COVID sank Argentina’s expectations, UN warns

While everyone was suffering from the economic consequences product of the appearance of Sars-CoV-2 which produces the disease of Covid-19, some regions will recover faster than others and, in this scenario, Latin America has suffered a blow to its expectations for progress and, within the subcontinent, Argentina has been the worst affected country. .

This is clear from the report prepared by the United Nations Conference on Trade and Development (UNCTAD), established in 1964 to deal with trade and investment issues. It is the main organ of the United Nations General Assembly to maximize trade and investment opportunities for developing countries as well as assistance in their efforts to integrate into the global economy.

Well, the report, being pessimistic, should become the main debate for national politicians on the campaign trail.

Symptoms of the country’s economic slowdown

In the same way that a person infected with Covid-19 presents clear symptoms which are subsequently corroborated by a laboratory, National economy shows panorama of low blinds, companies entering creditors’ appeal, and growing unemployment rate which are then corroborated by official reports from state statistical agencies.

One of the most obvious symptoms of the worsening recessive crisis in Argentina is the departure of foreign companies the country, the closure of business operations in our territory of which there are a large number of examples such as Falabella; Latam; Walmart; Dinners; Norwegian; Nike; Eli Lilly; Air New Zealand, etc. and until the closure of an embassy like that of Denmark.

He is productive exodus puts, in white on black, the existing crisis in the field of foreign direct investment (FDI), which takes into account the capital that comes from abroad to the country, companies based in Argentina or new companies, added reinvestment of profits made by companies of foreign origin.

This crisis is not an evil that affects Argentina in particular, but rather demolishes the foundations of Latin American economies in general.. The UNCTAD report explains that “The Covid-19 hits foreign investments in transition economies with more strength than other regions of the planet and despite stimulus efforts, it is unlikely that in the years to come there will be a return to pre-pandemic levels of household incomes. Foreign investments “.

In the country-by-country analysis, Argentina takes the worst part of the ratio with Venezuela, “… Argentina’s FDI inflows, which had already been on a downward trajectory since 2018, fell from 38% to 4 , $ 1 billion in 2020. The country has experienced a prolonged shutdown of the industrial sector, causing a decline in fixed capital formation and a decline in the economy. These contractions have further complicated the financing conditions of the country, which is currently in recession since 2018, which ultimately led to default on its external debt “.

Being more specific to the domestic market, UNCTAD analysts noted that “the difficult environment had a significant impact on FDI: new investments shrank by 45% and reinvested profits fell by 22%. investors including Walmart (US), Schlumberger (US), MetLife (US) and Danone (France) have sold their local assets to national or regional investors. ”

The expectation of a resumption of economic activity during the “new normal” is the bet of all governments, however. the Latin America region would experience slower growth than expected for developing economies.

While for emerging economies In Eastern Europe or Asia, the recovery in Gross Domestic Product (GDP) will be around 6.7% by 2021, in Latin America the development of the productive forces will be slower: 4.4% in South America ; 5.6% in Central America and 3.7% in the Caribbean States.

“In 2021, FDI in the region should remain significantly stable and below the average increase expected for all developing economies. Even assuming that fiscal and monetary conditions continue to adjust to the economic situation and its recovery and that vaccination campaigns move forward rapidly. , FDI should not return to their pre-crisis level before 2023, ”the report indicates in its conclusions.

Finally, the report also includes an electoral political vision, “the influx of foreign investment depends on variables that analysts monitor daily, such as the resumption of fixed capital formation, both private and public, but it will also depend on factors policies such as elections in Peru, Chile, Honduras and Nicaragua, and planned midterm elections in Mexico and Argentina ”.

Argentina, “the worst in its class”

The expert in international trade, Marcelo Elizondo, presented to the public a book in which he observed that “according to UNCTAD data, if we assess the global evolution of the accumulation of FDI, we see that during of the past 21st century, the continent where the fastest growth is Asia (660%). (It has increased by one and a half times The vast majority of countries in the world have added FDI during these periods. Despite this, there are a few cases of countries in the world that have not followed this trend. one is Argentina. ”

We are almost in the presence of a lost decade in terms of investment if we take into account the fact that the Argentina is the fourth country in the world with the largest absolute reduction in its stock of FDI between 2010 and 2019 with a fall of $ 16,421 million.

Elizondo, clarified the figures before outbreak of covid, “If, in addition, we measure all the years since the beginning of the millennium until 2019, Argentina appears alarmingly as the second country – globally and with 202 measured – with the worst performance in the evolution as a percentage of the stock of foreign direct investment. acting on its territory. While the world grew by almost 400%, in Argentina the nominal stock of FDI in 2019 is practically similar to that of 2000, at a figure close to 66,000 million dollars.“.

In an article published in NA, Natalia Motyl, economist at the Libertad y Progreso Foundation, explains the decline of the national economy and points to the lack of capital inflows that are used to generate more jobs: “If a country like the ours wishes to converge For the development of the richest nations of the world, it is necessary to attract this surplus of capital which abounds in the rest of the planet Capital is saved for a long time, and if you have not done so, you must get from those who did. However, to attract one, it must become attractive, and this is done with structural reforms. Currently, Argentina is not attractive for the arrival of investments. ”

And he explained: “The foreign direct investment It is 1.1% compared to the Gross Product, four times lower than that of Uruguay (4.7%), three times lower than Chile (3.3%) and lower than Brazil (1.7%) and in Ecuador (1.1%) “.

Marcelo Elizondo adds that “the stock of FDI in Argentina is each year less relevant compared to the world total: whereas in 2000 FDI in our country represented 0.91% of the world total; then in 2010, this stock in Argentina represented 0.43% of the total. world total; and in 2019 it is equivalent to only 0.19% of the world total. In the same sense, we can discover that while in 2000 the stock of FDI in Argentina represented 19.9% ​​of the total sunk in Latin America and the Caribbean; Argentina’s share of this regional total fell to 5.39% in 2010, and finally fell in 2019 to just 3.05% of the total for Latin America and the Caribbean. ”

These data show that the health crisis caused by the coronavirus has only worsened the economic problems which, in the case of foreign direct investment, already existed, showing that it is a problem of a structural nature.