argentina has
moved to 110 from 99 previously, an increase
that represents a shift from contraction to ex-
pansion territory. The main factor behind the
improvement was the better expectations for
volume of trade over the next six months, with
45 percent of the companies expecting volumes
to increase.”
One significant impact these changes
should make on the Argentine economy is
that long-stifled domestic and foreign invest-
ment capital should return to the country.
In Davos, Macri announced a 2016 foreign
investment target of $20 billion, citing com-
mitments already made for “hundreds of mil-
lions each” by a handful of multinational
companies, including Dow Chemical.
Among sectors in which new investment
could focus is the paint and coatings sector, fa-
cilitated by Argentina’s ability to domestically
source petroleum derivatives. Architectural,
automotive and industrial paints and coatings
could show gains in both production and
demand. A 2015 study by Agnelo Editora,
based in Brazil, suggested that the paint and
coatings market in the Southern Cone coun-
tries – Argentina, Brazil, Chile and Uruguay
– will cumulatively grow by six percent per
year through 2018. Within Latin America,
Argentina represents about 10 percent of the
total market.
Until now, Argentina has been a net gas
exporter, but expectations are that the country’s industrial use of gas will rise sharply. In
January, Argentina’s YPF SA and American
Energy Partners LP, agreed in January to jointly explore and develop $500 million worth of
oil and gas in the Vaca Muerta or “dead cow”
shale formation, in the Patagonian Province
of Neuquén.
In November, Fabián Gil, the new president of Dow Latin America as of January,
suggested that Argentina’s Bahia Blanca
complex could become Dow’s third major
polyethylene project, globally. Platts cited
Gil’s speech during a recent APLA meeting,
saying “Bahia Blanca is a hub where all the
gas that goes in can be consumed,” and added
that “Bahia Blanca is an opportunity because
of its location in the southern tip of Buenos
Aires where pipelines go through.” Apart
from potential new production facilities
there, Dow would also establish a research
and development technology center there, Gil
was quoted saying.
Gil, who was educated in Argentina, is now
responsible for 25 Dow production facilities
across Latin American, along with 16 R&D
centers and a dozen other offices, employing
some 5,400 workers. Dow’s Brazil Internet site
lists 13 pages of construction sector products
alone, many of which are utilized by the paint
and coatings industry. CW
Among sectors
in which new
investment
could focus is
the paint and
coatings sector,
facilitated by
Argentina’s ability
to domestically
source petroleum
derivatives.
Argentina Unshackles Economic Rules
