Argentina Country Risk Outlook

01 August 2019

Argentina country risk outlook Argentina’s economy is showing moderate signs of recovery, providing a boost to incumbent President Mauricio Macri’s hopes of re-election on October 27, 2019. President Macri’s choice of Miguel Ángel Pichetto, from the Peronist opposition party, as his running mate will gain traction with a wider pool of voters, reducing the likelihood of a return to Kirchnerism.

Security Environment

The risk of protests will remain high in the run-up to the general election, as labor unions and social organizations seek to capitalize on the unpopularity of austerity measures.

Anti-austerity strikes and riots are likely to target the seat of government in Buenos Aires ahead of the election, resulting in the closure of major highways into and out of the capital.

Union strikes will increase the risk of business interruption in the cities of Córdoba, Mendoza, and Rosario in the six-month outlook.

Argentina country risk outlookThere were 5,857 road blockades nationwide in 2018, a 12% increase compared with the previous year (5,221). Buenos Aires province led with 1,269 incidents, with Buenos Aires city and Santa Fe following with 1,076 and 379 protests, respectively.

In May 2019, protests by the Confederación General del Trabajo de la República Argentina (CGT) labor union grounded flights and disrupted work at key grain ports in the capital for more than 24 hours.

The strike action is estimated to have cost the economy more than US$900 million.

Trading Environment

The International Monetary Fund (IMF) concluded its fourth review of the Stand-By Arrangement (SBA) in Argentina on July 12.

The IMF will now disburse a further US$5.4 billion, the fifth instalment of its record US$56 billion loan to the country.

The Argentine economy has posted several promising signs of recovery in the past few months.

Real gross domestic product (GDP) growth increased 0.8% month-on-month in April, and since mid-May the peso has emerged as the best performing of emerging-market currencies against the US dollar.

However, inflation remains elevated at 30% year-on-year between March 2018 and March 2019. Along with a persistent risk of currency volatility in the run-up to the October election, this will delay a sustained economic recovery until late 2019.

Commodities will remain the key pillar in Argentina’s economy, with food and agricultural products representing nearly 60% of total exports.

Favorable weather conditions mean a record harvest is predicted for 2019-20, with total exports of grain crops during the period forecast to reach US$23.1 billion, according to the Rosario Grain Exchange.

Argentina’s burgeoning shale industry is also boosting the economic outlook. Argentina holds the world’s second largest recoverable shale gas reserves (802 trillion cubic feet) and fourth largest shale oil reserves (27 billion barrels).

Pricing outlook ArgentinaFuel exports are expected to rise by 20% to US$4.7 billion in 2020, due to increasing output at the Vaca Muerta deposit.

This will help to cut the trade deficit in fuel and relieve pressure on the peso over the long term.

On July 1, 2019, Argentina, together with Brazil, Paraguay, and Uruguay as the Mercosur customs union, reached a free-trade agreement with the EU.

The agreement follows 20 years of protracted negotiations and will eliminate high customs duties in key EU export sectors including cars (currently taxed at 35%), machinery (taxed at 14% to 20%), and chemicals (taxed at up to 18%).

Under the trade agreement, tariffs will be eliminated on 93% of Argentinian exports to the EU.

Argentina will gain increased access to the European market for agricultural goods, notably for beef, poultry, sugar, and ethanol.

Exports of beef to the EU remain on a recovery trajectory and are forecasted to grow by an annual average of 2.9% from 2019 to 2023.

Investment Environment

The operating environment for foreign investors in Argentina will remain challenging through 2019. The opening of an investigation into bribery in public works during the administration of Cristina Fernández de Kirchner will increase the likelihood of contract revision in the one-year outlook.

There will be an elevated risk of contract cancellation in the construction sector.

In terms of contract enforcement, Argentina’s court system will also prove a challenging environment for investors.

Enforcing contracts in Argentina takes 995, days at a cost of 22.5% of the claim value, ranking it well below regional competitors Brazil, Chile, and Mexico according to the World Bank Ease of Doing Business Index 2019.

As 2019 is an electoral year we expect that the issue will reduce in priority as focus is diverted to political campaign dynamics, as such major improvements are unlikely in the 12 month outlook.

5 Key Takeaways

  • President Macri’s choice of Miguel Ángel Pichetto from the Peronist opposition party as his running mate will boost his chances of re-election.
  • The Peso has strengthened by 10% against the US dollar since April 2019.
  • There were 5,857 road blockades nationwide in 2018, a 12% increase year-on-year.
  • Record harvest is predicted for 2019-20, with total exports of grain crops during the period forecast to reach US$23.1 billion.
  • Fuel exports are expected to rise by 20% to US$4.7 billion in 2020.

The monthly Risk Outlook is supported by our proprietary country risk rating tool, World Risk Review (WRR) which provides risk ratings across nine insurable perils for 197 countries. The country risk ratings are generated by a proprietary, algorithm-based modelling system incorporating over 200 international sources of data.

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In this month's Risk Outlook, we also provide a detailed forward looking assessment of developments within the security, trading and investment environments for Eritrea, Iraq, Mexico and Zimbabwe all of which have been the subject of recent enquiries from our client base.

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  • Eleanor SmithEleanor Smith

    Eleanor Smith is a Senior Political Risk Analyst within Marsh JLT Specialty’s Credit Specialties team. At Marsh JLT Specialty, Eleanor analyses developments in political risks, and advises clients on their effect in a range of sectors. Eleanor is also responsible for delivery of World Risk Review, JLT’s country risk ratings platform, to clients and prospects.


    Eleanor has a first-class degree in History with Spanish from UCL, and a Masters in International Public Policy from the same institution. With experience in a range of sectors, including diplomatic missions and not-for-profit, Eleanor can help clients understand their risk exposure.

    If you would like to talk about any of the issues raised in this article, please contact Eleanor Smith, Senior Political Risk Analyst on
    +44 (0)20 8108 9544.

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