by The foreign investments that the country needs most in order to grow are the largest, and this is why the approval of the Large Investment Incentive Regime (RIGI) is necessary.
May 19, 2024 09.00
Since the arrival of Javier Milei for president, Argentina seems to be heading into a new era what could attract foreign investments for him long-term development of the country.
To achieve this, the economist and his team made various trips to the United States, both to conferences and to dialogue with the main executives of the global financial and corporate environment. For example, at the end of May, there will be a meeting with Mark Zuckerberg of Meta Platforms and other Silicon Valley leaders.
Furthermore, The Government is trying to improve relations with global credit organizations, taking advantage of the fact that the country’s accounts are healing. A recent example is the confirmation of the Minister of Economy Luis Caputo that in April a financial surplus was achieved again, for the fourth consecutive month.
“The meetings that have been held with representatives of the International Monetary Fund have been bearing fruit, especially to validate the Government’s credible behavior in the international markets, through the display of great macroeconomic results, such as the abrupt decline in inflation. and the fiscal and financial surplus sustained until April”he assured Adrian Morenoeconomist specializing in financial markets.
“Given meetings with more personalities from politics and the global financial sphere, such as President Joe Biden, Argentina could obtain some investments, which were also encouraged by great businessmen such as Elon Musk, who showed his preference for investing locally”he added, in reference to the publication of the tycoon on his X platform in which he recommended betting on the country.
Musk asked Milei to go to Los Angeles, they met for more than 70 minutes, and then he came out with this idea of ’investing in Argentina’. As far as we could find out, there is an intention to do something here, probably a battery factory. What makes everything easier in Argentina are three things: lithium, which is next to any manufacturing project; then automotive companies like Toyota with whom Tesla has battery agreements to supply, and Toyota AC is huge compared to Latin America; and then private port infrastructure in the Paran Up-River that could quickly be coupledheld Mauro MazzaHead of Research at Bull Market Brokers.
In this frame, Mariano Sardnsfounder and executive director of FDI Heritage Manager, indicated that Milei is “improving its relationship with the West” and “saying what the capitalist world likes to hear”. In other words, the new Government is emphasizing a Small and efficient state; in which there is legal security and do not change the rules of the game; in the no monetary issue and low inflation; and in standards and pro-investment rules.
“He is saying all his speeches, his dialogues, that is why he is attracting a lot of attention in the capitalist world, because he is saying what investors around the world want to hear regardless of ideology. Having a good relationship opens doors and facilitates credit. Yes “Everything is going well, little by little the rest of the companies will arrive; some will take time to do so and others will come faster.”Sardns said.
However, the foreign investments that the country needs most in order to grow are the largest, and this is why approval of the Incentive Regime for Large Investments (RIGI)to attract the superiors to the US$200 million. “Large investments are those that generate a lot of land movement, construction and employment and then generate high added value”commented the expert.
To exemplify his position, Sardns mentioned the case of Chile, which exports around US$40 billion in copper aloneone of the most important metals in the current era of energy transition, when Argentina sells only US$ 4,000 million abroad.
“The potential that Argentina has is phenomenal in the generation of foreign exchange, employment and development of the country. That is why Argentina needs everything, but those that are most encouraged at first because it is the type of company that is encouraged to invest “The oil and mining companies are already dealing with this type of pass.”he pointed out.
The industrial engineer and specialist in Corporate Finance and Investment Banking clarified that The RIGI guarantees that what Argentina did not happen again “did so many times”that is, changing the rules of the game.
“At different times, Argentina was in charge of attracting, time after time, large companies, and then they ended up leaving because it changed the rules of the game. For example, all those that built highways, the mining companies themselves, the oil companies. Recently, they left. “ExxonMobil, one of the largest companies and the one that had invested the most in the Vaca Muerta area, and left directly. But this case is the most emblematic: they are companies that are used to dealing with problematic countries, but they got tired of Argentina.”concluded Mariano Sardns.
In this line, Eugenio Marchief economist at the Libertad y Progreso Foundation (LyP), reported that there are three factors that make the RIGI have the potential to have a strong impact in the short term.
Argentina is far from international conflicts, a factor that is becoming a determining factor in the decision to sink capital in a country. It has an abundance of resources that are appreciated and will be demanded by the world, such as lithium, copper, gas, food and human capital. And because, within the framework of the above, there are a number of investment projects that are ready to begin to be developed and are waiting for a signal of political certainty about the future of the country.held.
The interesting thing about RIGI and the arrival of new large foreign investments is that local small and medium-sized businesses would also benefitnot just the corporations that come from outside.
Although the RIGI is designed to apply large investment projects, we must not lose sight of the fact that the benefits will also be seen by SMEs and society as a whole. One of the main characteristics of these large projects is that, due to their scale, they mobilize a large part of the local productive ecosystem. Large companies do not produce everything they need for these great initiatives, but rather they support and hire MSMEs and local entrepreneurs as suppliers.detailed Mar.
But the regime alone will not do magic: The country has to continue its path of economic recovery to generate confidence in businessmen who intend to invest large amounts of money.
“If the arrival of global investments materializes, there should surely previously be a set of clear property rules in the country, with respect to private property as well as reduced tax norms that are maintained.”Moreno said.
And he concluded: “And fundamentally an economy that begins to rebound, since, if any foreign agent decides to invest in Argentina, they will want to recover the capital and obtain profits and will only be able to do so within a panorama where the demand for goods and services recovers, an aspect that For now it is not possible to see in this recessive context.
