BeSummary – Special Edition Global Interdependence Center May 16th, 2016
The New Argentine Business Environment The Politics of Stabilization and Structural Change 1. Business climate………………………………..……………...………………….….....3 1. Macri’s first steps………………………………..……………...………………….…....4 2. Public opinion trends…………….….…………..……………….………………….…..6
3. Strategic challenges..………………...………………..…………..…………….….…..7 4. Political scenarios...………………...………………..…………..………………….…..8
Business Climate A bad starting point Ease of Doing Business: 121/189
Global Competitiveness: 106/140 World Economic Forum, 2015-2016
World Bank Group, 2015-2016
Economic Freedom: 169/186
Heritage Foundation, 2015
3
Governance: 129/199
Macri’s First Steps Top priorities Ambitious and transformational agenda
Sharp turn in foreign policy
Speed of results
+
Expansion and consolidation of the government coalition Gradual economic stabilization program
-
Crime dilemmas and dug trafficking
-
4
Challenge complexity
+
• Economic stimulus: manage social demands without ignoring the state’s budgetary limitations. • Transparency and management: modernize the state apparatus, apply open-government policies and professionalize the access to public administration offices by enforcing meritocratic procedures. • Judicial front: disarticulate Kirchnerism’s authoritarian legacy among judges, seek the judiciary’s independence and capitalize on the perks of the previous administration’s declining reputation. • Seguridad: fight organized crime and drug-trafficking networks. In the intersection of the two latter, lays the challenge to manage the disorderly intelligence services.
Macri’s First Steps Building Power: a Varying Geometry
Core nucleus CC UCR PRO
Other
5
Differences of opinion exist, but there’s 90% approx. of synergy in the decision-making process More diverse group of actors with a rough 50% chance of converging with the government
87
FPV
82
Massismo
37
Non K Peronism
29
Other
10
FAP
8
Left Senate (Quorum:37)
Non K Peronism
60-65% rate of agreement with the government but also steeper differences
Chamber of Deputies (Quorum:129)
Cambiemos
4
FPV
42
Cambiemos
15
Other
6
Non K Peronism
6
Massismo
3 0
20
40
60
80
100
Public Opinion Trends Evaluation of Macri’s government and top social concerns 60%
Positive
Negative
Does not know 86
Inflation
50%
48
45
43
48
47
42
47
Electricity tariffs
40
38
40%
57
Unemployment
45
Gas tariffs
30%
Money laundering video (Rosadita)
42
Crime and public safety
41
20% 12
14
13
Drug-trafficking
39
Inability to pay monthly expenses
39
New indebtedness to pay holdouts
38
10
10% 0% Total
Buenos Aires Province (38%)
Central Argentina (29%)
Rest of Interior (32%)
Source: Query – April 2016
6
34
Names leaked in Panama Papers
0%
20% 40% 60% 80% 100% Source: D’Alessio IROL – April 2016
Strategic Challenges Pending measures and key issues Collective bargaining
1
Meet inflation targets (less than 30%)
What kind of capitalism do Argentines want?
2
Fiscal gap
Subsidies
3
Contain social reactions to tariff adjustments
4
Federalism
Quality of public spending
Restore trust New investment projects, restore trade surplus
7
5
Global economic slowdown
Political Scenarios
8
Optimistic (30%)
Moderate (50%)
Pessimistic (20%)
• Boosted capital inflows, falling inflation and economic growth during 2016-2017. • Favorable international context. • Moderate social tensions. • Cambiemos performs well in the 2017 mid-terms. • Government successfully implements key items from its agenda. • Macri increases his chances for reelection ahead of 2019.
• Inflation starts to decline in 2017. • Changing international economic context. • Growing social tensions and protests in the streets. • Tough election for Cambiemos in 2017. • Government faces obstacles to implement policies. • Moderate Peronism is strengthened and performs positively in 2019.
• Inflation endures and there is no economic growth. • Social conflicts intensify, causing problems in urban areas. • Kirchnerismo is reinforced as Peronismo is unable to capitalize on Macri’s decay. • Panama Papers crisis deepens, affecting Macri’s credibility. • Ruling coalition becomes increasingly fragile, governance challenges are heightened.
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