Besummary gic may 2016 berensztein

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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