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ECONOMY | 13-11-2020 19:02

CEOs frustrated with Argentina rattle off list of problems

Global companies are growing ever more frustrated with Argentina. The specific gripes vary, but broadly speaking executives say it’s hard to make money given the multitude of challenges facing the nation.

Danone SA likens doing business in Argentina to riding a roller coaster. Coca-Cola Femsa SAB calls it one of its most challenging markets. Steelmaker Ternium SA sees a “very volatile scenario” ahead. It’s taking a toll on beer giant AmBev SA too.

Global companies are growing ever more frustrated with Argentina, according to transcripts of quarterly conference calls reviewed by Bloomberg News. The specific gripes vary, but broadly speaking executives say it’s hard to make money in a backdrop that includes currency controls, uncontrolled inflation, price freezes, multiple exchange rates, the worst economic contraction on record and one of the region’s most severe pandemic lockdowns.

All this has corporate officials wringing their hands about what’s next for the country. Some don’t have the patience to wait it out – Walmart Inc agreed to sell its business in Argentina this month after a 25-year run in the country. Other multinational firms including LatAm Airlines Group SA, Chilean retailer Falabella SA and auto-paint firm Axalta Coating Systems stopped local operations this year. Honda Motor Co halted automaking in Argentina in May, while Starbucks Corp. and American Airlines Group Inc have reduced their footprint in the country too.

Argentina has lost over 20,000 private sector employers this year, a little less than the 23,000 lost over the prior three years combined. Undoubtedly some company closures stem from the Covid-19 pandemic and Argentina’s strict quarantine.

But in recent earnings calls, firms paint a harrowing narrative of their experience in South America’s second-largest economy, and the complaints point more toward policy failures than the pandemic.

In their own words:

Danone, October 19

Emmanuel Faber, chief executive officer, after announcing the company is reviewing its business in Argentina:

“We’ve been in Argentina for two decades and a half. So, we’ve been through the roller coaster game, indeed. And you heard us and including myself, I think, saying that indeed, by sticking to our game locally, by reorganising, reshuffling the way we work in Argentina, we’ve emerged crisis after crisis stronger than we were before. That’s the same that is currently happening.”

Coca-Cola Femsa, October 26

John Santa Maria, chief executive officer:

“The problem with Argentina is not so much volume growth but price restrictions that we have, price controls that are being put on by the government.”

“We’re seeing share gains across all categories, across all countries, the exception being probably Argentina.”

Constantino Spas, chief financial officer:

“Additionally, Uruguay delivered positive volumes while Argentina, which has been one of the most challenging operating environments for Coca-Cola Femsa during the year, has started to stabilise.”

AmBev, October 29

Lucas Machado Lira, chief financial officer:

“In Argentina, the combination of price controls in food and beverages and hyperinflation continues to take its toll.”

Archer-Daniels-Midland Co, Oct. 30

Juan R. Luciano, chief executive officer:

“I’m not going to be on record predicting a devaluation in Argentina ... since I would like to go back one day.”

Ternium, November 4

Maximo Vedoya, chief executive officer:

“There’s a lot of challenges in Argentina. I mean, what is happening with the exchange rates. Argentina clearly needs some reforms, and needs time to do some of those reforms. And so I think we are going to see a very volatile scenario in Argentina.”

On Argentina’s currency problems: “The one way out of this is going to be a devaluation.”

Barrick Gold, November 5

Mark Bristow, chief executive officer:

“Due to the ongoing financial crisis in Argentina, the government has maintained currency restrictions and the forced repatriation of export sales.”

The company’s gold mine “therefore has kept a cash-needs sales strategy, selling only enough gold to cover its cash payment requirements to run the mine.”

by Patrick Gillespie, Bloomberg

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