Argentina election boosting Macri likely a gain for oil investors: analysts
16/08/2017
Argentinian President Mauricio Macri consolidated his power in a primary election Sunday that could unleash investment to develop the country's huge unconventional oil and natural gas resources, analysts said Monday.
Macri's Cambiemos, a conservative coalition that came to power in a tight race in 2015, won in 10 of the 24 districts and came in a close tie in two others, according to a count of more than 95% of the votes by the National Electoral Department. The primary election was held to weed out the best candidates to run in the October 22 midterm election for Congress and Senate. It was widely seen as a test for Macri, 58, to extend his pro-business policies that have started to revive investment in the energy sector. "The big winner was Mauricio Macri," said Carlos Germano, a political analyst at Carlos Germano y Asociados in Buenos Aires. "He consolidated his political power so that now he has more leeway to maneuver in the last two-and-a-half years of his term."
The result, if repeated in October, will increase the coalition's number of seats in both houses, where it's already the first minority, Germano added.It had been feared that Macri's predecessor, Cristina Fernandez de Kirchner, could make a comeback in the primaries, using it as a springboard for running in the 2019 presidential race to bring back her populist politics. Under her party's rule from 2003 to 2015, state intervention and poor conditions for doing business brought a decline in energy investment and production, hitting the country with shortages and rising imports.In the primaries, Fernandez de Kirchner tied in her race for senator in the province of Buenos Aires against Esteban Bullrich, Macri's former education minister, each with about 34% of the votes. "She has emerged from the election as something of the past, not of the present or the future," Germano said.Even so, Germano said he doesn't expect investment to flood in.Macri's coalition will have to work with the opposition, including Fernandez de Kirchner, to push reforms through Congress.
If it is successful at this, "investors will start looking at Argentina as a country with a lot more predictability."
CHALLENGES
Federico MacDougall, a director at First Corporate Finance Advisors, a Latin American financial services advisory in Buenos Aires, said some of the big challenges for Macri are to pull the economy out of recession, reduce double-digit inflation and narrow the fiscal and trade deficits.This is delaying efforts by his government to reduce tax pressure on companies to help encourage investment and to cut energy subsidies to ease fiscal spending."If it's not profitable to do business in Argentina, companies are not going to come," he said.
Argentina needs estimated $20 billion a year in investment to develop shale and tight plays including Vaca Muerta, one of the world's biggest, to offset declines from maturing conventional reserves.The Macri government has forecast that investment in Vaca Muerta should reach $20 billion per year in 2019, up from $5 billion-$6 billion this year, helping to put oil production on track to recover to 560,000 b/d in 2025 and gas to 185 million cu m/d. In the first half of this year, oil production averaged 475,561 b/d, down 44% from a record 847,000 b/d in 1998, while gas output was 122 million cu m/d, or 15% down from a record 143 million cu m/d in 2004, according to Energy Ministry data.
Fuente: "PLATTS"
Argentinian President Mauricio Macri consolidated his power in a primary election Sunday that could unleash investment to develop the country's huge unconventional oil and natural gas resources, analysts said Monday.
Macri's Cambiemos, a conservative coalition that came to power in a tight race in 2015, won in 10 of the 24 districts and came in a close tie in two others, according to a count of more than 95% of the votes by the National Electoral Department. The primary election was held to weed out the best candidates to run in the October 22 midterm election for Congress and Senate. It was widely seen as a test for Macri, 58, to extend his pro-business policies that have started to revive investment in the energy sector. "The big winner was Mauricio Macri," said Carlos Germano, a political analyst at Carlos Germano y Asociados in Buenos Aires. "He consolidated his political power so that now he has more leeway to maneuver in the last two-and-a-half years of his term."
The result, if repeated in October, will increase the coalition's number of seats in both houses, where it's already the first minority, Germano added.It had been feared that Macri's predecessor, Cristina Fernandez de Kirchner, could make a comeback in the primaries, using it as a springboard for running in the 2019 presidential race to bring back her populist politics. Under her party's rule from 2003 to 2015, state intervention and poor conditions for doing business brought a decline in energy investment and production, hitting the country with shortages and rising imports.In the primaries, Fernandez de Kirchner tied in her race for senator in the province of Buenos Aires against Esteban Bullrich, Macri's former education minister, each with about 34% of the votes. "She has emerged from the election as something of the past, not of the present or the future," Germano said.Even so, Germano said he doesn't expect investment to flood in.Macri's coalition will have to work with the opposition, including Fernandez de Kirchner, to push reforms through Congress.
If it is successful at this, "investors will start looking at Argentina as a country with a lot more predictability."
CHALLENGES
Federico MacDougall, a director at First Corporate Finance Advisors, a Latin American financial services advisory in Buenos Aires, said some of the big challenges for Macri are to pull the economy out of recession, reduce double-digit inflation and narrow the fiscal and trade deficits.This is delaying efforts by his government to reduce tax pressure on companies to help encourage investment and to cut energy subsidies to ease fiscal spending."If it's not profitable to do business in Argentina, companies are not going to come," he said.
Argentina needs estimated $20 billion a year in investment to develop shale and tight plays including Vaca Muerta, one of the world's biggest, to offset declines from maturing conventional reserves.The Macri government has forecast that investment in Vaca Muerta should reach $20 billion per year in 2019, up from $5 billion-$6 billion this year, helping to put oil production on track to recover to 560,000 b/d in 2025 and gas to 185 million cu m/d. In the first half of this year, oil production averaged 475,561 b/d, down 44% from a record 847,000 b/d in 1998, while gas output was 122 million cu m/d, or 15% down from a record 143 million cu m/d in 2004, according to Energy Ministry data.
Fuente: "PLATTS"