ISSUE 4 | 2021
14
UNCERTAINTY IN ARGENTINA Argentina is currently experiencing a period of high volatility linked to macroeconomic conditions and political uncertainty. The legislative Simultaneous and Compulsory Open Primary Elections (PASO) that took place in September saw surprising results with the opposition party (Juntos por el Cambio) winning in most of the country's provinces. Juntos por el Cambio received about 8.8 million votes, representing 40.02% of the total, while ruling party Frente de Todos received 6.9 million votes, 31.03% of the total. These results caused great surprise in the national government, which had expected to do better. Undoubtedly, the most striking result was in the province of Buenos Aires, historically a stronghold of the ruling party, where the opposition won by almost 5% (38.23% vs. 33.49%). This brings fresh hope that there will be changes to macroeconomic policies after the general legislative election in November, which will likely result in a Congress more prone to introducing market-friendly policies.
The Energy, Mining & Utilities and TMT sectors are both active in Argentina’s M&A deal-making market. The current appetite for lithium, driven by the green economy and the need to reduce carbon dioxide emissions, make Argentina an attractive country for investment due to the deposits of this mineral in the northwest of the country. Argentina is the fourth largest lithium producer in the world and is part of the so-called LithiumTriangle, along with Chile and Bolivia. Lithium is a key element in the manufacture of the rechargeable lithium ion battery that powers electric vehicles. More than 20 countries across the world have adopted the zero emissions by 2050 policy and experts estimate that demand for lithium could multiply by as much as 40 times by 2040, with supplies of the mineral limited. New technologies are enabling the extraction of lithium with greater efficiency than the traditional method of extraction of brines.
Prices in this market have reached an all-time high in the last three years, driven by the demand for lithium for electric car batteries and the gradual depletion of lithium in Chinese deposits and demand is being underpinned by the recovery of global activity after the pandemic during 2020. Regarding regulation in lithium production, it is worth noting that there are tax benefits available for this type of investment and that mining legislation is specific to each province in Argentina.
FERNANDO GARABATO PARTNER
fgarabato@bdoargentina.com
PAULA KRITZ MANAGER
pkritz@bdoargentina.com
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