We are slowly starting the work to bring back solidity and capacity to the Argentine energy system, creating the necessary conditions for development at Vaca Muerta to begin.

Gabriela MICHETTI Vice-President ARGENTINE REPUBLIC

The path to a better Argentina

May 14, 2018

Argentine Vice-President Gabriela Michetti talks to TOGY about Argentina’s recent economic progress, the role of the country’s energy policy in ensuring the country’s stability, and how to make domestic opportunities more attractive to foreign investors. Since taking office in December 2015, ensuring the attractiveness and competitiveness of the domestic energy industry has been a key focus for President Mauricio Macri’s administration.

• On solid foundations: “Energy policy is one of the basic elements that enables the development of investment, industry and SMEs. This generates employment, productive activity and improves the quality of life for the entire population.”

• On Argentina’s potential: “To promote the arrival of investment, I believe that we only need clear rules, foreseeability and trust in the fact that the chosen path is a definitive and long-term one. Investments arrive on their own where there are opportunities because of the profits that can be made, and Argentina is full of opportunities.”

Most TOGY interviews are published exclusively on our business intelligence platform, TOGYiN, but you can find the full interview with Gabriela Michetti below.

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What are the main economic and energy achievements that have been made since the new administration took office?
When we took office, we found a general economic situation and a particular energy one that was really chaotic and critical. That is why I believe that our main achievements in these past two years have been to put into order and on track an economy that was diving. The process will be long, but the reasonability and long-term vision with which we are facing these issues allow us to know that the destination will be good and encouraging.
On energy matters, the panorama was particularly critical. The degree of underinvestment in the sector, which was the product of inexistent state policy on the issue and adverse and unreliable conditions, was unbelievable.
We are slowly starting the work to bring back solidity and capacity to the Argentine energy system, creating the necessary conditions for development at Vaca Muerta to begin, and really opening up the development of renewable energies for the first time. These are transformative and profound changes that will become the basis for real development in the long term.

How significant is FDI for Argentina’s macroeconomy and what measures are necessary to attract more investment?
Within this process towards mature and sustainable development, foreign investment is of vital importance. To promote the arrival of investment, I believe that we only need clear rules, foreseeability and trust in the fact that the chosen path is a definitive and long-term one. Investments arrive on their own where there are opportunities because of the profits that can be made, and Argentina is full of opportunities.
Historically, this has not happened in our country because those opportunities were filled with threats and insecurities that overshadowed the serious and long-term investments that were needed. Thank God this is changing in Argentina, and though they are still a bit frightened, investors are noticing this and approaching us.

How can national energy policy contribute to President Macri’s “zero poverty” goal?
To strongly move forward against poverty, we need to revert the structural problems that produce it, and this is directly related to development conditions.
This government knows that social containment measures are necessary, but are still just patches. What really takes people out of poverty are structural measures, employment generation and basic socio-environmental conditions for better quality of life.
Energy policy is one of the basic elements that enables the development of investment, industry and SMEs. This generates employment, productive activity and improves the quality of life for the entire population.

What is the role of Vaca Muerta in the administration’s global strategy?
Vaca Muerta is a resource of utmost value. The previous administration could not generate the basic conditions to turn the play’s value into reserves and allow it to really attract the investments that could make it productive.
This administration has taken those steps, and in 2018, Vaca Muerta is one of the most interesting promises in the energy sector. However, we have set the basis for a more diversified energy matrix that will enable us to not depend on one single source of energy, since Argentina is rich in all types of energy resources.

 

The Vaca Muerta framework agreement on productivity is an example of joint collaboration between different parties. What challenges remain to improving Argentina’s productivity and competitiveness as the country strives to reduce the so-called “Argentine cost”?
This agreement is one of the measures that gives an element of seriousness and foreseeability to investments.
We need to move forward on that same road. The sector that represents the workers is also realising the importance of understanding that the country will move forward if we all work together. They have to be active participants in this development because clear rules based on reason and the competitiveness of our industry will result in more solid companies that are capable of providing better salaries and more labour stability.
We are jointly working with all the stakeholders that intervene in all sectors. The private sector, employees and the state have to work together to achieve a healthy balance that guarantees rights and competitiveness at the same time.

Following the recent general tariff revision, what are your expectations for power generation and gas distribution?
We believe that as conditions for the sector improve, companies should be more active and resume investments that provide greater solvency to the system and allow for its development.
The government is taking the necessary measures to exit the unsustainable fiction that we could sustainably pay such lower prices for energy, gas and water; and is working to provide companies with competitiveness. It is necessary that the companies do their part by being responsible and realising the structural investments necessary for the system to be sustainable in the long term.

What measures are needed to boost the productive and employment generation capabilities of industrial SMEs?
SMEs are the main development engine of any country, and ours is no exception. At the same time, because of their conditions as SMEs, they are the ones that need more stability in the rules and market conditions, as any change hits them significantly. The government needs to accompany and provide security for SMEs, so that they can develop all that huge potential that will generate employment and provide solid growth for our country.

What is Argentina’s regional role, given the political and economic changes that South America is undergoing?
Argentina has historically been one of the countries that had led the region, and it has all the capacity to do so again. In very few months, we become leaders and hosted the main regional gatherings. If we keep taking reasonable and stable measures that signal that we are on a path of sustained growth, we will undoubtedly return to lead the region and work together with our brother countries.

What concrete objectives would you like to achieve by 2019?
Our objectives of single-digit inflation, monetary stability, the reduction of the fiscal deficit, and maintaining sustained GDP growth are already taking place. This will allow us to end our administration’s term by saying that we have put the country back on track and have set the macroeconomic basis for sustainable development.

What is the significance of Argentina holding the G20 presidency, and what will be the main agenda that the country promotes?
The fact that Argentina has taken on the presidency of the G20 is a signal of trust on behalf of the countries that will be visiting our country in 2018 and responsibility on our behalf for housing the highest authorities and representatives of the G20 countries and proposing novel work agendas during throughout the year. This places us in a leadership position, with the possibility of demonstrating that we are a country that has recovered stability and has a lot of growth potential.
Argentina’s presidency will be oriented to propose novel agendas related to education and tools necessary for the jobs of the future; this is one of the greatest challenges that all countries face. We also want to talk about environmental challenges and the commitments that we will assume globally on this topic, as well as international commerce policies and the challenges that the industrial sector faces.

For more information on developments in Argentina’s energy policy, see our business intelligence platform,TOGYiN.
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