Milei’s victory continues the profitable tango of Spanish companies in Argentina

The commercial relations between Spain and Argentina They are full of names in the most diverse sectors: Banco Santander, Naturgy, BBVA, Mafpre, Dia, Inditex, Acciona, Acerinox, ArcelorMittal, FCC, Melia Hotels, NH, Puig, Iberia, Air Europa, Abanca, HIspasat, Freixenet, Grupo Planeta, etc… Also some notable exits like that of Telephonewhich sold its subsidiary in the country for around 1,190 million euros last February to the local group Telecom, and that of ACS that a year ago he sold the construction company he owned in the country (Dycasa) through Dragados to the local company Inversora Mercedes, for an amount of just 1.85 million. Has the Argentine market lost attractiveness? Nothing could be further from the truth: we continue to be the second investing country after the United States. This medium reported yesterday that Action competed for the construction and equipment of Line F of the Buenos Aires Metro in a tender of 1,160 million euros (1,350 million dollars). While, in January, Gathered Techniques was awarded a contract to build a hydrocarbon storage terminal in the Vaca Muerta oil field for 440 million dollars.

Between January and August of this year, the relationship between both countries is balancing a little more, since Spain sold to Argentina for a value of 740.5 million euros while we imported from the Latin American country for an amount of 773.1 million, with a negative balance of 32.6 million euros.

The trade balance, according to provisional data from the Foreign Trade Secretariat of the Ministry of Economy, remains favorable to the Argentine side. Spain’s exports are high value-added products such as machinery, vehicles, appliances and electrical material, fuels, or pharmaceutical products. While Argentina wins the game through its agri-food products: soy cakes, crustaceans, soy oil, fruits, legumes and vegetables, etc… Spain exported to this country in 2024 for an amount of 995.8 million euros (1,159.4 million in 2023) while imports reached 1,496 million (for 1,532.6 million the previous year) with an accumulated negative trade balance of more than 500 million euros (353 million in 2023). Between January and August of this year The relationship is balancing a little more, since Spain sold to Argentina for a value of 740.5 million euros while we imported from the Latin American country for an amount of 773.1 million, with an accumulated negative balance of 32.6 million euros.

For the professor of Economics at the Faculty of Economic Sciences of the Complutense University, Isabel Álvarez, “in the face of possible erroneous interpretations, due to the withdrawal of assets of some large companies in the region, nothing leads to think that it is a generalized phenomenon“In this regard, it stands out that macro data and also business data confirm that there has been an increase in Spanish investments in recent years.” According to a report published yesterday by the Business Council Alliance for Ibero-America (CEAPI), Argentina, together with Mexico and Brazil, is one of the main recipients of Spanish investment. A trend that has been accentuated since 2021. Specifically, the Stock of Foreign Direct Investment (FDI) Spanish in Latin America, considering both that carried out through Foreign Securities Holding Entities (ETVE) and that of a productive nature (non-ETVE), it far exceeded 195 million million euros at the end of 2023. If we focus on Argentina This figure was 47.66 million eurosonly behind the aforementioned Mexico (70.79 million) and Brazil (53.37 million).

“The continuity of Javier Milei will not influence the Spanish company, since he has never talked about an increase in tariffs”, María Ángeles Ruz-Ezpeleta (EAE Business School)

Argentina’s economic ‘little path’

As in a well-known Argentine tango, the country’s economy is not exactly going through a bed of roses, despite the fact that the inflationary monster seems to be diminishing, according to the report from the National Institute of Statistics and Censuses (Indec) published last week. The inflation It reached 31.8% year-on-year in September, below the 33.6% in August, while the monthly rate climbed to 2.1%, in its largest rise since April (2.8%). In the accumulated of the first 9 months of the year, an increase of 22% is estimated. Regarding growth, Argentina increased only 0.3% in August compared to the previous month and 2.4%, if the reference is the eighth month of 2024. Despite the relative stability of prices, different sectors did not perform well due to the high exchange rate tensionsthat the agreement with the United States by which the country presided over by Trump will directly buy Argentine pesos worth 20 billion dollars. According to Indec, 10 of the 16 sectors it measures inflation recovered in year-on-year terms, including financial activity (+26.5¨%) and mining (+9.3%). On the other hand, activities such as industry (-5.1%) and commerce (-1.7%) fell.

“Latin America is our natural market”

For the EAE Business School professor, María Ángeles Ruiz Ezpeleta, “The continuity of Javier Milei will not influence the Spanish companysince it has never talked about an increase in tariffs.” In this sense, she affirms that “Milei should not be feared” and remembers that Argentina is “the second most important country in Mercosur, with which we have many good agreements.” This expert explicitly cites the one signed between the European Union (EU) and Mercosur (the economic bloc that forms Argentina together with Brazil, Paraguay, Uruguay and Bolivia) and urges “to continue investing” in this country taking advantage of the opportunities derived from this latest free trade agreement. “Latin America is our natural market due to language and culture, we must be open to these countries, whether they are left-wing or right-wing governments. They have voted for this one, others further to the left are almost dictatorships”, maintains this analyst who remembers that it is a progressive like Lula da Silva who presides over this customs union this year. . “This is clear proof that politics relatively affects the economy,” he concludes.

“The Argentine president’s policy aims to reduce public debt and inflation, and also has the support of the current president of the White House,” Pedro Aznar (ESADE)

Milei, a ‘relief’ for the markets

Pedro Aznar, professor at the Department of Economics, Finance and Accounting at Esade, speaks in a similar vein. “It gives stability to the investment”maintains this analyst. Investors seem to think the same and the main index of the Buenos Aires Stock Exchange opened yesterday with a rise of 17.7%. Aznar explains that “the Argentine president’s policy has as an objective lower public debt and inflation, and it also has the support of the current president of the White House.” Which, in his opinion, “favors investment optimism” since Milei “he is clear about his economic priorities.” All of the above, adds the Esade professor, “also reassures regarding the evolution of macroeconomic indicators.”

However, Ruiz Ezpeleta (EAE Business School) is more concerned about the economic situation of the Latin American country. The EAE Business School professor points out that the current Argentine president has focused on reducing inflation and public debt cutting public spending to a middle class quite dependent on it. Which, he maintains, is reducing the Gross Domestic Product (GDP) and leading the country into recession. Or what is the same, consumption also falls. However, this analyst clarifies that “Trump’s purchase of Argentine pesos has prevented the public debt from being devalued and further increasing.” Now, he adds, “The American president does nothing for free: “he wants China to not have so much power in the region or become the leading power, although that is inevitable.”