2/27/2024 - Economy and Finance

Foreign direct investment.

By Horacio Gustavo Ammaturo

Undoubtedly, obtaining transnational resources to promote economic development and the employment of a country is an aspiration for those who understand that private investment is fundamental and that if it comes from abroad it is better, because it means having gained a competing potential in the race for seduction to global capitals.

There is an indicator called FDI, Foreign Direct Investment, or Foreign Direct Investment, which shows the sums of money that international investors have aimed at Significant and lasting financial placements in a foreign company. Investments in public supply securities, whether business shares or obligations are also included.

Analyzing the successful cases of companies or markets that have obtained important foreign investments there is a condition term, that is, that without the fulfillment of financial positions, if any, are mainly speculative, not significant and short-term.

Regulatory predictability and legal certainty.

The role of the State is fundamental, because although in this case it is neither investor nor recipient of investments, it influences its decisions and actions in the activities between the private.

The example of China.

Since the implementation of Open Doors Policy started in 1978, China has experienced rapid development, currently becoming the world's second largest economy in nominal terms.

According to the data released by the State Currency Administration of China (SAFE), during the 11 years elapsed between 2011 and 2022 entered into a concept of foreign direct investment over 2.8 trillion dollars.

Instead, in 2023, the investment was only 15 billion representing a 91.67% drop About 180,000 of the year 2022.

Practically, Foreign investments were paralyzed from last year.

.What could have passed, as serious, as to astonish international investors who have accumulated positions for more than 10 years, leading them to liquidate their assets, in many cases, much below the acquisition values?

There was a slowdown in the global economy that meant lower demand for Chinese products, however, the magnitude in correction evidences other factors.

Las Vegas geopolitical tensions between the United States and China forced American companies and others whose interests are most linked to the West to reconsider their investments, but during the years of expansion there were also short circuits in the relations between the main powers.

The most influenced were the changes in regulations which meant the closure of international corporate audit and evaluation companies that allowed international investors to obtain reports on the business march of the companies they invested in. All this, supported with a new national security law aimed at restricting data flows abroad.

Subsequently, these restrictions on information were eliminated without such a favourable impact on investment flows for the Asian giant.

The lack of clear and lasting rules is paid very expensive. Investors can assess risks when standards are stable. It is worth more normative stability than adequacy of standards to the convenience of investors because this can change, and one can change loses reliability.

What can we expect in Argentina?

It is very likely that, in order to start a significant and long-term foreign direct investment process, Argentina must demonstrate predictability in its investment models, regulatory stability and, mainly, legal certainty, which summarizes and brings together all previous conditions.

For this, it is necessary inevitably “Consensus of the majority of the ruling class, officialism and opposition”, in which it must be included yes or yes the kirchnerism which remains one of the most voted forces by the Argentines.

Background is bad. Politicians who have changed their opinions against the same subjects and some judges who have failed different in similar causes have removed with their discretion the investors they serve.

Consequently, the other condition is legal predictability in failures and interpretation of rules.

Stopping policies and laws in time is the fundamental question, so agreement is necessary with all forces and groups of power.

The imperative way could only seduce those who come attracted by great margins and extraordinary opportunities.

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horacio gustavo ammaturo

Horacio Gustavo Ammaturo

I am Gustavo Ammaturo. I have a degree in Economics. CEO and Director of infrastructure, energy and telecommunications companies. Founder and mentor of Fintech, DeFi and software development companies. Blockchain Product Designer.

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