it’s already lower than with Macri, Cristina and Nestor

Foreign direct investment in Argentina records lowest levels since the 2001 crisis. In June of this year, according to Central Bank payrolls, US $ 748 million entered the country in the past twelve months for “non-resident direct investment”.

It is true that in these twenty years there have been months and episodes in modest circles, for example in the Lehman Brothers crisis. But they were short shocks, with a beginning and an end. Now the fall started in 2019 and has yet to cross the finish line.

To talk about these phenomena and avoid the distortion of inflation, economists construct measures and indices which make the language a little more technical but which facilitate comparisons with other countries. The non-specialist reader will understand. For example, what part of the economy is foreign investment.

Data for Argentina indicate that it is well below the regional average. Last year it was 1.1% of GDP, the lowest level since 2016 and one of the lowest in historical terms. The region’s average between 2011 and 2020 was 3.7%.

Taking into account the countries of the region, the investment flows arriving in Argentina were 5% last year and the previous year. This is less than the 8% of 2018 and 2017. And well below the 20% of the second half of the 90s. These figures are from the United Nations.

“Factors such as capital controls have distorted flows. Restrictions on the repatriation of dividends at certain periods temporarily increase investment flows, but discourages new investments and adds volatility to external financingSays Martín Castellanos, an economist at the Institute for International Finance, a Washington-based think tank.

And what about the pandemic? Doesn’t Argentina belong to a region that has gone through the worst economic crisis since 1901 according to the World Bank? Doesn’t that explain the recent drop?

“We cannot sweep the garbage under the Covid carpet – says Andrés Borenstein, economist at Econviews and podcaster of The Economy in Three Minutes-, the economy will not take off if this level of gap persists (83%). Foreign investments with Macri exceeded US $ 3,000 million and with Cristina, with a smaller spread, US $ 4,000 million “.

Three elements make it possible to highlight the reasons why foreign investment fell during these years.

One, perhaps, is the uncertainty who transmitted to the market the Political cycle 2019 succession and transition.

According to BCRA data, foreign investment started to decline somewhere in the second quarter of 2019, just before PASO, when the Kirchnerist electoral offer was put in place, the government of Mauricio Macri had in mind to negotiate with the IMF. a program of extended facilities to refinance the debt in a possible second period (like Martín Guzmán today) while he was asking the BCRA’s authorization to intervene on the dollar. None of this went in an orderly fashion.

The other factor is economic decisions and policies of the government.

The uncertainty about the exchange rate (gap), added to actions and regulations such as restrictions on companies to pay their debts in dollars, were not neutral. For example, the Central Bank forces companies that pay debts in dollars to buy 30% of foreign currencies on the official market and to refinance the rest. Or go to financial dollars. “The Central Bank takes care of the reserves and that’s good -dés Borenstein-, but after Do not ask Argentinian companies to get into debt and invest. These measures generate a very high reputation cost and reduce debt to the economy “.

The third factor is more of construction. Gustavo Svarzman, economist and professor at the UBA of Economic Development, says that “Since the early 2000s, Argentina has disappeared from the radar of international investments. In the best moments of the last decade, we were not the recipients of relevant foreign investments, which were limited to specific activities such as Vaca Muerta or mining anyway. “. He specifies that “in the 90s, the dollars came from privatizations, like YPF, and sales of companies like Terrabusi, Bagley, Loma Negra. The economy has become foreign, we thought we could earn money in Argentina ”.

Svarzman points out that Argentina’s performance regionally was worse than others just when the economy grew at China’s pace between 2000 and 2010. It went from being the third-largest regional investment destination to one. lower position than Chile and Colombia.

Today the Foreign capital stock is 26.4% higher than 20 years ago (see infographic). But if we take inflation (in dollars) into account, it is lower. The best performing countries at this time were Uruguay and Costa Rica. While in the 1960s and 1970s, large investments were the automotive industry, petrochemicals and steel industries are now the services. “Where have these big bets gone before?” Brazil, Mexico or Argentina. Today a call center can be set up in Uruguay ”.

The Center for Studies for 21st Century Production of the Ministry of Productive Development has compiled investment announcements between January 2020 and June 2021 for a total of US $ 33,673 million. Foreign companies have anticipated their intention to throw away US $ 15,371 million. This is about 177 ads for mining, automotive, petroleum, chemicals, knowledge economy. But as American economist Roberto Clower said, one thing is demand notional and the other is the effective. The first is to wish and the other to clarify. In Argentina, this gap is also widening.