Beatriz Nofal: “Argentina is Better Prepared for Crisis and the Impact Will More Moderate”

She said that the country wouldn’t be in the eye of the storm but that it would feel the impact of the international crisis in the commercial and financial sectors, reducing the current growth rate.  That is why she recommended that the State maintain an active role in supporting the real economy.   The motto, “save yourself” is useless, she pointed out.

Beatriz Nofal, from Mendoza and president of the National Agency of Investment Development, ProsperAr, visited the province this week to announce her union with Celso Jaque’s government in the development of a local agency to capture investments.  In this interview with Los Andes, Nofal indicated that Argentina “Is better prepared than ever,” to face the international crisis.

-Why do you consider Argentina to be better prepared today to face this crisis than on other occasions?

-Argentina is better prepared than on other occasions first of all because of the twin surpluses, the fiscal surplus and the external surplus, that are what give the economy better resistance against external shocks like the present one.

The fiscal surplus, because it allows us to confront our commitment to pay external debts, and the external surplus, because it has permitted the country to avoid problems with its payment balance, in addition to generating an important accumulation of reserves in the Central Bank, that gives it firepower, even to be used against any problem that develops.

It is important to say that in the middle of a financial and international bank system crisis, with its epicenter in developed countries, Argentina has a solid, solvent banking system, without any liquidity problem. In our country, the financial system, instead of acting as a propagator of crisis, today can be a shock absorber of crisis.

-Does this mean that we are resistant to the crisis?

-I have not said that we are going to be immune. Argentina is better prepared and this means that the crisis will have a more moderate impact. But there will be impacts that will be noticed, in the first place, in a lower rate of growth of the Argentine economy, such as what is happening in Chine.  The storm is going to arrive, but we are not in its eye.

– One or two points lower of growth in Argentina: how many fewer job positions does that implicate, how much of a drop in the tax collection?

-I don’t have the exact calculation, nor would I risk estimation.  The collection, let’s remember, isn’t just linked to the internal economic activity, but also to the evolution of exports and this depends on how the international demand and the price evolve.

There are already estimations that the PBI will grow between 6 and 7% this year, which is why if one looks at the world and sees that the United States will be in recession and that countries like Spain, Holland and Ireland have negative growth rates, this sort of rate is important.

For the next year a scenario of positive growth for Argentina’s economy is expected, and there are no antecedents in the country of such a long growth cycle, and much less in financial conditions like those which are faced in the world today.

-But this growth hasn’t just been drawn out?

-It’s a growth given by the different components of the added demand.  At a slower rhythm, but the consumption, investments, and exports continue to grow.

-What will happen with investments in 2009?

-Until now the performance of investments in Argentina have been very good.  The past year the rate of fixed gross investment on the product surpassed 24% in terms of current prices and 23.2% in constant terms.

The investment grew at a rate of 14% last year; this year in the first semester the growth was 16%, and it duplicates therefore the growth of the PBI. As far as direct foreign investment, on the basis of data balance of payments in the Central bank, a growth of 60% in the first semester of this year was registered.

Last year the direct foreign investment reached US$ 6.5 billion, which represented a 16.7% growth with respect to 2006.  And to give comparative data, the average of the 90’s without privatizations was US$ 5.3 billion.  However, let’s hope that this rhythm of growth isn’t maintained in 2009 in an international conjuncture like the present one.

-And what effects will it have?

-Historically, whenever the economies of the central countries contracted, the flows of direct investment on a global level also contracted.  Thus it is probable that Argentina also has a lesser flow of direct foreign investment.  

For that reason I want to emphasize that, in the middle of this crisis, the mission of Owen Illinois reached Mendoza, which involves representatives at the highest level of international businesses and financial handling of the company, to evaluate the concretion of an investment of US$ 85 million, only in the first phase, in an oven for glass bottles. Owen Illinois is, in addition, the world’s largest glass container factory.

-When is the concretion of this investment predicted?

-For now the executives are completing the details.  Soon they will have to decide, but they are predicting a final determination from here until the end of the year, and then there will be two years more to concrete the investment, after acquiring the property.  They already have the technical layout of the plant.

-How do you view the province–prepared to face the crisis?

-I believe that Mendoza is also better prepared to face the crisis, as is Argentina.  I do believe that what we have been doing, we must do even better.  The certain thing is that, even being better prepared, we are not immune.  There will be less growth, and when one has been going at a determined speed and decelerates, you feel it.

Therefore “save yourself” must be resisted, each one assuming his or her part, so that the deceleration is the most important.

-How do you evaluate the effectiveness of the protectionist measures announced by the national government?

-A set of measures is needed because the crisis can affect us as much in the commercial channel as in the financial channel. The businesses will feel the financial impact because there will be international credit restriction, but the greatest impact will be commercial, with the drop in prices of products for export and because fewer quantities will be demanded.

This will also be felt in terms of importation, because the strategy of “save yourself” is practiced in other countries, and because the countries affected by the crisis will try to export more to countries whose demand continues to grow, such as Argentina.

-And what must we do faced with this panorama?

-The measure to establish value-criteria of the Argentine Customs seems fine to me.  But also, as far as finances it is necessary to take measures of greater austerity, although without trimming public, monetary, or exchange investment and to accompany them with measures directed towards the real economy in order to sustain private investment, which is very important.

-Is it possible to avoid deceleration as a prelude to recession in Argentina?

-There will be less growth; some may interpret it as recession. Still it’s early to make predictions of what will happen in 2009.  It’s early because the international financial markets have not been stabilized.  In the world it is still debated as to whether or not we are going to face a short recession and a rapid recuperation or if it will be a long recession that can be transformed into depression.

The impact upon Argentina will depend upon how the world situation is resolved, and above all, how the recession affects two very important commercial partners, China and Brazil.


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