In connection with the outbreak of the covid-19 pandemic, one of the longest and strictest quarantines in the world was introduced in Argentina. GDP fell by almost 10% in 2020, only a slight recovery is expected in 2021. In addition to high inflation, whose year-on-year rate reached 36% in 2020 despite a sharp economic downturn and is still one of the highest in the world, the country has to contend with a falling domestic currency and a strict foreign trade regime.
Argentina remains in dire need of foreign investment and an influx of modern technology. For investors, the weakening of the Argentine peso could be an apparently interesting opportunity, but other aspects prevent the possibility of generating profit (high inflation, high duties and taxes, bureaucracy, etc.).
The economy is still very closed to other countries (perhaps with the exception of MERCOSUR countries) and dependence on agricultural crops makes it extremely sensitive. Already 43% of Argentines are below the poverty line, child poverty reaches an unprecedented 63%. Unemployment rose to 11.8%, the highest in 15 years.
In the name of social harmony, the government tries to compensate citizens for the shortfall in income by various means, but it does not have enough resources to do so. They solve the situation by printing more banknotes, which is one of the reasons why inflation is still high. Social measures (3-4% of GDP) include the payment of various types of special benefits (for families, the self-employed, the unemployed, doctors and nurses, etc.).
Since the beginning of the pandemic, the Argentine government has also introduced tools to help the business sector in paying salaries, paying for services, etc. There have also been initiatives to support consumption, for example in the form of the “Ahora 12” credit plan. In total, state aid required USD 20 million, which represents approximately 6.7% of GDP. 43% of businesses have received this help since the start of the pandemic.
In connection with the impact of the pandemic, the tourism and hotel industry was logically the most affected. The second most affected sector was foreign trade, which fell by 13.8%, followed by construction. Anti-pandemic measures have disrupted production and sales for more than half of companies, with 65% experiencing a loss of more than 60% in sales at some point. The decrease in income was also accompanied by a decrease in the number of workers and an increase in unemployment.
Given the drop in revenues and the macroeconomic situation of over-indebted Argentina, it will take years for the country to reach fiscal balance. In the course of 2020, the government managed to reach an agreement with private creditors on the postponement and reduction of debt repayments. In 2021, negotiations follow with the IMF (claims of USD 45 billion), which is more realistic about Argentina’s options, and some form of agreement is expected. In the medium term, the threat of state bankruptcy is thus probably averted.
Post-covid-19 opportunities for foreign exporters
Despite the current economic situation, there are opportunities for Czech companies that want to gain a foothold in Argentina. The future is mainly engineering, considering Argentina’s preference to produce the largest possible range of goods locally. Considering the potential of agricultural production, another promising field is agricultural machinery and smart technologies applied in agriculture. Huge reserves of mineral wealth are found in Argentina.
In addition, the vast majority of these deposits have not yet been explored and therefore offer a huge scope for foreign investors in the mining and quarrying industry. In general, Czech companies have a chance here with technological innovations, which have long been in short supply in Argentina and, by extension, in the entire region.
Space for these innovations and new technologies is also offered in sectors that will be necessary for economic growth in the short term: biotechnology, petrochemicals, healthcare, IT, etc.
Mining, mining and oil industry
According to allcountrylist, the development of the mining and quarrying industry is one of the government’s priorities, as it has the potential to generate large amounts of foreign exchange from the export of raw materials abroad. The country has large reserves of copper, lead, iron, gold, silver, lithium, molybdenum, uranium, potassium and other rare metals. According to estimates, up to 70% of the area potentially suitable for mining has not even been explored yet. At the beginning of 2021, 16 sites were mined, 7 projects are under construction, 7 projects are in the feasibility study stage, 6 projects are in the initial preparation stage, 40 projects are in the advanced exploration stage and 250 projects are in the initial exploration stage.
Since 2015, much attention has been focused on lithium and copper. Especially from lithium, Argentina promises a large source of income in the future. In 12 areas (Jujuy, Catamarca, Salta provinces) there could be up to 92 Mt of lithium, which would cover supplies for 100 years. Copper reserves are estimated at 65 Mt. The government is luring foreign investors into mining projects, from which it promises a quick start of mining, an influx of investments and the creation of jobs.
There are also fiscal advantages offered by the governments of the individual provinces, since natural resources are their property in Argentina. Suppliers of machinery and technology must take into account the size of Argentina (the 8th largest country in the world) and the distance of the sites from large cities, which significantly increases the demands on logistics and sophisticated after-sales service (availability of spare parts, transport of technicians and service to the place of installation of the technology, etc. ).
ICT
Mobile and broadband Internet access in Argentina is about 15% slower than in neighboring countries, and the government wants to remedy this situation. The geography of the country also presents problems, as the population is concentrated in several cities with large distances between them.
Opportunities are thus found in the construction of mobile signal transmitters, of which over 20,000 are missing. Not only technology suppliers, but also independent operators of these mobile transmitters may have a chance. ARSAT’s fiber optic backbone needs to be extended to homes and businesses.
In the future, it is planned to cover the entire country with a 4G signal. ARSAT is implementing the National Internet Plan, thanks to which it wants to connect over 1,300 cities and towns to broadband Internet. Private companies (Claro, Personal, Nextel, Movistar) are also investing, including preparations for the construction of 5G networks.
The Argentinian online company Mercado Libre is called the “Latin American Amazon”, which creates a partially open network of trading, logistics and financial companies around itself, which form an ecosystem of interconnected entities in which Czech companies can also participate.
Agricultural and food industry
Argentina has great potential in agriculture, 53% of its area is covered by arable land. Up to 70% of Argentina’s exports are agricultural products. Agriculture and related industries make up a substantial part of GDP (34%). However, the application of new technologies in agriculture is a big challenge for Argentina, despite the mentioned dependence on agriculture, it does not invest much in this area.
Tax breaks and incentives in the field of agriculture and forestry exist, but they are not many. All machinery related to this sector usually enters the Argentine market with a zero tariff.
There is a need for technologies related to more efficient energy management, crop/harvest monitoring, process optimization, etc. Perspective categories are also organic production and organic food, biomass processing, breeding and genetics.
