Is Argentina back on the world’s map?

By Jean Daudelin

Argentina has the second largest economy of South America (after Brazil), its third largest population (after Brazil and Colombia) and, in spite of all the problems of recent years, the region’s second highest GDP (PPP) per capita (after Chile). It’s a huge country whose agricultural potential and agro-business productivity are phenomenal, it has large reserves of gas and, for almost a century and in spite of recent difficulties, it has boasted one of the best-educated population of the continent.

And yet, it has had no significant international or even regional presence or influence for at least 50 years.

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Fertilizers (yes) and international affairs: the Argentina-Brazil potash feud

At the beginning of March, mining giant Vale announced that it would close its massive Rio Colorado potash project in Argentina. The move was justified strictly on economic grounds: even though the company had already invested some $2bn in the project, the size of the investments required and the problems created by inflation and an overvalued currency were said to have forced it to cut its losses and leave. Predictably, Argentina’s government was outraged but the move was well-received by markets that saw the whole venture, well, as an expensive adventure. The stock in fact went up after the announcement.

On the surface, in other words, run of the mill behaviour by a run of the mill multinational. The hitch is, Vale is anything but a run of the mill multinational. While formally headquartered in the Netherlands, it is in fact Brazilian and a strategic tool that Brazil’s government is keen to use to project and protect its interests in the world. Through investments by a public sector pension fund it controls (Previ) and by its National Bank for Economic and Social Development (BNDES), and also via its influence over the company’s largest private sector equity holder and Brazil’s second largest bank (Bradesco), the federal government exerts a tremendous influence on the company. This became clear in 2011, when its then-CEO, Roger Agnelli, was forced to resign by President Dilma Rousseff, following rising tensions about patterns of investments that, she and her predecessor Lula, felt neglected the domestic scene.

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