The United States-based financial services corporation, Morgan Stanley issued a report saying that as result of the economic policies instituted by the Macri administration this past year, Argentina now has a notable potential to grow and attract long-term foreign investment — which could amount to US $60 billion — over the next five years. These investments would come mostly in the form of projects to develop the energy, infrastructure, agriculture and mining sectors.
The report goes on to say that the stock market will also be the an attractive sector for potential investors, who could make a return of up to 258 percent in that period of time. While this is the best case scenario, analysts said the most likely forecast would grant a return of 133 percent to those who pour their money into the sector.
“We believe the deepening of Argentina’s capital market will trigger roughly $230 billion (~8% of GDP p.a.) in net financing and foreign direct investment over the next five years, and we expect Argentina’s role and prominence in fixed income and equity investment portfolios to grow,” the analysts said.
Moreover, the report predicts that Argentina will not only normalize its economy, but will also generate an admirable “cycle that will increase long-term, sustained economic growth.”
According to this train of thought, if all the measures the bank considers necessary to achieve this are implemented quickly, the economy could in theory normalize and the Government would be able to “implement far reaching structural reform that lift potential real GDP growth by 4 percent.” So far, even the more optimistic economists predict a 3 percent growth, at least for this year.
In order for all this to happen, the report says there are three things that need to take place: “normalize macroeconomic conditions, improve the stock market and channel the capital to investments that reinforce growth.” According to the analysts, the Government is already working towards making the first goal happen by implementing measures aimed at lowering inflation and reducing the fiscal deficit, two of its most important objectives in the economic sector.
However, the report says that there is a factor that could prevent this from happening: politics. The country’s possibility to reduce its fiscal deficit — a measure deemed key for growth by analysts and government officials, particularly the new Treasury Minister, Nicolás Dujovne — largely depends on its ability to finance itself within international markets. But should this become a problem due to the increasingly isolationist trend many countries around world are looking to enact, the country could implement even harsher austerity measures that would have negative consequences in both the political and social spheres.
“Given Argentina’s history of committing to painful austerity measures, the current administration’s limited political capital is clearly a risk to complete the normalization process,” the report points out.