June 9 (Bloomberg) -- After 11 years of relying on consumption to drive its economy, Argentina must focus on attracting investment, said two economic advisers to the man bidding to be the ruling party candidate in next year’s presidential election.
The government needs to restore relations with foreign investors and slow wage growth to aid investment, said Miguel Bein, director of Buenos Aires research firm Estudio Bein & Asociados, at an event in support of an economic development fund set up by Buenos Aires province Governor Daniel Scioli. He was joined by Banco Hipotecario Vice President Mario Blejer, a former central bank president, in the first time Scioli’s advisers have spoken publicly about economic policy.
Argentina’s economy grew by an average of 5.9 percent a year from 2005 to 2012 as the governments of former President Nestor Kirchner and his wife Cristina Fernandez de Kirchner used a boom in commodity prices to fund increased public spending and rising wages. The spending spree has helped push currency reserves to near an eight-year low, while the economy contracted 0.9 percent in March from the year earlier.
“In Argentina, the incentives have always been to put the foot down on the accelerator to seek popularity,” said Bein, a former deputy economy minister. “We mustn’t do that anymore. The driver of the economy can no longer be consumption. The driver of the economy must be investment.”
Foreign direct investment has fallen to historic lows in Argentina, said Blejer.
Argentina is already trying to recover investor confidence after negotiating to pay back outstanding debt with creditors including the Paris Club and arbitration cases from the World Bank. The country is also seeking to repair relations with the International Monetary Fund by revamping economic data the Washington-based lender said was inaccurate.
The country must continue to do so by balancing its fiscal and financial accounts and reducing its reliance on grain harvests, Blejer said in a 15-minute speech.
“Argentina’s development doesn’t depend on meteorological forecasts, it depends on the political will of its leaders,” said Blejer. “They need to put forward consistent, believable objectives. With that kind of political will, sustained development in Argentina is inevitable.”
Scioli, a member of President Fernandez’s Victory Front, was second with 17.3 percent voter support against 20.6 percent for lawmaker Sergio Massa in a survey by Management & Fit that pitted potential presidential candidates against each other. The poll of 1,600 people taken April 28 to May 8 had a margin of error of 2.45 percentage points.
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