Ar­gentina runoff elec­tion could bring big changes in econ­omy

Big stake for sec­tors from agri­cul­ture to bank­ing

Kuwait Times - - BUSINESS -


Marcelo Cervi­gni watches a huge trac­tor plant­ing soy­beans on his farm while flip­ping through smart­phone pho­tos of neigh­bor­ing canola fields pum­meled by a hail storm the night be­fore. The dam­age will cost him about $80,000, a painful blow from na­ture but one he says is mi­nor com­pared to the taxes and ex­port re­stric­tions put on farm­ers by out­go­ing Pres­i­dent Cristina Fer­nan­dez. He hopes they will be lifted by the new pres­i­dent be­ing elected to­day.

“It’s not good to be in a busi­ness where prof­its are get­ting closer to zero,” said Cervi­gni, a fourth­gen­er­a­tion farmer out­side Capilla del Senor, a town about 50 miles (80 kilo­me­ters) north­west of Buenos Aires. For sec­tors rang­ing from agri­cul­tural to bank­ing, there is a lot at stake for Latin Amer­ica’s third-largest econ­omy in to­day’s runoff elec­tion.

Fer­nan­dez and her late hus­band Nestor Kirch­ner, who was pres­i­dent be­fore her, un­abashedly in­creased the role of the state. They spent heav­ily on pro­grams for the poor while sharply in­creas­ing taxes and adding reg­u­la­tions aimed at keep­ing prices low at home for things like bread and bus rides.

To­day, the largely pro­tec­tion­ist econ­omy is suf­fer­ing many ills: in­fla­tion around 30 per­cent, an enor­mous in­for­mal sec­tor that doesn’t al­low the gov­ern­ment to col­lect badly needed tax rev­enues and a stag­nat­ing gross do­mes­tic prod­uct that has brought job cre­ation to a halt.

“We are talk­ing about an econ­omy that has not grown over the last four years. Clearly it’s spent,” said Fed­erico Thom­sen, a Buenos Aires-based econ­o­mist. Some busi­nesses, such as those in the agri­cul­tural sec­tor, are hop­ing for a big over­haul from the next pres­i­dent. But other in­dus­tries, par­tic­u­larly tex­tiles, are ner­vous about po­ten­tial changes, fear­ing they could lose tar­iffs and other lim­its on im­ports that help in­su­late them from for­eign com­pe­ti­tion.

Ev­ery sec­tor would be af­fected by re­form of the cur­rency mar­kets, which would likely go hand-in­hand with a sharp devaluation of the Ar­gen­tine peso. Re­stric­tions on buy­ing US dol­lars have cre­ated a boom­ing black mar­ket in which many busi­nesses are forced to buy dol­lars at a much costlier rate.

Open­ing up the econ­omy could also pave the way for mil­lions more dol­lars of for­eign in­vest­ment in “Vaca Muerta,” or “Dead Cow,” the moniker given to the big shale oil re­serve in southern Ar­gentina that has been largely un­tapped. In at­tempts to at­tract in­de­pen­dent vot­ers, the two can­di­dates in Sun­day’s runoff elec­tion have tai­lored their mes­sages to the cen­ter. But in essence they rep­re­sent starkly dif­fer­ent eco­nomic vi­sions.

Daniel Sci­oli, the gov­er­nor of sprawl­ing Buenos Aires prov­ince who is backed by the pres­i­dent, presents him­self as the con­tin­u­a­tion of the ma­jor­ity of the cur­rent ad­min­is­tra­tion’s poli­cies, with small tweaks where needed. Mauri­cio Macri, the op­po­si­tion mayor of Buenos Aires, wants to lib­er­al­ize the econ­omy, from lifting the cur­rency re­stric­tions to scrap­ping many ex­port and im­port taxes.

Not sur­pris­ingly, the lit­mus test for in­dus­tries to de­cide who to sup­port comes down to how they have fared un­der Fer­nan­dez, who is barred by the con­sti­tu­tion from seek­ing a third con­sec­u­tive term.

Clothes and shoe man­u­fac­tur­ers, toy pro­duc­ers and thou­sands of small busi­nesses have ben­e­fited from im­port re­stric­tions that limit cheap Asian im­ports. Many of their lead­ers fear Macri would re­turn to the ne­olib­eral poli­cies of the 1990s, a pe­riod that many Ar­gen­tines say set the stage for coun­try’s 2001-2002 fi­nan­cial melt­down.

The view is dif­fer­ent on farms across Ar­gentina, a na­tion with mil­lions of acres of fer­tile land good for ev­ery­thing from rais­ing cat­tle to pro­duc­ing huge quan­ti­ties of soy­beans. Fer­nan­dez’s ad­min­is­tra­tion re­stricted ex­ports of grains like corn and wheat, along with eggs and milk, in at­tempts to keep prices low for do­mes­tic sta­ples. Farm­ers ar­gue it had the op­po­site ef­fect: Many ded­i­cated fewer acres to those crops and in­stead fo­cused on soy­beans. Prices for soy­bean oil soared be­tween 2008 and 2013, but have come down sharply the last few years. The Kirch­n­ers saw a cash cow in soy­beans: They added a 35 per­cent tax, based on world prices, to ex­ports. In­fu­ri­ated farm­ers in re­cent years have pe­ri­od­i­cally gone on strike while stockpiling mil­lions of tons of crops in hopes of sell­ing later at higher prices and lower taxes. Both Sci­oli and Macri have promised to scrap ex­port taxes and quo­tas on corn and wheat and grad­u­ally re­duce soy­bean taxes. Their sim­i­lar pro­pos­als may be based on the re­al­ity that the in­com­ing gov­ern­ment will badly need rev­enues. The Sci­oli camp es­ti­mates that nearly $13 bil­lion of stock­piled crops are wait­ing to be sold.

“The last 12 years have been ter­ri­ble,” said Car­los Altieri, who owns a 250-acre farm ded­i­cated to wheat, soy­beans and milk out­side Cepilla del Senor. “No mat­ter who wins, we’ll be bet­ter off than we are now.” — AP

NEW YORK: Shop­pers are seen out­side Macy’s Her­ald Square in mid­town Man­hat­tan in New York. Re­tail ex­ec­u­tives are hav­ing a lack­lus­ter out­look on hol­i­day shop­ping with the warm weather that has de­pressed sales of cold-weather ap­parel; a drop in in­ter­na­tional tourists due to the strong dol­lar; and the pref­er­ence of con­sumers to spend ex­tra money from lower gas prices on other items, such as home im­prove­ment goods and cars. —AFP

BUENOS AIRES: Mem­bers of the Ar­gen­tine Postal Ser­vice load a truck with ballot boxes for to­day’s gen­eral elec­tions in Buenos Aires on Fri­day. — AFP

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