The Argentina Investment Report for December 08, 2015

By Patrick Archer – @InvestBA

The Argentina Investment Report is a weekly snapshot of headlines regarding the country’s changing economic landscape; as well as the challenges, risks and opportunities awaiting foreign investors in Argentina. 

Fiat Chrysler will invest US$650 million in its Córdoba plant to produce a new model that will be exported to Europe. The announcement was made this week by Cristiano Rattazzi, the president of Fiat Chrysler Argentina, who promised to share more details before the end of the year. Production at the company’s Córdoba plant has been suspended frequently this year due to the economic slowdown in Brazil, historically the most important export market. (La Nación)

“Macri needs to eliminate the currency controls and devalue next Friday. The question is whether capital flows in immediately given the internal challenges of the Argentine economy and an unfavorable international backdrop with a possible interest rate hike in the U.S., the resulting higher cost of borrowing for emerging markets, lower commodity prices, the crisis in Brazil, its main trading partner, and the slowdown in China, its second trading partner.” (El País)

“After the runoff election, the majority of analysts raised their targets for the exchange rate. The consensus is for $11.10 pesos to the dollar by the end of the year and $14.85 by the end of 2016. Among those surveyed, Citigroup Global Markets has the highest target of $14/$18, OJF & Asociados predicts $13.69/$17.82, Deutsche Bank calls $9.75/$17.30, BofA Merrill Lynch sees $13/$16, and Credit Suisse offers the lowest target of $9.90/$12.55.” (Cronista)

“Argentina could move to a single exchange rate on December 14 when the new government takes power, says the next Minister of Finance Alfonso Prat-Gay. Investment banks like Morgan Stanley would prefer an immediate correction to the exchange rate regime. In a report sent to investors last week, the bank said ‘although many Argentine observers are calling for a correction postponement, we believe a single, quick adjustment is the preferred option.'” (El Financiero)

“The warning of a flood of Argentine soybeans became reality yesterday in Chicago as a wave of speculative investment funds dumped 10,000 contracts of the oilseed equivalent to 1.36 million tons of soybeans. The 2015/16 cycle in Argentina is expected to yield 15 million tons of soybeans valued at US$5.4 billion. Together with soybeans, corn contracts also fell in Chicago on the possible flood of Argentine corn in the global market.” (La Nación)

“Macri’s objective is to put all available intelligence toward trying to defuse the time-bombs being left by Cristina Fernandez: A Central Bank with no reserves, a fiscal deficit equal to 7% of GDP, a negative trade balance, a two-year recession for an economy that can’t seem to rebound. The highest priority will be to generate a shock of liquidity that calms the devaluation fears of the market already forecasting an official dollar close to 15 pesos when it floats freely.” (Diario Democracia)

“President-elect Macri is laying out his plan for improving business relations with Brazil. The problem is Dilma Rousseff is more focused on the scandal at home that threatens her political future than on advancing a bilateral agenda. For Argentina, the bad situation in Brazil is turning into a perfect storm given the new agenda of Macri: foreign trade occupying a fundamental role as one of the great pillars in the production of dollars. (iProfesional)

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