Argentina’s resources boom gathers pace

{"text":[[{"start":6.72,"text":"Among the world’s natural resources companies, Argentina used to be considered one of the great under-achievers."}],[{"start":14.28,"text":"Take mining. In 2020, neighbouring Chile recorded $40bn of mining exports, much of it extracted from deposits on its side of the Andes mountain range it shares with Argentina. Yet Argentina’s own exports amounted to just $2.6bn."}],[{"start":30.52,"text":"That situation is starting to change as Argentina begins to witness a full-blown resources boom. The country’s oil and gas sector and mining industry are both undergoing a surge of investment that is transforming their standing globally and their role in the country’s economy."}],[{"start":46.32,"text":"Some of the world’s leading mining companies are making big investments in copper and lithium deposits, mostly in the north of the country. In the energy sector, companies are ploughing money into the Vaca Muerta shale formation in Patagonia, which analysts say is three times the size of the Permian Basin in Texas, the heart of the US shale boom."}],[{"start":null,"text":""}],[{"start":65.6,"text":"“We are living in a moment of revolution in the energy industry in Argentina which we have not seen in decades,” says Hugo Eurnekian, CEO of Compañía General de Combustibles (CGC), an Argentine oil and gas company which is investing in Vaca Muerta."}],[{"start":82.2,"text":"For an economy that has long struggled to generate foreign exchange, one of the causes of decades of macroeconomic instability, the resource boom could boost its reserves and even spark a new cycle of export-led growth."}],[{"start":95.04,"text":"“It is a virtuous cycle,” says Rolando Figueroa, governor of Neuquén province, where much of the Vaca Muerta deposit lies. “The dollars that are earned from activity in Neuquén help to create economic stability.”"}],[{"start":null,"text":""}],[{"start":108.2,"text":"The boom is partly the result of government policies. Some of the investments in Argentina’s resources sector have been facilitated by a new tax and legal regime the government has introduced — known by its initials in Spanish as Rigi — which offers tax, customs, legal and foreign exchange incentives for investments that exceed $200mn."}],[{"start":128.28,"text":"The objective is to attract large and long-term investments, precisely the sort of projects that the resources companies are looking at. In one example, investments under the Rigi scheme face a corporate tax rate of 25 per cent, compared with the standard rate of 35 per cent."}],[{"start":145,"text":"One of the aims has been to spur investment in Vaca Muerta, an 8.6mn-acre geological formation. According to the US Energy Information Administration, Vaca Muerta has 308tn cubic feet of recoverable natural gas — the second largest shale gas reserve in the world — and 16bn barrels of recoverable shale oil, the fourth largest such deposit."}],[{"start":167.72,"text":"In August, the Argentine government unveiled new estimates that Vaca Muerta contained 30.2bn barrels of oil, nearly double the US estimate that was made a decade ago. Wood Mackenzie, the energy research company, says Argentina now has a project pipeline of $100bn of new investment in the oil and gas sector."}],[{"start":null,"text":""}],[{"start":187.12,"text":"Shale deposits can be expensive to develop. However, CGC’s Eurnekian says that the new entrants to the industry are creating a more dynamic environment that is driving innovation. “If we can reduce our costs just a little, and increase the recovery factor just a little, the increase in value is immense,” he says."}],[{"start":206.16,"text":"It is not just oil and gas: mining is also starting to boom. As well as the Rigi incentives, the industry has been boosted by a new law which allows development to take place closer to the country’s many glaciers."}],[{"start":218.48,"text":"The extraction of lithium, the metal used in many batteries which was first mined in Argentina in 2014, is expanding rapidly. But the real game-changer could be copper, the backbone of much of the renewable economy, where a number of large projects are now under way. The government estimates that $47bn of mining investment has been approved or is being examined."}],[{"start":239.92,"text":"“We are able to give the world the things that it is demanding,” says Gustavo Sáenz, governor of Salta, one of the provinces in the north of the country at the centre of the new mining boom. “We are now able to offer investors legal security, predictability, clear rules that are not going to change over time.”"}],[{"start":256.64,"text":"The combined impact of these investments is likely to be a surge in exports."}],[{"start":260.8,"text":"Citigroup estimates that Vaca Muerta could generate $35bn of exports by 2031, compared with $12bn this year, while mining exports will grow to $36bn by 2035, up from $8bn now."}],[{"start":277.16,"text":"What could hold back the boom? Environmentalists warn that the new glacier law could threaten the water supply in a number of cities if it leads to mining projects being approved in the wrong locations."}],[{"start":288.48,"text":"Logistics are a major potential bottleneck, including the infrastructure for exporting gas, and will require substantial investment. There is huge demand to open new routes that would give the resource-rich regions easier access to the Pacific coast, mostly through Chile, which would lower the costs sharply for exports to Asia."}],[{"start":307.16,"text":"The other risk is political. The current policies have strong support from both Milei’s government and the provinces that have mining or energy resources. However, while these sectors are booming, the manufacturing industry is struggling, hit by new competition as tariffs have been slashed."}],[{"start":323.36,"text":"As a much bigger employer than the resources sector, those pressures could lead to a backlash against the incentives on offer to the oil and gas and mining companies."}],[{"start":334.68,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1792741290_4944.mp3"}