Argentine Business Community Remains Nervous as Economy Recovers

July 6, 2016Argentinaby EW News Desk Team

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Manufacturing companies in Argentina have postponed investments in the second half of the year, as the economy takes longer than expected to recover, according to Reuters. President Mauricio Macri has sought to reform the economy through market-oriented reforms and settling Argentina’s debt with creditors. In addition, the economy is threatened by higher living costs and decreased consumption.

Macri has remained ambitious in his endeavor to repair the economy, but he got off to a rocky start, as the nation’s investment level contracted over 3% during the first part of his tenure. Hesitance from the business community is indicative of Argentina’s struggle to maintain traction, but the South American nation is in a better place when compared to previous years.

The government is close to reaching a full settlement after a hefty 2001 bond default. Further, Macri has liberalized the economy in certain respects, such as lifting currency controls. The government’s new policies are in stark contrast to predecessor Cristina Fernandez de Kirchner, whose leftist policies gave way to strict control over the economy.

Further, Kirchner maintained an antagonistic stance toward the United States and creditors, resulting in lawsuits and a lack of faith from the business community. Kirchner isolated her country from world markets, but Macri’s reform measures have integrated Argentina back into the financial community.

Macri’s pro-business policies have added renewed vigor to the economy, but more work lies ahead. For instance, Argentina’s job market remains in a precarious position not seen in over 10 years, as employment skyrocketed to its highest rate in seven years, notes Staffing Industry Analysts.

Part of the problem stems from employers who remain on the fence as the economy embarks on an unstable course. Further, the jobless rate could not have come at a worse time for the public as many struggle to pay bills and purchase goods. Inflation has run rampant due to the government’s incessant money printing in previous years to counter economic turmoil.

Inflation is bad to the point where the government will establish price controls for medication, and while such a move will help many, no policies have been implemented that would stabilize food prices. Argentina is among the wealthiest nations in South America, but poverty has become a looming issue, with destitution increasing from 29% in 2015 to over 32% in 2016.

So far, authorities are ill prepared in fostering job creation and instilling confidence in the business world. Leaders are overly concerned with the needs of creditors, and while debt is a large problem for Argentina, officials should be more concerned about an economy that is not producing enough jobs that would lift more people out of poverty.

Argentina’s economy is seeing job growth in certain sectors, namely agriculture, but it is enough to add new life to the economy. With that, officials are hoping that a floodgate of investment will come into the country, but analysts do not see this happening anytime soon. The construction sector, however, could be the nation’s redeeming quality, and although it would add some short-term gains, the sector could propel the economy forward after years of stagnation.

Macri’s administration hopes to take advantage of the export sector to create additional jobs, especially with access to international markets, most notably China.

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