Investment plunged nearly 26% in August, one of the reasons why the government is trying to attract projects to China
The government aims to strengthen its trade relations with China in context investment crash due to persistence of exchange rate and inflation. General Secretary of the Bureau Karina Milei plans to participate in the international exhibition fair that begins in Shanghai in the first days of November.
A private report revealed the context in which the executive branch is now targeting the Asian giant to support investment projects in Argentina. Consulting firm Orlando J. Ferrereswhich monitors investment levels monthly, reported gross domestic investment in August down 25.8% in year-on-year terms.
It is a measurement of physical volume that does not take into account the effect of inflation. In the first eight months 2024, i.e. the cumulative drop in inflation is 21.5 percent. For machinery and equipment, there was a decrease of 23.7% in August compared to the same month last year due to a significant decrease in the import of capital goods, which amounted to 42.8%.
In terms of gross product, the investment rate is still in August 15.6%the lowest number in recent years. In 2021, a year after the impact of the pandemic, this percentage was higher than 18% GDP.
In the construction sector, Ferreres mentioned that investments fell by 27.6% year-on-year in August, deepening the decline recorded in July, which was 16.3 percent. In summary terms, the decrease for the eight months of 2024 was 24.6%.
According to the consulting firm, “the level of investment in August was negatively affected by a sharp decline in imports of capital goods, although an acceleration of the decline is also observed in the construction sector.” As for expectations, the report says: “Going forward, economic entities appear to be largely adopting a wait-and-see strategy , especially in relation to the decisions taken by the government of course“.
Orlando J. Ferreres, a consultancy that usually tracks investment levels monthly, said gross domestic investment fell 25.8% year-on-year in August.
They identified other reasons such as “decline trust in governmentand the perseverance he demonstrates inflation” and claimed that September “will be the first in which RIGI “It was regulated and in full force, although no concrete movements were seen yet.
“We understand that in the medium term, the government’s decision to allow the use of laundered funds for productive investments such as the purchase of agricultural machinery and real estate projects will be more relevant, which should support the current low levels of investment,” he concluded in this private report.
It is in this context, as as reported Infobaegovernment Javier Milea It is beginning to look to China for investment that will lead to a still-delayed economic recovery. Karina Milei He will make his first foreign trip to Shanghai as the head of the Argentine Investment Promotion Foundation, which was in the chancellor’s orbit just a few months ago. Diana Mondinova.
China’s presence in Argentina through investment is more evident in sectors such as mining. Chinese companies process a wide range of minerals in several provinces of the country. FROM Jujuy until ChubutThese initiatives include mining lithium, gold, silver, copper, zinc, iron and leadmaking China a key player in Argentina’s mining sector.
In fact, in a recent report Rosario Stock Exchange (BCR) highlighted five of the Asian giant’s recent investment projects in Argentine mining (excluding lithium), for more than 850 million USD.
The government needs the activation of large investments to show that economic activity is recovering vigorously, something that official figures still show in trickles and fades. In July, the Monthly Estimate of Economic Activity (EMAE) showed an improvement 1.7% compared to June, but in August leading indicators that this trend could be broken.
“Going forward, economic entities seem to be mostly adopting a wait-and-see strategy, especially in relation to the government’s exchange rate decisions,” Ferreres said.
“For the rest of the year, we foresee a weak growth path with ups and downs and wide sectoral disparity. In particular, leading indicators for August were not as positive as in July, specifically those related to industry and construction (which came from a series of recovery months),” the LCG report said.
For its part, economic activity monitor PxQ indicated that “leading indicators of industrial production (auto production, steel production and industrial energy demand) showed mixed results in August. While car production and energy demand fell month-on-month, steel production maintained the positive trend from the previous month,” they reasoned.
Meanwhile, PxQ continued: “On the construction side, leading indicators (cement shipments and Construya Index) posted monthly declines in August. This could foreshadow ISAC’s first fall after four consecutive months of increases.”