Argentine President Javier Milei is trying to draw foreign investment to help stabilize a faltering economy. Some big international companies are abandoning the country instead.
HSBC Holdings PLC announced on Monday plans to sell its business in Argentina to Grupo Financiero Galicia for $550 million, along with a $1 billion pretax loss. Clorox has ended operations there, while Exxon Mobil Corp. may also pull out. This comes after Banco Itau pulled up stakes last year while Walmart Inc., Falabella SA and LatAm Airlines Group SA departed during the pandemic.
HSBC’s unit in Argentina, “generates substantial earnings volatility for the Group,” Chief Executive Officer Noel Quinn said in a statement Tuesday, adding its business there has “limited connectivity to the rest of our international network.”
The decisions to leave come amid Argentina’s worst economic crisis in more than two decades . Analysts expect its economy to contract for a second straight year. To help combat inflation and shrink the fiscal deficit, Milei has devalued the peso by more than 50% and slashed government spending. While monthly inflation has slowed — albeit still at crisis levels — analysts surveyed by Bloomberg expect prices reached nearly 300% annually in March.
“There is a lot of interest in Argentina abroad, but foreign investors are expecting fiscal discipline and sustainable changes,” said Fabian Kon, the CEO of Galicia, adding the need for strong institutions.
Read More: HSBC to Book $1 Billion Pretax Loss on Argentina Unit Sale (2)
As some multinationals leave, Milei’s cuts to public spending and monetary supply have sparked a rally largely fueled by hedge funds and local Argentine investors: The stock market is up 35% in dollars and sovereign bonds maturing in 2029 have risen 47% so far this year. With that rally as a backdrop, traders in Buenos Aires believe that foreign investment has yet to flow into capital markets or the real economy.
Eduardo Constantini, the CEO of Consultatio, a financial firm in Argentina that bought local broker TPCG this week, expects medium-term investors are likely keeping a close eye on political developments before making a bet on the country.
Constantini is waiting to see if Milei can negotiate an agreement with congress on his package of reforms after lawmakers rejected the first version of the bill earlier this year.
“It’s very early and reasonable to think that foreign investors aren’t making direct investments only three or four months into this government,” Constantini said in an interview. “The reality is the federal government has to shrink. We’ll have to see if politicians reach a deal.”
Beyond HSBC, Exxon Mobil Corp. is mulling bids for its Argentine shale assets as it looks to unwind its bet on the South American nation’s oil and gas riches. Clorox sold two production plants and brand rights to Apex Capital and revised its full year forecast.
Galicia’s Kon sees reason for optimism.
“Argentina is going in the right macro direction — it needs fiscal balance, a single exchange rate, lifting of currency controls and a stable regulatory framework,” Kon said. “If this happens, inflation will come down and Argentina will start to grow.”
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
