Argentina Summit 2017:
In November 2015, Mauricio Macri was elected president of Argentina, ending more than a decade of Kirchnerism. Since his inauguration, the president has enacted a programme of economic policy adjustments: foreign-exchange controls have been removed, agricultural export duties have been reduced and costly energy and transport subsidies largely dismantled. In addition, and perhaps most importantly, Argentina has managed to negotiate and execute a successful agreement with holdout creditors; exiting default and sending a signal that Argentina is back on the global stage and open for business. Still, significant challenges to re-balancing its economy remain. Inflation remains excessively high, the country’s fiscal deficit is large and its political landscape is fragmented. Poverty, while difficult to assess due to the lack of reliable statistics, is believed to affect very large segments of the population.
Against this backdrop and more than a year on from Macri’s election, The Economist’s Argentina Summit 2017 will gather government and business leaders from Argentina and abroad to evaluate the country’s progress. Chaired by The Economist’s editors, the Summit will tackle key questions including: What is the outlook for growth? Can the government rebuild the country’s institutions? Can Argentina learn from countries that have faced similar development challenges? What is next for multinationals doing business in the country? How can Argentina encourage innovation and entrepreneurship? What can the government do to attract more private-sector investment? How can it restore Argentina’s image abroad?
In the spirit of debate that defines The Economist, the summit seeks to encourage an intelligent, lively discussion of Argentina’s social, political and economic future.
Executive Summary: Argentina Summit 2017
By: Delfina Brancato
Buenos Aires, Argentina
8 March 2017
The purpose of this executive summary is to serve as a knowledge base for Brandiska Inc. clients wishing to understand Argentina’s current socio-political and economic situation, as well as an analysis from the experts about its future.
The Argentina Summit 2017 forum began with a Keynote presentation by Marcos Peña, current Chief of Cabinet of Ministers of the Argentine Nation, who gave a brief presentation about Argentina’s overall progress over the last year. He stated that the new government remains hopeful for Argentina’s future, despite challenges they are facing from the amount of corruption and deceit the Kirchner government left behind. He reiterated that during the Kirchner government, the State lied about virtually everything for a prolonged period of time, which now makes it difficult to have real discussions about data and information released in the past. The new government values the principles of democracy, objective facts, the continuous and ongoing debate with the opposition, a real competitive economy, global integration, and the generation of new jobs. He believes in the urgency for change in the political culture of Argentina. Despite not having met all of the promises made during the election campaign, he notes that they are continuing to work on and staying focused on the 8 strategic objectives, 100 government goals, meeting the deadlines and objectives set out for each of them, through collaborative team efforts, and coordination within the government, specifically at the top level. Furthermore, he stated that considering their minority in Argentina’s congress, they have managed to sanction a record number of laws. The relationship with the unions has been excellent during the past 15 months, especially considering the context of economical recession. However, they will continue to condemn violence, as seen with the CGT. He believes that Peronism Party needs to be renewed, in order to truly become an opposition party. They will continue to strengthen dialogue with mayors and governors, and most importantly continue to inspire people to aspire for social ascent. Macri’s government is building the infrastructure needed for the country’s growth: reforms in social and economic areas, and global integration. It is understood that the legislative elections approaching in October 2017 are very important, and they believe they have the people’s ongoing support, however, even if they do well in the election, they will continue to be in the minority in both houses of the Congress.
His presentation was followed by the first expert panel “A View from the Top” Sebastian Piñera, former President of Chile.
Argentina:
According to Piñera, we are living in a very different world, facing problems such as: protectionism, terrorism, climate change, disintegration policies, etc. Regardless, he believes there are many benefits for Latin America and Argentina. LA has had privileged natural resources, and has not had the wars which have devastated the rest of the world, additionally there’s no terrorism, or racial conflicts. Despite all of this LA remains underdeveloped, 1/3 of the population is living under the line of poverty. LA has not seized the opportunity to develop to its full potential. In the case of Argentina, the country has not been completely free, as they have not been integrated to the rest of the world: it is protected by borders, and has had governments that have controlled all of the decisions, and have not given the people the freedom to create. From such freedom comes innovation, entrepreneurship, which is all in the heart of Argentine population. What we are seeing today in Argentina is a full re-birth. Over the past months Argentina has succeeded in a number of issues: a minority government has created majority for the approval of laws, there is a community of dialogue, solved holdout issues, lifted foreign exchange controls, economic sincerity of prices of public services. This was an awful year for Argentina, no fiscal deficit reduction, did not lower inflation, however, the government set the ground for 2017. Argentina will grow this year; they will reduce the fiscal deficit and inflation by half.
Argentina is not used to competing in the global market, and as much as it is comfortable to stay within the safety net, this will not allow the country to grow. Argentina will now have to face competition within Argentina, and the rest of the world.
Argentina lacks structural reforms. One thing is to attack deficit, but another is to recover a leadership position. This requires much more work. Argentina has a macro economic imbalance. In Argentina there are 8 million pensioners, and 6 million formal workers. There needs to be a significant cultural change.
Mercosur and Pacific Alliance:
Mercosur and Pacific Alliance are very different projects. Mercosur is a customs union, which allows for trade within the area, however, it is not complied with in many occasions. The pacific alliance is an integration of goods and services, capital, market and trade, and opens its borders to the world. These are two different concepts. Mercosur needs change; Brazil has had its worst recession in its history, Argentina and Venezuela as well. Mercosur will change with the new governments in Brazil and Argentina, and Uruguay just entered their first free trade with Chile. Mercosur will soon realize that the integration between the countries in the region cannot neglect global integration. This will allow an alignment between Mercosur and Pacific Alliance.
I believe Mercosur is a project that, as it was designed, has no future. The Pacific Alliance allows for free trade, capital movement, integration of stock exchanges and services, and they also go out to new markets, especially in South East Asia. Mercosur should follow this example.
Chile:
Chile is growing by 1% and not creating jobs. This is not a result of the commodity crisis, as much as it is a result of the poor economic policies.
Next panel “Becoming a True Global Player” with Sebastian Gaiani, Secretary of the Ministry of the Treasury, Jesko Henstchel, Director, World Bank, Southern Cone, Norteru Fukushima, and Japanese Ambassador to Argentina
Sebastian Gaiani: Argentina’s economy
Macri inherited an economy with many fiscal imbalances. It was a closed economy, public services were not being charged properly, and that generated a situation of strong fiscal deficit, which is one of the main concerns we have at this moment. We have a tri-annual plan to reduce it. In that context, in the first year of Macri, there was an important recession, the argentine GDP fell 2.3% and that was concentrated in the second and third quarter of last year, while the fall in employment was mainly in the first half and we lost 100,000 jobs.
In August 2016 the economy began to recover very slightly, and it is not seen in the GDP until the last quarter of 2016. As of August the employment began to grow. The data that we see from January 2017 is still better than December 2016. It begins to show a tendency.
With these numbers we can say that if one analyzes the growth rates today, the economy in 2017 is going to grow 3.6%. This we think we will notice more in the second and third quarter of 2017, which will also coincide with the two quarters that fell strongly last year and it will leave a good base of growth for the year 2018.
Mercosur:
The priority is to strengthen Mercosur, and from Mercosur, there are advanced talks with the European Union to have a gradual process of integration. It is not so easy to add agreements. Argentina has comparative advantage in some sectors, the demand will be increasing because we have so much to offer, the mining, agro, tourism industry but for all the manufacturing sector and of new developments we would like to expand our market and these agreements are fundamental.
Norteru Fukushima Investor Prospective:
Next year Japan will celebrate 120th anniversary of Japanese/Argentinian diplomatic relationship, and above all there are companies that have 100-year history in the country like Bridgestone, or the bank of Tokyo Mitsubishi. In the 80-90 there was a boom, there were more than 120 companies but in these 15 years everything fell by half, in the case of Brazil there are 700 Japanese companies, in Mexico more than 1000 companies, which tripled during these past 15 years.
Prime Minister Abe visited Argentina in November 2016; it’s been a half a century since the last official visit. Also, Vice president Michetti visited Japan with a great team, and this totally helped to advance the relationship between the two countries, and we are writing several agreements. Prime Minister Abe declared that Japan considers Argentina a strategic partner. In Latin America only Brazil and Mexico are strategic partners for Japan, Argentina is a country that has a lot of business potential for them.
In the future, Japan will be having many visits to formulate several large projects in Argentina, especially in the infrastructure sector, agro industry and energy sector. Japan is also preparing President Macri's visit to Japan In May 2017, and next year the G-20 will be held in Argentina, and Prime Minister Abe will come again.
That is why many companies have a lot of intention to invest in Argentina, and now 1.3 billion dollars have already been announced to be invested here especially in the automotive sector, but in order to further increase these investments there needs to be more financial and legal security.
3 Obstacles:
1) Legal framework
2) Sovereign Guarantee
3) Contract in pesos. We prefer to have contracts in US dollars.
Japan is very hopeful that the government will solve these obstacles.
Japan is always seeing the possibility with Mercosur but so far it has been complicated. Pacific Alliance needs Mercosur because it is such an important place, which is why Japan supports the reform President Macri because it is good for Argentina, Mercosur and the region. Japan intends to have an agreement with Mercosur.
Argentina according to the World Bank:
Argentina has natural resources natural energy, human capital that is very high and this has many advantages at a regional and global level. Not only the agricultural sector, but the high value meat and machinery, will have a very important demand in Asia. This is going to be a comparative advantage in the long run. Services of high value like software, is a market that Argentina has a very strong knowledge base.
The third point of opportunity is the current geo-political situation: there is a very strong discussion the world and the US on the benefits of trade on the benefits of a global integration and this I believe gives an opportunity to Latin America to achieve a deeper integration between the Pacific Alliance, Mercosur and Mexico. This is a very important chance.
One of the challenges: there are important gaps in Argentina, the investment rate in Argentina is 17%, the savings rate is much lower than the average Latin American, there are gaps in the public sector, gaps in social equity, 1/3 of young adults aged 21-23 years have not finished high school, all of this is at a disadvantage in order to achieve integration.
World growth is approximately at 3 to 4% and it was at 8%, therefore integrating into a market that is getting smaller is not easy.
According to the world economic forum global competitiveness report Argentina is one of the countries with the poor performance:
The Global Competitiveness Index (GCI) reveals the poor performance among many of the 20 largest emerging economies—which together account for 27 percent of global GDP—in terms of the functioning of their institutions, as well as in establishing efficient product and labor markets. In particular, six of those countries rank below the 100th mark: Argentina, Brazil, Egypt, Mexico, Pakistan, and Venezuela.[1]
The second part is access to credit, Argentina has a credit penetration of 13% and in LA the average is 50%, the development of capital markets and access to credit is essential.
There are 3 projects that we approved two weeks ago, and we hope they are going to help Argentina.
1) A guarantee for the renewable energy sector
2) Project of urban transformation working with CABA in Villa 31 in which the city is making a transformation of this town with people in a very socially integrated way
3) We are working with Argentina in public contracting which is one of the areas that can make the process much more transparent. The modernization ministry is making changes in order to make everything digital, very open processes.
The following two panels discussed “From Startups to Scaleups I” and “From Startups to Scaleups II”.
Marta Cruz, Co-funder NXTP Labs, Alec Oxenford, Serial Entrepreneur, Co-Founder, olx.com, and Mariano Mayer, National Secretary of Entrepreneurs and Small and Medium Enterprises, Ministry of Production, Government of Argentina
· Recently we did a report on Latin American technology companies, where we analyzed 5,000 technological companies in the entire region. Our findings: there are 124 companies that have valuations higher than 25 million dollars, 18% of these companies are from Argentina and were created in the last 15 years but most importantly 37% of the value of all of that portfolio, which is 37 trillion dollars, also come from Argentine companies.
· In Argentina there are almost no leading sectors-- a little in the agro and technology, but in the vast majority of sectors, Argentina is neither a global leader nor competitive. This situation can be modified with time and focus. Technology can give Argentina the ability to make the jump as a leader and to "leapfrog,” because the companies that have the ability to scale faster are in the technology sector.
· Today the most valuable company in Argentina is Mercado Libre, a technology company. Six years ago this would have been unimaginable.
· Today in Argentina there are 4 unicorns that are worth more than 1 trillion dollars.
· The difference between 4 unicorns and a cluster of companies is very important: It will take time to change infrastructure and change the rest of the economy in order to have a cluster of companies, and not just 4 unicorns. The good thing about those 4 is that it is reassuring in a sense, and shows us that it is possible.
· What can the government do to reduce the bureaucratic steps that still exist if someone wants to start a business in Argentina? Through the government plan “Argentina Emprende”, it becomes clear that the government understands that the protagonists have to be the entrepreneurs, and the SMEs, and the government must help where they add value and not become a nuisance. It is difficult in a country like Argentina (where there are big differences between Buenos Aires than the rest of the country) but clearly where the government can improve is in the rules of the game, it is the "doing business" or regulatory framework. Today the situation is very bad, for example one of the parameters is how much an entrepreneur delays in starting a business, and we intend to improve this with the “the law of entrepreneurs[2]”. In Argentina it can take anywhere between 2/3 months to 1 year to set up a company and register the fiscal key in the AFIP and open a bank account, depending on the province. We want all this to happen in one day on the Internet and for it to be much cheaper. (Note: footnote Law of the Entrepreneurs was enacted 07/04/2017).
· How big is the start-ups ecosystem in Latin America and where is Argentina in this ecosystem? We are behind Brazil, which has 48% of the most valuable companies, and Argentina is at 18%. We want to boost the investment ecosystem in Argentina, not only with local investors but foreign investors as well. Beyond needing the “law of the entrepreneurs”, what we need is to re-activate investments. We want to contribute to make us a more reliable country, and become more visible to the rest of the world. Argentina has 4 unicorns and we are in a privileged position.
· Does Argentina have the competitiveness to be a leader in the digital world? The cases that exist, 4 Unicorns, prove that it is possible, however there are many other places in the world where it is much easier to raise money for a start-up than in Argentina.
· In Argentina there is no real technology culture, if one is a citizen in the US everyone knows the founders of Apple and Microsoft, and everyone understands and uses their products but that does not happen here yet, people do not yet understand the relevance that this sector has for the rest of the economy.
· The taxes in Argentina for start-ups: the tax burden is very high. The cost of labor is high (the cost adjusted by productivity of a sophisticated engineer, a data scientist for example, which are the most important profiles in technology today, are not good yet - there is a lack of profiles), however it is improving; there was no government in the past until the one today, which has made this topic relevant in the agenda. This is a giant step forward.
· Existing SMEs have a great challenge: It is necessary to take SMEs to a 21st century entrepreneurial culture in Argentina.
· The digitization agenda is what is being spoken about in the world today. Everything that has to do with digital management, the automation of the industry, training of the employees, in order to prepare them for another type of work environment. In our country, the problem of family businesses is more evident than ever because the new generations are realizing that they need to innovate and there is still a lot of friction with the generations above them. With the entrepreneurs we need to generate 200,000 more companies, and not all of these are going to be high impact or dynamic, however with the high potential SMEs we have support programs in place.
· Women in technology: Research supported by the Inter-American Development Bank, indicate that companies that have gender diversity tend to be more sustainable over time and generate more employability.
· The impact of the technological sector: It begins to happen that almost a requirement of a strong technological cluster is to be able to have a "non-technological" industry that supports it as well. Countries that are leaders in technology have other highly developed industries that benefit from this.
· Cost and efficiency: technology can accelerate processes and reduce costs. Technology also raises the average salary: The wages of the technological industry are among the highest, and it pulls up all other wages.
The panel on “The Road Ahead for Argentina” with Susana Malcorra, Minister of Foreign Affairs and Worship of Argentina
We are in a world with a lot of uncertainties. Now from the optics of Argentina, and this new government we have more certainty. Being closed to the world has not brought us good results. We are certain that it is not philosophical; it is practical because after a long period of being closed to the world, and being extremely selective, we had terrible results.
I believe it is our region's responsibility to take advantage of what is happening in the world right now. We should be very alert to where the opportunities are going.
We are working towards seizing the opportunity that the EU no longer has an agreement with the US in sight. We believe that what is happening with NAFTA gives us an opportunity to bring Mexico back to a vision of the region, in many issues that Mexico only saw the US as a partner.
We believe that the dichotomous vision of Atlantic and Pacific, which has been raised in recent times, is absurd and a serious approach must be made between Mercosur and the Pacific Alliance. We believe that all this rhetoric surrounding integration South America was not reflected in the facts. All that is direct inter-regional investment and all that is inter-regional trade did not grow and has very low levels. Argentina now has the Presidency of Mercosur (December 2016), and we are trying to have concrete results.
Mercosur - European Union
· There is a possibility for the EU to wake up and understand that there is a historic opportunity to regain the leadership on multilateralism issues.
· It seems to me that the agreement between the EU and Canada shows some opportunities. We could use this example as a starting template for Mercosur and the EU, although we would have to adapt it, as Canada is very different from us.
· The internal balance of the EU finances will change post Brexit, and many countries that receive positive financial balances in the agricultural sector will become net payers, I think it is necessary to take advantage of this properly. The fact is that the EU cannot have an agreement with Mercosur without the agro industry being included.
Pacific Alliance and Mercosur:
· They are two solutions, two different regimes, they are asymmetrical, and it seems to me that we have to be creative in finding the way of cooperation.
· I do not see in the short term a complete integration in the single market between Pacific Alliance and Mercosur. Because the alliance is not a single market.
· It is difficult to sell the concept of Mercosur when internally it is so far from being the integration we aspire.
· An integrated market of the size represented by Mercosur, earns a lot more and gives us an opportunity to negotiate well. We need to have an understanding of where our weaknesses and strengths are.
China:
· China is important as Argentina is cleverly opening up to the world.
· We have reviewed much of what was signed between the Chinese government and the Kirchner administration, in fact the ongoing hydraulic projects in the south, in the hydroelectric power stations is being completely reviewed, with an account of a lot of the objections that there were, fundamentally the environmental ones. It is being completed with the objective of having a new project that is viable, sustainable and that really serves the objectives of Argentina.
· Nuclear power plants fall within our priorities; we have adjusted that agreement with China, which was approved by the Congress.
· We have reviewed the agreement on the “base” that China has placed in Argentina, and we have clearly defined in written form that the objective will be exclusively civil.
Venezuela:
· The Venezuelan solution has to be found by the Venezuelans, there is no miracle solution. It is necessary to establish an electoral timetable that can have supervision from UNASUR or from some other mechanism.
· The OAS democratic charter. This letter says that there is supervision in the event that a country fails to comply with the principles that the OAS. In order to advance in this supervision it will require the consensuses that are needed in any multilateral government.
The economist concluded by saying that there’s a clear change in Argentina’s foreign relations, which is very important, and there is a clear active agenda moving forward.
Next panel on “Taming Inflation and Responsibly dealing with debt” with Mariano Federici, President, Argentine Financial Intelligence Unit, Maria Cavalcanti, President, CEO Pro Mujer, Fernando Cerro, and Technical Director, INDEC
Central Bank and Fiscal Deficit:
· Real interest rate paid by the central bank was negative, because the interest rate was on average 28% all year and inflation was 40%. The central bank lowered its debt in terms of debarment.
· The Central bank spread inflation in several periods, and this was optimal.
· Now the responsibility is in the field of the national public sector to correct the fiscal deficit.
Microfinance:
· There are 2 types of problems in Argentina for microfinance: the money the client receives is never enough, due to inflation. On the investor side, we have money from Europeans and North Americans, however the market was cut off for Argentina not only due to inflation but also due to devaluation and default. Many investors did not want to work with Argentina.
· It is important to think of two things: the inflationary policy "foreign exchange" to attract investors in the long term, the other parts a policy of financial inclusion.
· The Economist has an INDEX financial inclusion index and Argentina is 44 out of 55 countries. There is no infrastructure in Argentina to support financial inclusion, as we know that more than 50% of the population in Argentina is unbanked. In the low-income population this level grows 60/70%, it is much more expensive to be poor in Argentina. We are working to bring banking to this segment of the population, but it is not simple when we lack a structure to facilitate the opening of accounts, to introduce new financial products, and lack of mobile banking structure.
· We consider it relevant to this discussion that the lack of integrity in financial economics in recent years really had a very direct impact on many of the challenges that Argentina faced particularly in terms of attracting investments and access to capital markets, all of which contributes to inflation.
· The Kirchner administration and corruption: impacted on the integrity of our financial system and the integrity of our economy, created companies and structures that were only viable within the framework of the corrupt strategy, which hired people who today are at risk of losing that source of work. Our role is to underpin the importance of integrity, to protect financial stability as a pillar of the macroeconomic stability. Together with the government we to try to adopt policies to prevent illicit flows of money in order to create a deterrent effect that is necessary to discourage crime and create a more adequate investment climate that encourages investment and taking risks in a fair market.
· Investors have realized that investing in countries that do not protect financial integrity is not a good business in the medium and long term and ends up costing that investment. That is good for those who want to install a complete financial and economic model, to compete in the international market.
· There are many pending legislative reforms that could provide control agencies with the necessary tools to combat crime more effectively. We see the case of Brazil that is a model that exemplifies some of these problems as the legal tools with which the judges have served to uncover many of these cases and to punish those responsible.
Inclusion of women:
· There are studies that show that the inclusion of women in the workforce can change between 2 to 3 trillion dollars, in Argentina that can mean an increase of 17% GDP.
· GENDER GAP Index, Argentina is placed 130 of 144 countries, there is a lot of work to be done. However, it is a very great potential.
Next panel on “Making Renewable Energy a Reality” Juan Jose Aranguren, minister of Energy and Mining, and Victoria Flexer, Professor, CONICET, Universidad Nacional de Jujuy
Renewable Energy at a National level:
· Renewable energies are part of President Macri's state policy. It is a commitment that the renewable energy has to have in the Argentine matrix a relevant place not only for the impact that it has in mitigating the climatic change but also for lowering cost. Our country has a high dependence on fossil fuels, 87% of our matrix is ominated by fossil fuels and therefore it is a good opportunity to diversify the matrix. This in turn will allow us to achieve energy security, which means having accessible, varied energy, and at reasonable price.
· Argentina natural advantages: this is a virtue, and a defect. It seems that a country like ours that has renewable and non-renewable resources in quantity, unfortunately for our own ineffectiveness during many years we are depending on imported energy, instead of developing our own resources, generating work in Argentina, paying taxes in Argentina. The idea of ur government is to reverse this situation, and attract the external and internal investments to accompany us in this process.
· Technical capacities and private resources: Argentina has a very interesting capacity as there is not only construction capacity, but also knowledge at the engineering level of current technologies, as well as the vast scientific-technological body of the country. Such an example of this is currently happening in the province of Mendoza where there’s construction of wind turbines.
· The CONICET scientists work on solar energy, wind and tidal power.
· The need for foreign investment: Argentina was a pioneer in developing legislation in 2006 to promote wind and solar energy, unfortunately very little was done. In 2014 some members of the congress were reformulating the law that had been approved (Law 26.190) and ended by passing law 27.791 with a large majority in congress. There is a broad consensus throughout Argentine society of the importance of renewable energy.
· Argentina has installed 200 megawatts of solar and wind energy, and has 600 of small hydroelectric projects. In total they reach 1.8% of the country's generation matrix.
· As for investor confidence: in 2016 in the energy sector there were local and international public bid, which were open and transparent, and they achieved investment of $6,500 million dollars in both thermal energy, and the projects RENOVAR I program and II. With RENOVAR program, we will reach 2018 with approximately 9% of what is the electric energy consumed from renewable sources.
· We have to comply with the law which says that by 2025 20% of energy consumed must be from renewable sources, and we will surely going to surpass that law, because we have very good quality resources in Argentina and it is a type of energy that makes economic sense.
· All alternative energies for both solar / wind / tidal power are considered to be intermittent. It means that they have periods that we can take advantage of them and periods that we cannot, and moments in the middle which are "grays" where we do not have full power generation. A clear example is in solar energy, during the day we can capture that energy, and at night there is nothing. However, if we would like the energy matrix to have a very important percentage with renewable energy, we would have to think about the capture and the accumulation of that energy. It is necessary to accumulate during the day for example (in the case of solar energy), then to inject it to the system during the night. Argentina has very important possibilities because the accumulation of energy can be achieved in large banks of energy, which are like large rechargeable batteries, and then released when there is no energy. The batteries are static and are made with a lithium resource (Lithium we have in the country). These are the best batteries.
· Research and development on battery: CONICET is working on research for batteries and lithium (the only ones that are working on the development of batteries worldwide).
· The Ministry can support more scientists to research and find new technology in the sector: In the RENOVAR program, we have a support for national copper that allows us to make a transfer of technology and develop the technical capabilities. In the case of lithium, I hope that this year we can announce 3 projects in which we move from the pilot stage to the development stage, lithium in the world today is consumed at about 200,000 tons and is expected to pass in 2 years to 500,000 tons. Argentina produces between 25-30,000 tons and we will triple that level of production in 2 years, precisely linking that energy sector with the mining sector. Argentine scientists can do this and very well.
· What is the energy mix that Argentina wants: there is no single answer, and from here until we reach that goal there will be many things that will change, for example with respect to the development of lithium batteries. Today, for example, a solar energy project was approved in Abu Dhabi where the cost of the mega watt is $ 750,000 per mega watt. But still the batteries cost $ 170,000 per mega watt. It is necessary to improve not only the issue of the size of the physical space that the battery occupies, but also to have an economy of scale to make it more economical.
· We also have to think of other energies, not totally renewable but very abundant, such as hydrogen. FUELCELL is going to have a stake in what is energy transportation in the world.
Energy Imports:
· How much does Argentina depend on foreign energy? It all depends on the time of the year, in the middle of winter, when we cannot cover the demand for natural gas it reaches 150 million cubic meters per day, and it is not enough to import 30% (Bolivia, 20 million cubic meters per day, or in the form of liquefied gas, which is another 20/25 million, and something from Chile). In the summer, these days of heat, we resorted to the supply that we received from Uruguay via Salto Grande, from Paraguay via Yacireta, although it is one hour and fifty for the two of us we are taking 90% of Yacireta's generation. And when the cost is cheap in Brazil because they have a lot of water, we are taking thermal energy in the order of 10%. The worst is not because we do not have it but because we were not able to develop it, and this is what we are going to transform.
· Energy subsidies: in spite of the tariff increases, when we compare 2015 to 2016, these were maintained at 2.9% of GDP. If we had not applied these adjustments today the deficit would be much greater, and on the other hand that rate adjustment we would have paid through inflation.
Energy Savings:
· The question is fundamental. In what was Macri's decision to elevate both the energy and mining secretaries to the ministry, somehow responding to the challenge we have as a country, we also created a secretary of energy planning, and within that we have a sub-secretary for energy efficiency and savings by engineer Andrea Heinz. We presented at the summit of Marrakesh COP 22 at the end of last year that if we did not do anything in saving and energy efficiency of the 135 Tera watts hour we consume in the year of electricity we would have to spend 190 Tera watts hour for the year 2025. Our scenario that we are going to be at 161 is 15% less, and this is due to the implementation of programs of saving and improvement of energy efficiency, including pos-generation that today there are 4,000 / 5,000 Tera watts that are dissipating in the environment, which industries do not use and we would easily be able to recover.
· But if we do not give energy the true cost that it has as the law says that we have to recover the economic cost of producing it, it will be difficult for us to be able to blow up these cogeneration or energy efficiency projects.
· With respect to costs: all renewable energy projects have a relatively high installation cost but then the cost of producing energy is really small. It is necessary to make a minimum maintenance of the equipment. It is zero risk.
· Investments: In November we launched a call for projects, intended to reduce the cost of electricity generation and to improve reliability in the system. We would like to know how good the transmission networks are in Argentina, both in ultra high voltages, high and medium voltage. We have received more than 198 expressions of interest, from 89 different groups. This year there will be public tenders, both international and national to close open cycles, to build combined cycles, and to solve the bottlenecks that we have in the high voltage system. We have estimated that we need to invest in 5,000 KM of ultra high voltage networks in order to solve those bottlenecks. Or transfer the energy that will generate the dams of the Santa Cruz Union once its construction has been approved.
[1] Global Competitiveness Report 2014-2015
[2] Law of the entrepreneurs was enacted 07/04/2017 https://lavca.org/2017/03/30/five-keys-understanding-argentinas-entrepreneurship-law-en-espanol/
