Interview: Professor Marcelo Simon on Argentina’s Economic Future

Interview: Professor Marcelo Simon on Argentina’s Economic Future

A decade after Argentina’s historical financial collapse, foreign investors are returning to the once 5th wealthiest economy in the world. Lured by its resource abundant land, highly literate population and a booming oil and mining industry, it is not surprising that both Brazil and China have recently taken notice. However, rampant poverty, stark economic divides and ill-reported inflation rates have continued to make this Latin American nation a high risk investment for foreign investors. Professor Marcelo Simon, Business and Political Science Professor at UADE (Universidad Argentina de la Empresa), Fundación Ortega y Gasset and ESEADE, discusses this issue in the following interview.

GRI’s Medhawi Giri: How would you define Argentina’s current political and economic climate?

Professor Marcelo Simon: Highly pessimistic. Among others: an ailing flow of Foreign Direct Investments, no domestic investment, high rate of inflation, increasing rate of poverty as a well as inequality and a day per day improvised national economic management.

MG: The IMF recently censured Argentina on their skewed inflation and growth rate reports, making it the first country ever to be censured in this regard. This is, no doubt, troubling for foreign investors who would look to Argentina for opportunities. What would you say the country needs to do to revamp this negative image and reopen its doors to foreign investment?

Simon: Argentina needs a plan, a long term vision of the nation’s future and stop improvising emergency economic policies.

MG: So is there a short/medium term policy or plan currently in place for providing a more investment friendly situation for foreign companies interested in the country?

Simon: Almost none. I would say that there is an exception which is the government support to the mining activity, even though the biggest project – 6 billion Potassium Vale – has abandoned the country. Argentina has a huge potential for mining activity: copper, gold and silver among others.

MG: When it comes to Latin America and growth, much of the focus has been on Brazil. A recent Financial Times article stated the following about the Argentina-Brazil relationship: “While Argentina’s economy is much smaller than Brazil’s, it is an important market for Brazilian manufactured exports, many of which are less competitive outside the region. Argentina, meanwhile, needs Brazil for its market and because it literally has few other friends”. What are your thoughts on this?

Simon: I agree with this comment. On top of this, Brazil’s long term strategy of becoming the leader in Latam [Latin America] requires a close relation with Argentina. Even though Argentina has a messy economy, it still has some influence on the region, especially on the Spanish speaking countries, inherited from its previous role of regional leader until somewhere around the 1940s/1950s.

MG: But Brazilian miner Vale SA stated recently that it will be suspending investments in its US $6 billion Rio Colorado potash project in Argentina due to the fact that its been plagued with cost overruns. How will this withdrawal affect Argentina?

Simon: We say en español: “Es una mancha mas para el tigre” (It is one more stain on the tiger). Vale’s decision is a demonstration of the low level of attractiveness of investing in Argentina nowadays.

MG: Hand in hand with its economic woes, equality and poverty have been and continue to be an issue of concern within Argentina. What mandates are currently being placed to deal with these issues?

Simon: From my point of view Argentine current policies to combat inequality and poverty are inefficient. Before discussing on how to distribute wealth, I think that we should discuss how to generate it and that debate is absent in Argentina.

MG: And how about Latin America as a whole. There has been much buzz on Latin American integration. What do you think about this initiative and do you believe an integrated Latin America is possible?

Simon: I think integration in Latam is highly possible, if the countries develop a joint long term strategy following this objective. And I also think it would be highly beneficial for the region. But we are not walking in that direction yet.

Professor Marcelo Simon is a professor at UADE (Universidad Argentina de la Empresa), Fundación Ortega y Gasset, and ESEADE, all in Buenos Aires, Argentina. Professor Simon has a Master Degree in Business Administration (MBA) from Pace University (New York City) and an M.Sc. and B.Sc. Degrees in Industrial Engineering from the Instituto Tecnologico de Buenos Aires (Buenos Aires). He is a business consultant, author of a book and several articles for newspapers and magazines, and has participated in seminars about Small and Medium Companies in several countries of Latin America. He is currently the director of Sur Internet Online SRL, a firm serving technology based businesses.

Categories: Economics, Latin America

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