In this three-part series the Emerging Real Estate Digest will examine the investment case for Argentina. The final edition of the series will be published just two days before the consequential election for Argentina’s new President to take place on October 22, 2023. The parts are:
👉🏻 Argentina was Born to be an Exporting Superpower
Replacing Brazil as the King of South America 🤴
Argentina was born to be an exporting superpower. It has superb geographic attributes and advantages, fertile and arable land, strong economic and cultural ties to Europe, impressive population demographics, and is packed to the gills with the resources the world wants.
Argentina was born to be an exporting superpower. It has superb geographic attributes and advantages, fertile and arable land, strong economic and cultural ties to Europe, impressive population demographics, and is packed to the gills with the resources the world wants.
Superb Geography and Arable Land
Argentina’s geography gives it immense advantages which are only topped or equaled by a handful of countries such as New Zealand and America. The entire western border of the country is lined with the Andes Mountains range which contains the tallest peaks (i.e., Aconcagua) in the world outside of Asia. This impediment to invasion happens to contain vast mineral wealth, serves as a climate regulator for the fertile lands to the east, and attracts tourists with pockets full of forex.
To the east, the Atlantic Ocean offers protection as well as a 3,100 mile coast line providing sea resources such as the 1 million tons of seafood Argentinean fishermen haul out annually. Brazil is generally discombobulated and in no position to wage a credible offensive making the north also safe.
Three major and navigable rivers (i.e., Uruguay River, Paraguay River, and Parana River) in the region converge into the Rio de la Plata and pass through Argentina before emptying into the Atlantic Ocean. Rivers provide protection, drinking water, electricity and the ability to efficiently transport goods. For example, the Parana River carries 80% of Argentine farm exports. It is dredged deeply enough allowing ocean vessels into the heart of the farming region, giving it an advantage over Brazil and America who rely more heavily on less-efficient trucks and barges to move exports from the fertile interiors to coastal ports.
These rivers snake through populated areas of the Pampas region, the 4th largest contiguous chunk of arable land in the world. It is one of the world’s most naturally fertile zones for crop production and the grazing of cattle and livestock. The west Pampas is perfect for corn and soy. The south Pampas dries out and is ideal for wheat cultivation. The Pampas is far enough south of the equator that it experiences winters which serve as a natural insect suppressant and general sanitizer boosting yields naturally without copious use of pesticides. The Pampas is to South America what the Midwest is to America.
Smack dab in the middle of the Pampas sits Argentina’s economic and political capital, Buenos Aires. The city’s placement on the Rio de la Plata, the widest river in the world at 141 miles (i.e., 220 km), is the ideal location for a port to receive and send goods. Cargo shipments in the core have virtually no choice but to pass through Buenos Aires and face few natural barriers during the journey. It is a powerful natural magnet for commerce and explains why 45% of the population live in the city.
Argentina is bigger than you might imagine. It is the 8th largest country in the world (2nd in South America) and covers an area of 1.1 million mi² (i.e., 2.8 million km²). It is 3.5 times larger than Turkey, 7 times the size of Zimbabwe, and if imposed on Europe would stretch from Portugal all the way across Europe and nearly up to Russia’s border with Belarus and Latvia.
Economic and Cultural Ties to Europe
Argentina has deep cultural and political ties to Europe, particularly Spain and Italy, which could provide it with valuable access points for investment and market access with Europe. The current government squanders this advantage and instead fantacizes about being China’s chief ally and trading partner in the region.
Argentina is a young population with almost ideal demographics.
Agriculture
Agribusiness activities account for 20% of taxes collected, 18.5% of private employment, and 70% of the country’s dollar income through exports.
Soybean production was nascent 30 years ago, today it is the country’s largest crop export and occupies nearly half of the cultivated land. Argentina produces about 20% of the world’s soybean, ranking 3rd behind only America and Brazil.
As with soy, Argentina is 3rd in corn production behind only America and Brazil. Argentina is able to export the majority (70%+) of its corn due to low domestic demand. The people prefer meat, and the livestock normally fed through pastoral gazing.
Argentina is a consistent top 10 exporter and producer of wheat, however it missed the opportunity to fill the need caused by the Ukraine conflict. In response to higher prices globally for wheat, the Peronists decreased export quotas by 31% for the grain meaning less wheat was available for sale internationally and more would be sold domestically at prices fixed by the government. Farmers responded predictably and the 2022/3 wheat harvest is one of the lowest in years.
Animal Products
In 2005, Argentina was 2nd in beef production, and is now the 6th largest producer. It exports about a quarter of its beef, and is the 3rd largest domestic consumer of meat behind only Hong Kong and America. This sector has suffered from restrictive policies, competition for land from soybean cultivation, and droughts. Argentina is a major player in other animal product production involving sheep, chickens, pigs and more.
Shale and Lithium
Argentina is blessed with petroleum-dense shale reserves located close to population clusters and existing transportation infrastructure. It ranks 3rd in oil and gas production from shale behind only America and Canada. Bringing more oil and gas fields online would only take a few years, not a decade or longer as would normally be the case.
Argentina has the 2nd largest reserves of lithium just behind Bolivia. The reserves are relatively easy to extract since they are located in brine deposits in underground aquifers. Argentina is a distant 4th in lithium production behind China, Chile and Australia.
📰 Read the Emerging Real Estate Digest write-up on lithium in LATAM if this topic is of interest
Copper, Gold and Silver
Within one decade, Argentina could be a top 10 copper producing country. Presently it produces no copper. The copper would come from the Andes deposits, the same place Chile derives its copper. Chile is by far the dominate copper producer in the world.
Argentina ranks 17th in gold production and could do much better. The American miner Newmont has recently announced a $540 investment in a gold mining operation in Argentina, but such mines take a decade or more to begin producing.
Argentina is a top 10 silver producer.
