19
May

Argentina: A Smoother Ride

Written on May 19, 2016 by Waya Quiviger in Americas, Foreign Policy, Global Economy

Argentina is throwing itself back into the international economic community, after a 2002 default that thwarted the country’s access to world capital markets. The center-right Macri government, which came to power last December, is moving full speed ahead with economic reforms. And just last month, a U.S. appeals court cleared the way for Argentina to make payments on $9 billion in bonds – allowing the country to re-enter bond markets. This means big investment opportunities for Argentina’s northern neighbors.

The energy sector has extremely high growth potential. Argentina holds vast reserves of shale gas and oil and is seeking to bolster its renewables industry. However, unchecked energy subsidies swelled under the previous government – led by center-left President Cristina Kirchner – reaching 2.9 percent of GDP in 2014, according to the Argentine Budget Association. The association reports these subsidies accounted for more than 12 percent of 2014 federal spending, not including debt payments.

Just after taking office, President Mauricio Macri cut electricity subsidies to wholesale power distributors. A gradual and sustained increase in electricity and gas prices is planned for almost all sectors of the Argentine economy. Households that cannot afford the price hike will be able to continue paying a subsidized bill.

“The recent reforms in energy prices have sparked interest in investing in the energy sector, both on traditional and renewable energies,” says former Executive Director at the International Monetary Fund (IMF) and Cipher Brief expert Andrea Montanino. Read more…

 

Published on MAY 18, 2016 | KAITLIN LAVINDER in thecipherbrief.com

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