Argentina’s October presidential election will dictate whether macroeconomic policy moves further in favour of the mining industry or not, analysts told S&P Global Commodity Insights last week.
Although the federal government does not determine the majority of the mining code, the new president will inevitably set macroeconomic policy that will aim to repair the inflation crisis that leapt up to 69.7% in 2022.
Hallgarten & Company’s mining strategist, Christopher Ecclestone, told S&P, “The mining industry doesn’t have a lot of gripes about the current government’s mining policy because mining policy is dictated by the provinces, not by the federal government. We must remember that what the federal government dictates is macroeconomic policy and the currency.”
Argentina is a major producer of silver and gold, with a strong channel of lithium projects. Experts predict that the country may become the second largest lithium producer in the world, overtaking its neighbour, Chile.
To achieve this, Argentina would benefit from a new government that drives beneficial change to the foreign exchange market, an established floating exchange, and lowered export taxes.
Miners currently face challenges that stretch beyond their industry, according to lead partner for mining at KPMG Argentina, Mario Belardinelli. Strict import controls that push foreign companies toward local suppliers, for example, are combined with slow import approvals by Argentina’s customs authority, “causing risks in the pace of production and the supply chain that moves regional economies.”
There is consensus on the key role of mining for a rebound in the Argentinian economy. All political parties have shown support for the mining industry so far, leaving industry members hopeful that the mining code will be left unscathed no matter the outcome in October.
Belardinelli went on to add, “The three presidential candidates with the highest number of votes in the primary, open, simultaneous, and mandatory elections highlighted the importance of mining for the country’s economic recovery.”
Last year, mining exports reached US$3.86B, the highest since 2012, and US$370M was invested in exploration, up 68% from 2021.
Speaking to BNamericas, Leonardo Viglione, leading mining partner at Argentina PwC, said that the proposals of the ruling party and the opposition differed on how to curb runaway inflation, reduce the fiscal deficit, and manage the exchange rate regime.
Leader of the La Libertad Avanza party, Javier Milei, secured 30% of the primary vote. Juntos por el Cambio, the party led by conservative former security minister Patricia Bullrich, secured 28.3% of the vote, followed by Union por la Patria, led by current finance minister, Sergio Massa, at 27.3%.
Both Milei and Bullrich have vouched to eliminate export taxes, a pro-business policy that would be initially difficult to implement given Argentina’s current financial health. The pair are expected to get rid of the multiple exchange rates used by the country. Yet, Milei has received extra attention for drastic proposals, such as abolishing the central bank altogether and adopting the US dollar.
Post-election, the foremost challenge for the Argentinian miners will be to achieve macroeconomic stability that encourages more investment into large projects that are in the exploration stage, especially copper and lithium, which would replace the declining gold projects.
Also, it will be important to advance exploration and development projects to expedite lithium as a new exportable mineral, since Argentina is in a leading position to attract this type of investment.
