This new policy brief by the Atlantic Council’s Adrienne Arsht Latin America Center urges Argentina’s new government to build on economic reforms by further revising regulations for the energy sector. This is necessary to take advantage of the full producing potential of a sector that will be critical for jumpstarting the economy, moving manufacturing and bringing in foreign direct investment. The next four years will be crucial to jumpstart Argentina’s energy sector.
The new Argentina: Time to double down on the energy sector? examines the state of play in Argentina and targets the missing links to making the country an energy powerhouse. With international interest in revitalizing Argentina, newly inaugurated President Mauricio Macri must take the unprecedented opportunity to expand the ability of private firms of all size to invest in the industry and stabilize energy prices.
Atlantic Council author Cristian Folgar, a former Argentine undersecretary of fuels, outlines five concrete recommendations for improving the business climate and producing both upstream and downstream benefits. Even in the current low price environment, the report concludes that, if reformed effectively, Argentina can increase production in its resource-rich but stagnated energy sector, as well as boost growth and create investment opportunities for Argentine and foreign businesses alike.
“Argentina’s energy sector could be the key that turns the lock on manufacturing and industrial output,” said Peter Schechter, director of the Adrienne Arsht Latin America Center, “With greater investment, particularly from outside the country, the energy industry could become a catalyst for sustained economic growth.”
The brief makes key recommendations for the Macri administration to foster greater foreign investment:
- Extend the benefits already established under the 2014 hydrocarbons law to all investments in the sector.
- Reach a political agreement between Yacimientos Petrolíferos Fiscales (YPF), the provinces (owners of the resources), and eventually the provincial state-owned companies.
- Open up idle concessions acreage to potential investors.
- Establish a sustainable price range for natural gas.
- Signal a medium-term crude oil price to indicate Argentina’s commitment to development down the road.
Energy reform’s benefits will extend beyond the industry. “Much enthusiasm surrounds the new Macri government and the changes implemented in the first 100 days. Now, with a deal inked with holdout creditors awaiting congressional approval, the energy sector is poised to be at the top of investment interest. The government must do all it can to capitalize on this,” said Jason Marczak, Director of the Latin America Economic Growth Initiative at the Adrienne Arsht Latin America Center.
The complete policy brief and the recommendations are available online: http://publications.atlanticcouncil.org/argentina-energy