Argentina is one of the worst economies in which to invest, says The Economist

The international magazine The Economist has been concise with Argentina in its recent work on investment risk in Latin America in the face of measures taken by Covid-19. In the report entitled “Populism and Politics: Operational Risk in Latin America”, the country is ranked among the riskiest to invest, with 57 points out of 100.

The report places Argentina in seventh place, overtaken by countries like Venezuela, which obtained 86 points; Nicaragua, with 65; and Haiti and Bolivia, with 63 each. At the other extreme are Chile, Peru and Uruguay.

“Latin America suffered from one of the highest death rates and one of the most pronounced recessions in the world in 2020 in the face of the coronavirus pandemic. In 2021, the focus is immediately on the the fight against the pandemic, the launch of vaccines and the return of economic activity to pre-pandemic levels “, details the report. And he stressed:” But it will have lasting repercussions. There will be economic “scars” to investment.

And in this sense, to determine the level of risk that the investment will suffer, the publication focused on three factors: political risk, economic risk and regulatory risk. On the three points, Argentina leads the standings.

On the Political risk, the publication mentioned the electoral context that some countries will experience in 2021, including Argentina. In this point and on a scale of 1 to 25, Argentina received 12 points.

“The pandemic presents obvious risks to the security environment and political stability, and weaknesses in political effectiveness in Latin America will hamper the ability of governments to meet these challenges,” said the report, which subdivides this point into three: security, political stability. and government efficiency.

In all three, Argentina is among the highest. Regarding security: Argentina was ranked No. 8. In terms of political stability, the country was ranked 4, with more than 40 points. And when it comes to government efficiency, it was ranked 8th again.

The country’s greatest danger, according to the report, has been government efficiency since “Divisions within the ruling coalition worsen governance”.

Another major risk is deep discontent with political leaders in the region: that opposition groups can come to power and cause a significant deterioration in the operating conditions of investments.

2021 is an important election year for Latinos, with presidential elections in several major economies such as Ecuador, Peru and Chile, and midterm elections in key countries like Mexico and Argentina.

On the economic risk, the report of the international magazine, pointed out that the greatest risk facing entrepreneurs is linked to “the lack of correction of macroeconomic imbalances”, which produce “a strong inflationary monetary adjustment”. This problem was deemed “very serious” and Argentina obtained the worst score: they obtained 25 points out of 25 points of risk.

The document also mentions the difficulties related to foreign trade and payments, since the government is removing non-tariff barriers as part of the import substitution policy. This represents a “moderate” risk and the country collects 9 points out of 25.

As for regulatory risks, The Economist pointed out that the government “nationalize strategic companies”. “Growing nationalism of resources amid growing objections to large-scale mining, energy and agriculture projects presents risks, in the form of removal of incentives, increased demands for local content and, in extreme cases, nationalization.For publication, the risk is again high and placing Argentina in 16th position out of 25.

SN