The Costs of Promoting Business in Argentina

Argentina is in the middle of a political and economic transition. Since Mauricio Macri of the conservative Republican Proposal party was elected president in November 2015, the country's political leadership has shifted to the right as the new government attempts to create a more business-friendly environment. During the last years of the previous administration of former President Cristina Fernandez de Kirchner, a rapid rise in deficit financing contributed to heavy inflation (near 45 percent year-on-year in August 2016). In a bid to draw more foreign investment, Macri has tried to implement fiscal discipline in the country, cutting public spending to reduce the country's widening budget gap, which totaled 5.4 percent of Argentina's gross domestic product in 2015. At the same time, he ordered the removal of most foreign exchange restrictions -- one of the largest barriers to foreign investment in Argentina -- and reduced taxes on agricultural exports. Whether the current...