MercoPress. South Atlantic News Agency

Generous Argentina poised for an encouraging recovery, in spite of …

Record soy crop and the Brazilian market should pull Argentina out of recession

Last year ended for Argentina with a 2% economic drop as a consequence of the international crisis and its impact on the majority of productive sectors. However, from the second quarter onwards, some improvements -expected to remain unchanged for 2010- have become visible and the outlook for the year is more encouraging.

According to abeceb.com economic consultants, Argentine recovery will be based on those sectors which decreased in 2009: the farming sector, the car industry and the iron and steel industries.

The soy harvest is expected to reach the record output of 51.5 million tons. Moreover, Brazilian demand will boost both the production and the exports in the automotive sector.

However the building sector is not forecasted to recover to pre-crisis growth level, especially as a result of the decrease in public works. Steel, on its behalf, will jump thanks to the rallying of the international building industry.

Argentine industry indicators begun to give positive signals following the second quarter of 2009 and the economic expansion index last November increased for the fifth month running. Similarly the Industrial Union said in its latest report that industrial production following thirteen monthly consecutive contractions ended 2009 with a modest 3.2% expansion.

“The improved indexes can be tracked mainly to the recovery of steel, food and the automobile sectors”, said the report.

Abeceb.com also points out that improved international prices for commodities will benefit the farm sector, helping to recover profit margins lost in previous crops.

Domestic demand is also set to play a strong role in Argentine growth expectations as people feel more confident and increase spending which should help sectors such as food, beverage, and textiles. The record soy crop is also anticipated will generate greater demand for farm equipment and fertilizers.

But structural hurdles remain besides the political uncertainty and the “non-orthodox” economics of the Kirchner presidential couple. Basically what is more disappointing is the scarce investment in increasing established production capacity which could hinder or retract Argentina’s production potential.