Our Roadie Codi, proud intern of our business and law consulting internship in Buenos Aires, wrote this interesting essay about Argentina’s recent economic and legal changes: Argentina has recently taken the spotlight in the international investment discussion. In past years the country has suffered record inflation rates, declining economic growth, and strained international trade relations that have discouraged foreign investment. Previous administrations´policies essentially closed Argentina´s doors to the trade markets. Former chairman of Boca Juniors football club and ex-mayor of Buenos Aires Mauricio Macri ran his presidential campaign under the political coalition “Cambiemos,” (“Let´s Change”) and since his inauguration in December, his drastic reforms have caught the attention of investors worldwide.

Argentina´s place in the world market:

“Argentina has decided to take its place in the global landscape.” – President Macri

The evermore declining state of the Argentina economy combined with burdensome trade policies and low trust levels in the Argentine peso have caused the country to drift further and further away from its potential in the international markets. In an interview with Bloomberg News President Macri said, “Argentina has decided to take its place in the global landscape.” In order to make this happen, the new president took several drastic measures in order to restore worldwide faith and interest in the Argentina economy.

Talking about economics? Obama and Macri in Buenos Aires

Talking about economics? Obama and Macri in Buenos Aires

Floating the peso: As promised in his campaign, President Macri removed the famous dollar clamp within his first week and let the peso float freely on the market. Lifting the exchange controls caused an over 30% devaluation of the peso, which is currently trading around 13.8 pesos per dollar. The previously established currency controls had severely distorted the value of the peso and led to both domestic and foreign distrust in the economy.  With the new legislation, Minister of Treasury and Public Finances Alfonso Prat-Gay said, “He who wants to import will be able to do so, and he who wants to buy dollars will be able to buy them.” He continued, “The dollar clamp far from impeding bank reserves to erode, did exactly the contrary, it impeded dollars from coming in because holders did not know if tomorrow they would be able to recover them; it was a nonsense policy that hit importers and local industry.”

“By lifting capital controls and devaluing the currency, the new administration will have tackled the most obvious distortion in Argentina’s macro-policy framework,” –  Neil Shearing,  research group Capital Economics.

Overhaul of INDEC: In 2013 the International Monetary Fund (IMF) placed acensure against Argentina for publishing false data on inflation numbers, GDP, and CPI. Some have attributed these falsified numbers to the previous administration´s control and manipulation of the INDEC statistics bureau in order to portray a false sense of economic success. President Macri began work immediately on overhauling INDEC so that it would produce accurate and correct reports on the nation´s statistics. The president also gave the IMF complete access to audit its books. “We want to publish the reports so that everything is transparent,” Prat-Gay said.  In response the IMF has dictated that they will lift their motion of censure. IMF’s Western Hemisphere Director Alejandro Werner said, Argentina “has started an important transition to correct macroeconomic imbalances and microeconomic distortion.”

Negotiations with the Holdouts: One of the most controversial black marks on Argentina´s credit history was its debt negotiations with the nick-named “Holdouts.” In 2001, Argentina defaulted on over $100 billion of debt. Agreements were made with the majority of creditors to restructure the debt, but a certain group of hedge fund owners, the “Holdouts,” were not happy with the offer. As tensions increased and agreement could still not be made, the Argentina government refused to pay them at all. This led to an injunction that locked Argentina out of international capital markets. However, the prior administrations refused to budge, causing the country to suffer greatly from the lack of access to capital funds. In an effort to lift this injunction and regain international trust, President Macri renewed negotiations with the “Hold-Outs.”On March 30, 2016 the Argentine senate voted 54-16 in favor of selling $12.5 billion in bonds in order to pay the debts. The Macri administration reached a series of agreements with several investors including Paul E. Singer’s NML Capital, Montreux Partners, Dart Management and a group of Italian investors, totaling to more than $10 billion in payments. Following this agreement, Judge Thomas Griesa agreed to lift the injunction, giving Argentina much needed access to international capital markets.

Removal of Tariffs- An increase on tariffs over the past years has caused agricultural production to drop considerably. The 2015-2016 wheat production fell 16% from the previous year. President Macri told farmers gathered in Pergamino,

“There are no more excuses to not produce more…I will sign the decree today for the end of punitive export taxes and government regulations.”

This decree removed all export tariffs on corn, sunflower, wheat, mean and fish. Tariffs on soy products and their derivatives, one of the nation´s largest exports, were dropped from 35% to 30%, with plans to phase them out completely by 2022. Export duties in other industries, such as mining, were also removed. Grains sales increased 450% in the last 3 weeks of December. Mining costs are expected to drop 8% and associated sales are expected to increase 5% in 2016.

Increasing Foreign Direct Investment:

In the past 4 years Argentina has received less than 1% of its GDP from foreign investments, compared with Uruguay who recieved 10%. According to the World Bank Group, Argentina ranked 121 out of 180 countries on their ease of doing business ranking, behind countries such as Iran and Jordan. It has some of the lowest rankings in the world regarding trading across borders, starting a business, and getting licenses. Following policy changes and an increase in foreign investment promotion, billions of dollars of foreign investment have flooded into the country this year alone.

“We need important companies of the world to finance and construct roads, ports, waterways, energy, [and] trains. We’re a huge country that only depends on trucks today. It’s impossible.” – President Macri

Simplifying the Importation Process: The previous importation license system, DJAI, was not importer friendly and discouraged foreign investment. It did not comply with World Trade Organization regulations and often left importers waiting months, and sometimes indefinitely, past deadlines in order to know if their importation licenses had been improved. On December 21, 2015, the Argentine government terminated DJAI and transitioned to a more importer friendly system, SIMI. The new WTO compliant system SIMI is less complicated and more transparent for both the importers and the public administration. Importers can now request importation licenses online as well as follow the progress of the approval process. Importers are guaranteed approval notifications within the deadlines placed by the WTO.

Energy: In an effort to jump-start the energy sector, the new president has landed several large contracts in order to invest in Argentina´s energy potential. Companies YPF SA and DOW Argentina have promised a $500 Millioninvestment for the exploration of shale gas, with possibilities of increasing the investment to $2.5 Billion. President Macri has also devoted considerable resources to developing the alternative energy sector. He set a goal for the country to have 8% of its energy consumption come from renewable energy sources by 2017, and 20% by the year 2025. The Argentine company Genneia committed to a $500 million investment in wind farms.

Results: Following the ease of trade restrictions, easier trade processes, and accurate statistics, billions of dollars of investments have been pledged for investments in the countries, including investments from the following companies.*
Coca-Cola Co – $1 Billion
Genneia – $500 Million
Total SA – $100 Million +
Royal Dutch Shell Plc – $100 Million +
Dow Chemical Co – $100 Million +
BP Plc – to invest in theVaca Muerta formation, part of the world´s second largest shale gas reserve

*all amounts in US dollars.

Internal Changes:

Argentina has suffered from chronic infrastructure shortages these past years due to a lack of funding. According to the World Economic Forum´s Global Competiveness Index 2014-2015 ranked Argentina´s Infrastructure 104th out of 144 economies. President Macri promised in his campaign to carry out the “most ambitious infrastructure plan in Argentina’s history. The following reforms are aimed to encourage free market competition in the infrastructure industries and increase the quality of life of the citizens.

Subsidies: With the exception of the most vulnerable areas, all electric and gas subsidies were ended. In the year 2014 these energy subsidies totaled 14% of federal spending. This should save the federal government billions of dollars per years, hopefully reducing the fiscal deficit, which are currently the highest that they have ever been since 1982. This is also a move to increase foreign investment into the electric and gas sectors and encourage free competition.

Infrastructure: At the heart of President Macri´s infrastructure overhaul lays the Belgrano Plan. This plan calls for 16 billion dollars invested over the course of the next 10 years in order to construct 250,000 homes, build sewage networks, and repair/upgrade roads, rail, and aero-commercial connectivity in 10 northern provinces of Argentina.

Telecommunications: On January 4, 2016 the Macri administration motioned to repeal the Broadcast Media Law which limited the reach and market share of cable TV companies. This motion was approved by congress in April. The Macri administration also consolidated multiple government media organizations into a single national communications body ENACOM. This deregulation within the telecommunications industry fosters competition and private investment, hopefully increasing the quality of telecommunication services in the long run.

Income tax: The new government raised the tax floor so that anyone making less than 30,000 argentine pesos per month (approx $2000 US) will not have to pay income tax. This affected over 180,000 taxpayers within the country and is designed to soften the blow of the abrupt economic changes for those facing tougher financial circumstances.


If the country can survive the short term costs of the drastic free-market transitions, Argentina could result in a key player in international markets, leading to economic growth and an increase in the quality of life for its citizens.

Many of President Macri´s stated plans have resulted in concrete legislation and policy changes that have been welcomed by free-markets around the globe. The new policies show that Argentina is willing to compete in the international market and play by the rules. The country now has access to the global credit markets and is using the borrowed funds to invest and rebuild its economy and infrastructure. However, the rapid nature of the reforms comes at a price and have placed increased financial burdens on the people. Brazil´s economic crisis is also having a huge influence on the economy. According to IMF projection, Argentina won´t experience economic growth until 2017 or 2018. Despite the struggles, Macri´s domestic support has increased from 51% to 60% according to Analia de Franco of the Analogias polling firm in Buenos Aires. “There is a strong optimism,” said Jaime Campos, president of Argentina Business Association. “We are confident that the government will do things correctly. [Macri has] a team that is well prepared, integrated and that knows the issues.” If the country can survive the short term costs of opening it´s doors, Argentina could result in a key player in international markets, leading to economic growth and an increase in the quality of life for its citizens.

The original article can be read here: https://www.linkedin.com/pulse/argentina-reopening-its-doors-jose-maria-allonca