Buenos Aires — The Argentine government on Thursday released to the press a report by Economic Commission for Latin America and the Caribbean (ECLAC) that highlights a historical record for Argentina in terms of foreign direct investment (FDI), with the country having received $15.4 billion during 2022, 123% more than in 2021 and more than doubling the balance of pre-pandemic 2019.
However, the government’s official statement did not include a breakdown of the types of foreign currency injections into the country, while a report prepared at the request of Bloomberg Línea by Salvador Vitelli, head of research at consulting firm Romano Group, and based on official data from Argentina’s statistics bureau INDEC, shows that 57% ($8.8 billion) of the funds that entered the country consisted of “debt instruments”.
This amount can be attributed to the debt taken on by companies in the country with their parent companies abroad, as a result of a foreign exchange restrictions that began with the administration of Mauricio Macri in 2019, and that only became stricter during the current presidency of Alberto Fernández.
The lack of access to international credit markets and a fierce drought drained the coffers of Argentina’s central bank, leading to increasing restrictions on the possibilities for companies to access the purchase of dollars.
To sustain their operations, mainly in foreign trade, many companies turned to their parent companies and took on debt with them.
“They charge that debt to you as direct investment, but to what extent is it that? You are forcing them to do that, because of the exchange rate,” said Vitelli.
Without counting this indebtedness by companies with their own parent companies, foreign direct investment in 2022, which was $6.6 billion, would be fifth highest annually in the last decade. On the other hand, the 2022 amount was 36% lower than in 2018, and 46% lower than in 2012, the peak of the last 17 years.
The ECLAC report
According to the ECLAC report, the country received more than $15 billion in FDI last year, 123% more than in 2021 and twice as much as before the pandemic. The country’s Ninister of Industry and Productive Development, José Ignacio de Mendiguren, said the data reflect the “confidence of international companies” and “the economic course”.
With these data, said the government, Argentina ranked as the fifth country in the region for FDI, with 6.9% of the total.
“We have good economic data, industrial activity has been growing, and we achieved the lowest unemployment in the last 14 years. All this is crystallized in the level of investment, which is a fundamental axis for development,” said De Mendiguren.
The ECLAC report also highlights that investment project announcements in Argentina grew by 17.8% in 2022, totaling $4.47 billion, and was strongest in the oil and gas, mining and renewable energy sectors. It also notes that the engine of FDI growth was inter-company lending, which expanded by 692% year-on-year, and the reinvestment of profits, which accounted for a 37% share of the country’s total FDI.
According to ECLAC, global FDI contracted by 12% year-on-year last year, while FDI in Latin America and the Caribbean grew by 44%.
