Strategic intelligence in Latin America


Macroeconomic challenges hold Argentina back but agriculture ploughs on.

Argentina is going through a very difficult economic situation, which has been severely deteriorated by the ongoing pandemic. 2021 will continue to be a difficult year as the government tries to renegotiate its debt with the IMF, rebuild the Central Bank’s scarce reserves, adjust its exchange rate and reduce the fiscal deficit, among other necessary measures, but it will try to reactivate the economy through the development of public works. For some, investment in Argentina is unthinkable in the short or medium term, no matter the sector as structural problems continue to hold the country back.  


In 2021, there are legislative elections which could complicate life for the government of Alberto Fernández. Not only because the results will help define the last 2 years of the current administration, but also, the government must continue to take difficult decisions to stabilise the economy. If the government prioritises the electoral result (which is not guaranteed) over the economic situation, tensions will rise. The government has a dilemma, and it is not clear how it will get out.


Argentina is going through a very difficult economic situation, which has been severely worsened by the COVID-19 pandemic. Investors’ interest should focus on the political environment as policy changes are needed to improve the economy and correct the existing imbalances. Without these corrections, it will make little sense to even look at the project level in 2021 as the probability of these projects going ahead will be almost nil.

Among these corrections, the most urgent are to agree with the IMF on the renegotiation of the debt that expires in the next 2 or 3 years; rebuild the scarce reserves of the Central Bank of the Argentine Republic and narrow the gap between the official and the parallel (unofficial) exchange rate; achieve genuine growth through the strengthening of exports; reduce the fiscal deficit; open up the economy (raise rates) and change the sources of financing the fiscal deficit (that is, abandon for the time being the current high levels of monetary issue).

“Investment in Argentina is unthinkable in the coming months or even years, no matter the sector. Argentina’s problems are not temporary but structural. Macroeconomic pressures, institutional weakness, high tax burden, shortage of foreign exchange, etc. All of which create uncertainty. Add the pandemic to this and I think it will take 5 to 10 years to recover.”

Executive, food business, Argentina


The Vaca Muerta Field, located mainly in the Province of Neuquén, is one of the largest investment projects that Argentina has had for some years. Vaca Muerta is the 2nd largest unconventional gas field in the world, and the 4th largest unconventional oil resource.

In recent years, the level of investments made by companies in the sector has exceeded USD 5 billion, but for the project to be delivered, it will be necessary to maintain this level for at least 10 years. This will not only allow Argentina to have cheap energy for domestic consumption, but it will also favour the trade balance by reducing energy imports.

To this end, the government launched its “Gas Plan”, through which the State will control, via subsidies, the difference between what will be charged to the consumer and the prices that arise from the tender, which will be what the producers receive. In other words, they will subsidise demand and not supply.

Investment will also be required in related infrastructure, for example, the reactivation of the Norpatagónico train that will link the Vaca Muerta field with the port of Bahía Blanca, in the Province of Buenos Aires, scheduled for 2021, foresees an investment of about USD 800 million.


As the economy deteriorates, turning to construction as the engine of reactivation has been cited many times locally and internationally. The Argentinian government has already shown a strong interest in driving the economy through the development of public works. The destination of the investments will be in transportation, houses, water and sanitation works, and the construction of universities and hospitals.

The official 2021 budget foresees an increase of 85% for public works, which will imply reaching 2.2% of the national budget (doubling that of the previous year).

The great unknown is whether or not the government will have the necessary funds available to implement these projects. In an economy that was already very distressed, with very serious monetary issues and the impact of the pandemic, many analysts doubt these announcements will materialise.

Knowledge Based Services

For many, the knowledge based services industry in Argentina has a better outlook than others. Today it is Argentina’s second largest export industry and generate high quality employment. In addition, it has the potential to be located anywhere in the country that has good connectivity.

Several companies have already started to expand internationally, such as Mercado Libre and Globant, which are perhaps the largest and best known. But the increasing potential of the sector and the impact on other productive sectors can be incalculable.

Take for instance, Satellogic, a company whose services for agriculture can be enormous. It is the first company to develop an Earth observation platform capable of remapping the planet in high resolution and high frequency. In recent days, it announced the launch of a dedicated rocket with 10 satellites, which will allow up to 4 daily revisits from anywhere on the planet.

Working remotely and carrying out many daily operations and activities digitally, as a result of the pandemic, it has further strengthened the potential of this sector. In addition, through the enactment of a new Knowledge Economy Law, a sector promotion regime was established that reduces taxes and employer contributions and provides fiscal stability to new projects in different areas such as biotechnology, bioinformatics, nanotechnology and nanoscience.

“There are opportunities in knowledge-based services. We have a highly-skilled and cheap labour force by international standards. There is a great entrepreneurial ecosystem, which is growing but it needs state support.”

Entrepreneur, Argentina


Livestock production has always been an important sector and the engine of the Argentine economy. Although there is continual debate as to whether Argentina should take a step forward and export products with greater added value.

The great fall in the national GDP during 2020 will surely bring a contraction of the domestic demand for many products derived from the agricultural and livestock sector, which will reinforce the export capacity of food. The evolution of commodity prices, especially agriculture and their derivatives will strengthen this position. Argentina has the potential to double its food-production capacity.

During the pandemic, the refrigeration industry continued to flourish. Some meat packing plants have been growing at a rate of 30% per year, mainly tied to export dynamics. The early reactivation of the Chinese economy has helped.

The export of soybeans and its derivatives continues to have a positive outlook, especially after the decision to reduce export tariffs made by the government months ago, which had an immediate impact on export volumes.

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This Week

Volume 1 - Issue 15

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