Argentina’s next leader
will have a tough task
sorting out a stumbling
economy, but surging farm
and oil production could offer
a helping hand.
The nation’s farmers are
forecast to push harvests to
new highs in 2020, bringing
in much-needed dollars.
Meanwhile, rising oil production from shale fields should
bolster fuel exports, reining
in an energy trade deficit.
The prospect for growth
bodes well for both marketfriendly President Mauricio
Macri and opposition leader
A lber to Fernández, who
would probably shift Argentina to the left. They face a
critical primary vote on August 11 before the October
The wheat crop begins to
roll into ports at the end of the
year. It’s set to top 20 million
metric tons for the first time.
Then there’s corn. Growers
haven’t begun planting the
next crop, but a rally in prices
and an export tax that’s just
a third of the levy on soybeans
mean sowings may expand.
Production could subsequently reach a record 51 million tons, according to the
Rosario Board of Trade. More
corn will reduce the share in
fields of soybeans, Argentina’s
biggest farm export. Still, the
US Department of Agriculture sees a bumper soy crop of
53 million tons.
Farm exports, which are
priced in dollars, are key to
shoring up the fragile peso,which in turn helps to control
high inflation. Shipments are
also a boost for tax revenue.
Farming success depends
on the weather. Fortunately
for the next president, who
will be sworn in on December
10, forecasters are upbeat
about the 2019-2020 season.
That’s because a neutral
weather pattern or a weak El
Niño are set to prevail over a
strong El Niño or even-moredestructive La Niña. Both of
the former scenarios would
bring mild conditions, conducive for plants on the Pampas
Look no further than the
current calendar year to see
the results of good weather.
Exports of crops that benefitted from the right mix of temperatures and rain are predicted to reach US$23.1 billion, according to Central
Bank chief Guido Sandleris.
That’d be the most in three
Argentina’s burgeoning shale industry is also boosting the
outlook in the commodities sector.
Fuel exports next year are
forecast to soar by 20 percent
to US$4.7 billion, according to
Daniel Gerold, head of G&G
Energy Consultants in Buenos
Aires. That’s thanks to increasing oil output in Vaca Muerta,
where Argentina’s efforts to
replicate the success of the
Permian Basin in the US are
finally yielding some results.
That will help cut a trade
deficit for fuels that Gerold
sees finishing this year at
US$1.3 billion. By 2021 there
could even be a surplus, he
Argentina has been leaking
billions of dollars a year for
nearly a decade to import energy like natural gas, putting huge pressure on the peso. Getting back to being a net exporter of fuels would contribute to
stabilising the currency in the
Some analysts are really bullish. As shale oil production
rises, Argentina’s total energy
trade balance, which includes
electricity, could shift by as
soon as next year to a surplus
of as much as US$1 billion from
a deficit of US$500 million forecast for 2019, according to
Ricardo Arriazu, an economist
who runs his own consultancy
firm and specialises in oil.
That’s in line with government forecasts. Argentina may
achieve equilibrium in energy
trade this year, according to
Energy Secretary Gustavo Lopetegui. That would mark the
first time out of the red since
2010. By 2021, the nation could
run a US$2 billion surplus, Lopetegui said.
Fulfilling the potential of Vaca Muerta requires billions of
dollars a year of investment.
But big spending won’t happen
until country risk falls from
current heights and the government ensures clear and consistent rules.
That, in turn, depends on
who wins the elections.
Argentina’s bond yield spreads
seem to imply a 60 percent
chance of re-election for Macri.
“Vaca Muerta can solve
Argentina’s insolvency problems,” said economist Arriazu. “But it’ll only grow if the
right policies are kept in place.”