Sandra Hernandez / Flickr / CC BY-ND 2.0
During his visit to Buenos Aires in March, President Barack Obama praised his Argentinian counterpart and called him “a man in a hurry.” Indeed, many in Argentina and abroad have been surprised by the determination with which Mauricio Macri has implemented reforms to open the economy, remove excessive restrictions, and bring fiscal accounts back in order. So far, Macri has been successful in attributing the social pain of the reforms to the gravity of the situation he inherited. Still, Argentina’s patience could run out before the economy starts growing again.
From 2003 to 2011, the Argentine economy was one of the fastest-growing in Latin America. Under President Nestor Kirchner and his wife and successor, Cristina Fernandez de Kirchner, the country rode the wave of the commodity cycle, largely fueled by Chinese demand, and vastly expanded social programs and government spending. When the boom ended, however, Argentina was left with an increasingly interventionist state that paralyzed investment and growth, while inflation kept rising and fiscal deficits widened.
As global oil prices collapsed over the last two years, regional governments have started to lose their leverage in the energy industry. To attract international investors, they must offer increasingly favorable terms, which means ceding more of their own control.
As Latin American countries reassess their energy policies in light of lower oil prices, there is an opportunity to apply lessons learned from the US experience to enact regulations that mitigate environmental risks, strengthen public support, and attract investment.
The election of President Mauricio Macri may signal the start of a new era in Argentine energy policy and cooperation with the United States, but the new government still faces challenges to increasing oil and gas production and erasing energy subsidies.
