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Argentina Miners Hope for Pragmatic Peronism Amid Project Freeze

Laura Millan Lombrana
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Argentina Miners Hope for Pragmatic Peronism Amid Project Freeze

(Bloomberg) -- Whoever wins next month’s presidential election in Argentina will have to rely on commodity exporters to bring in much-needed foreign currency. The mining industry is hoping that will win them some concessions.

Since Peronist candidate Alberto Fernandez nailed a landslide win over President Mauricio Macri in an August primary election, Argentina’s foreign currency reserves have fallen 22%, with $14.6 billion draining from the country.

The victory has led mining companies that were considering billions of dollars in investment in Argentina to think again. They want clarity on whether Fernandez and his running mate, former President Cristina Fernandez de Kirchner, will resort to the protectionist measures and populist policies of the past.

“It is more than natural that anyone mulling an investment in Argentina is taking some time to think,” said Gustavo Koch, executive director at Argentina’s mining chamber Caem. “Decisions will be delayed and I’m not sure they will necessarily happen after the elections.”

Foreign companies are monitoring the situation, according to both Daniel Meilan, a former Mining Secretary under Macri, and Rolando Davila, secretary general of the Chile and Argentina chamber of commerce. Both said they’re serving as advisers for the companies, which they declined to name.

“It’s a shame, but this looks like another setback for the mining sector in Argentina and the question is how long and how big that setback will be,” said Fiona Mackie, Latin America director at the Economist Intelligence Unit. “Even if Fernandez wants to implement a relatively pragmatic, centric policy, there’s a huge risk we won’t see macroeconomic stabilization for a few more years.”

Last Sunday, Macri’s government announced capital controls to halt the slump in foreign currency reserves, including restrictions on distributing benefits abroad and on buying dollars. But there’s already been a backlash in agriculture, Argentina’s top exporting sector. Among other strategies, farmers are planting more soybeans instead of corn because it requires less investment.

Meilan says that whoever becomes president will need to support mining growth in Argentina to help rebuild the country’s economy. “Argentina has no alternative,” Meilan said in an interview in Santiago, Chile. “It needs to export and it needs dollars to come back in. That’s true for Macri, and that’s true for Fernandez.”

Mining giants Glencore Plc., Newmont Goldcorp Corp. and Yamana Gold Inc. are doing early studies on a plan to jointly develop the Agua Rica gold and copper deposit in the country’s northwest. In March, the government said an investment decision could happen within months. The companies are planning to present a feasibility study within the next year, Yamana said on Tuesday in an emailed answer to questions. Newmont Goldcorp and Glencore declined to comment.

Yamana does not expect capital controls to have a significant impact on the business, as the project is years away from entering production, the statement said. The company doesn’t like the imposition of currency controls, but is confident that it’s a short term measure and that it can manage around it.

Reviewing Rules

Barrick Gold Corp., which operates the Veladero gold mine, said in an email that it is reviewing the new rules and it expects to be able to work within the regulations as required. “Argentina’s political situation right now is dynamic,” the company said. “While we are always supportive of our host countries, we do not involve ourselves in politics.”

Fernandez hasn’t made public an economic program for his presidency. While he was seen as more moderate than de Kirchner, his rhetoric has become increasingly combative, saying he is unwilling to support the government’s emergency measures aimed at containing rising volatility.

The Peronist candidate told about fifty mining company officials at a private meeting in Buenos Aires last month that Argentina needs to produce and export minerals as a way to get foreign currency flowing into the country, according to a presentation on the meeting by pollster Poliarquia seen by Bloomberg.

Fernandez didn’t make promises, but asked miners to see him as an ally, saying he will not be an obstacle for mining activity, according to the document. A spokesperson for Fernandez did not immediately respond to a request for comment. The document, aimed at mining executives who did not attend the meeting, included a word of caution.

“There is no certainty that what he said in that meeting is what will actually happen,” the Poliarquia presentation said. “Everything that mining representatives heard was said by a politician, an Argentine and a Peronist who is about to win the next elections.”

--With assistance from Vinicy Chan.

To contact the reporter on this story: Laura Millan Lombrana in Santiago at lmillan4@bloomberg.net

To contact the editors responsible for this story: Luzi Ann Javier at ljavier@bloomberg.net, Reg Gale, Philip Sanders

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