BUENOS AIRES (Reuters) - Domestic and foreign companies likely will invest $14 billion in Argentina this year as firms open their pockets to make good on previously announced investments, the head of the government’s investment promotion agency said on Tuesday.
President Mauricio Macri’s government struggled to pull in the investment it promised in his first year in office but the head of his Investment and Trade Promotion Agency, Juan Procaccini, said in an interview that 2017 was looking better.
“The first year we had so many things to do in terms of ... becoming again a normal economy,” Procaccini said. “Now, we’re enjoying the fruits of that effort.”
The agency, created shortly after Macri took office in late 2015, is working with companies on an additional $12.5 billion worth of investments in projects that have not yet been announced, he said.
Foreign investors stayed away from Argentina during much of the past decade due to former President Cristina Fernandez’s populist policies and many are waiting to see if market friendly reforms Macri has proposed or passed remain in place.
Foreign direct investment (FDI) totaled just $5.7 billion in 2016 - down from $11.8 billion in the previous year - as the economy contracted 2.3 percent. The agency’s goal is annual FDI of $20 billion to $25 billion, Procaccini said.
The 2016 dip was due in part to multinational companies repatriating their profits outside of Argentina after Macri lifted capital controls.
Specifically, a plan to boost wind and solar energy capacity in coming years was likely to bring in $13 billion in investment, Procaccini said. There also is potential for $30 billion in mining investments to help Argentina catch up to neighboring Chile, and efforts to cut labor costs will help attract investment in oil and gas.
The agency has identified $58.6 billion in investment announcements since Macri took office, many for projects that would take an average of four to five years, Procaccini said. About three-quarters of the investment expected this year would come from foreign companies.
Macri’s diplomacy has helped attract investment from non-traditional sources, Procaccini said, noting that Japanese companies were looking for projects a year after leaders of the two countries had their first bilateral meeting in decades.
“They want to have the political framework aligned between the two countries,” he said. “We will have very strong Japanese companies investing in Argentina for probably the first time ever.”
Reuters reported last month that major Japanese trading companies were eyeing lucrative rail contracts.
Writing by Luc Cohen; Editing by Caroline Stauffer and Bill Trott