Views from the Field: Argentina


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For investors who have endured nearly two decades of hardship in Argentina, new developments in one of Latin America’s largest economies point to better days ahead. The country was once a leading destination for private equity when the asset class emerged in the region in the 1980s. However, after facing chronic economic challenges and growing competition from other regional markets, conditions for investment in Argentina declined significantly. The culmination of its woes came at the turn of the century, when the country defaulted on its public debt during a crippling financial crisis. The deep recession dealt a severe blow to foreign investors, who all but deserted the country.

Amid this crisis, Argentina turned to the populist protectionism of presidents Nestor and Christina Kirchner in 2003. ‘Kirchnerismo’ erected economic barriers—isolating Argentina’s economy—and employed widespread subsidies to redistribute wealth in an effort to ameliorate the country’s situation. The commodity boom of the last decade sustained the Kirchner regime, propping up a system based on the concentration of power in narrow, clientelistic political institutions and short-termism that hindered Argentina’s growth over the long term. The effect of the government’s shackling of foreign investment was clear: between 2008 and 2010, disclosed private capital invested totaled US$1.2 billion, with three large deals accounting for more than 80% of that total. Since 2011, however, that total has been just US$262 million.

In spite of these challenges, a new chapter has begun in Argentina. Following more than a decade of Kirchnerismo, the election of Mauricio Macri in 2015 signaled a shift towards market-oriented policies and the opening up of the country.

Argentina has rejoined international financial markets, removed capital controls to liberalize its foreign exchange regime
and implemented government initiatives to foster entrepreneurship and private capital investment. These changes have caught the attention of international investors, and while some of the reforms may take time to take effect, the Argentine economy is expected to
recover in the years ahead.

In this Views from the Field, veteran fund managers from across the private equity and venture capital spectrum offer their insights and
perspectives on the competitive landscape and opportunity set for private capital in Argentina, recent economic and political trends and key considerations for investors as they evaluate rapid change in one of Latin America’s key markets.