The exchange rate is making Argentina not competitive, says Syngenta CEO

The general director for the South of Latin America at Syngenta, Antonio Aracre, said that the Argentinian government needs to revise the competitiveness of the exchange rate in Argentina, which “does not depend only on a devaluation, but on the interest rates that establishes the Central Bank.” 
 

“We started to feel the impact of credit, mostly mortgage credit, and also public projects, and constructions in general because the mortgage credit push construction projects and construction is the mother of industries,” he said to La Nacion journal.

 

 

What happens is that construction pushes almost all industries. It seems that we are going to witness an economy growing at 4% to 5% this year and the next year, for sure. In the case of agriculture, that I know more, it has grown a lot since last year, but there were several macro-economic changes that helped: less export taxes, a more competitive exchange rate and ease in exports. Of the three, the most complicated right now and next year is the issue of competitiveness of the exchange rate.

 

 

Because it was a competitive exchange rate in 2016, but in 2017 we will have a 22% inflation, which is an intense inflation, and for next year we talk about an inflation around 15%. If the exchange rate does not follow inflation, the real competitiveness is lost and the truth is that it is tough to compensate the balance of payment that does not generate pressure for a lower exchange rate. If you see, there is an interest rate that is positive and strong, as it is the preference of the Central Bank president, so the possibility of a competitive exchange rate seems to be more complex.

 

 

The old devaluation that we know in a scheme of flotation that there is today in Argentina is not possible. I believe that a competitive exchange rate does not depend on devaluation, but an economic policy of the Central Bank that would be compatible to competitiveness. This requires an interest rate that reflects less positive concepts in a way that less money goes into savings.

 

 

In 2018, in macro-economic terms, I’m very optimistic because I believe that the statements I made about construction in general, mortgage credit, and public projects will continue, while agriculture will also continue to grow. But I believe that for long-term in 2019 and 2020, if there is no solution for competitiveness, we will find it difficult to sustain this growth. The tax and labor reforms are on the agenda and can help this competitiveness. But if there is a loss of 15% to 20% of competitiveness in the exchange rate there is no reform that could resolve this.