President Mauricio Macri returned on Sunday from his first international tour of the year, in which he visited Russia, Switzerland (for the World Economic Forum) and France. It was the kick off of a year that shapes up to be pretty intense for Argentina, at least when it comes to foreign policy.
The Bubble spoke to international political analyst Francisco de Santibañes to see what his take was on Macri’s tour, whether there was any concrete victory and what should be the government next steps in its long quest for foreign investments.
“It was a tour in which what we already thought could be confirmed. On the one hand, the good perception that Argentina has overseas. Not just in the west, but in Russia as well. [Argentina] has managed to maintain relations with a country that, in terms of energy and military, is an international power.”
However, he says the local government didn’t manage to come back with any relevant investments. “There were a couple of announcements, such as the one regarding uranium in Russia, but none of them were particularly significant,” he explained.
During the first stop of Macri’s tour, Argentina’s government signed a memorandum of understanding with Russian company Uranium One to pursue the exploitation of uranium in Argentina by using an extraction method developed by them and called In Situ recovery. According to Argentina, the Russian company will make an initial investment of US $250 million and will create 500 jobs.
However, De Santibañes pointed out that a steady flow of larger investments hinges on the macroeconomic policies that the Macri administration implements at home rather than the visits the President pays to other countries.
“The meetings Macri had overseas and the relevance provided by the presidency of the G20 can help this process,” but what potential investors really need is certainty, especially when it comes to knowing that policies such as reducing fiscal spending, the deficit and the size of the government, as well as opening the economy so Argentina becomes more competitive, will be implemented in the future.
When consulted whether the gradual approach to turning the economy around could deter potential investments from entering the country, De Santibañes said that “what Argentine and foreign investors need is a high level of certainty. A gradual approach is a strategy that can work, but for that to happen you need to generate that level of confidence.”
“You need to convey the message that those policies will really be implemented, mainly by sending fiscal signs. The primary deficit needs to be considered, but the total deficit – which includes expenses concerning sovereign debt interests – has to be considered too, since an international scenario where rates are going up could be risky for Argentina,” he added.
De Santibañes, a member of the Argentine Council for International Relations’ Executive Committee, argued that the most important part of the trip was the bilateral meeting with French President Emmanuel Macron, which in all probability left Macri with a bittersweet sensation.
First the bitter part, which is “[Macron’s] resistance to the signing of a free trade agreement between Mercosur and the European Union,” said De Santibañes, who explained him caving depends mostly on the “pressure the other European countries can exercise on France, as Macron faces pressure at home from an extremely strong agricultural lobby.”
However, he said that it’s likely the meeting helped both leaders improve the relations between both countries, and that could be seen at the next round of negotiations, which begins today in Brussels.
On the sweeter side, he argued, was the French administration’s clear support to Argentina’s access to the Organization for Economic Cooperation and Development (OECD), “which would translate into a series of institutional advantages for the country.”
De Santibañes explained this was key for the country’s plans to enter the intergovernmental economic organization because, except for the European Union, Argentina already has the support of all other power players it needs.
“It’s got the support of the US and the OECD’s General Secretariat. The only one left is the EU and France is a key player here, so that will probably translate into Argentina soon entering the organization,” he said.
Membership in the OECD offers reputational benefits, the ability to shape global debates, support for domestic reform, and strong ties to governments and business. “The OECD is a key voice supporting the global agenda on economic growth, global competitiveness and good governance,” said an OECD representative who spoke to The Bubble in November.
Mauricio Macri’s government sees joining the OECD as a key component of Argentina’s re-entry into the international markets and his commitment to reform.
Government representatives have reiterated over and over how important investments are for his plan to achieve steady economic growth. Taking that into account, De Santibañes argued that the administration has three main opportunities in the foreign affairs arena that, if seized, can be of substantial benefit: signing the free trade agreement with the EU; accessing the OECD and further cement relations with the US to be consolidated as a regional protagonist.
Regarding a free trade agreement, he said that it allows producers to get a higher amount of supplies at a lower price, which makes them more competitive. Especially considering that more than 80 percent of what Argentina imports is then used to produce goods or services it later exports.
As for the potential access to the OECD, “it means that Argentine companies can access better credit rates; and [the country] implements policies aimed at reducing corruption and improving the efficiency of the public sector.”
And when it comes to the US, well, “due to the domestic crises Brazil and Mexico are going through, Argentina can rise as a possible articulator and strategic partner in the region for the US and many other states.”
“The G20 presidency, more than an achievement itself, can be seen as a platform for the government to move forward on these three subjects,” De Santibañes finished.
We’ll see what the government does.
Francisco de Santibañes is a specialist in economy and international relations. He’s got a masters degree in International Relations and Foreign Affairs from John Hopkins University, and was a Doctor of Philosophy (PhD) candidate in War Studies at King’s College London. He wrote the book “La Argentina y el Mundo: claves para una integración exitosa” (Argentina and the world: keys for successful integration.”