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A nation of opportunities

Argentina presents huge infrastructure opportunities, but not without risk. Antony Oliver explains why.

At the start of the 20th century Argentina had high hopes and great potential to become as economically strong as the US is today.

It was a land of fantastic opportunity with vast natural wealth and a highly educated, mostly European originated population. Named after the Latin argentum, it truly was a land of silver, and Argentines became synonymous with wealth.

Since those heady, Tango dance-fuelled days, however, the nation has lurched from one economic or social crisis to another. It has, without doubt, consistently failed to achieve its economic or social potential.

It is ironic, therefore, that this summer, when Tony Blair became the first UK Prime Minister to visit Argentina, the British media made great mileage out of the absence of any reference to the Falkland Islands during the talks.

Ironic because in Argentina the issue rarely, if ever, comes up. Instead, what is top of every Argentine's mind is economics - more specifi - cally, what the government should be doing to move the nation forward.

It was no different in 1983 when Argentina and the UK clashed over the Falklands' sovereignty. The military junta went to war in an attempt to unite a nation divided by recession. The annex failed and so did Argentina's government.

But economic desperation has driven political transi - tions, from military regimes to dictatorships such as that of 'populist' leader Juan Domingo Peron, for almost the last century. The com - mon theme throughout has been corruption and underinvestment.

Fortunately, Argentina's natural wealth and education remain. Sadly, so does political and economic turmoil - although the 5000% inflation of the 1980s has been wiped out.

Peron and his universally worshipped wife Eva may have departed, but the politics remain. Carlos Menem, the most recent Peronist president, while revered for his inflation-busting free market reforms and privatisation policies, faces a string of charges linked to his passion for Ferraris and high living, allegedly financed as part of the nation's $150bn debt burden.

At the close of last cen - tury, therefore, the nation made a bold decision against corruption and in October 1999 put a coalition government led by Fernando de la Rua into power. Economic austerity has followed, but despite inflation being con - trolled by an enforced parity between the peso and the US dollar, the huge debt mountain is making it difficult to climb from spiralling reces - sion.

Faced with 18% unemployment and increasing crime, Argentines, ever the economists, are re-examining their decision to replace corrupt economic growth with flawed transparency and recession.

Corruption, tax evasion and legal uncertainty increasingly dog the nation and stunt growth. The over-valued peso makes it hard to trade with neighbours in South America's common market Mercasur, particularly Brazil where the real is devaluing by the day.

High interest rates have resulted from the fear of defaulting on loan repay - ments, the scale of which has driven the government to introduce a 'zero deficit' budget policy. This sees the country's books balanced on a monthly basis.

The reality is that after meeting its pension, salaries, debt interest and local provincial government obligations, Argentina has only around 14% of its income to juggle. Long term investment decisions are difficult to make and harder to honour.

But the net result of Argentina's roller-coaster ride is not all bad. The basic infrastructure of the nation is in place. Among its Latin American neighbours it has the highest gross domestic product per head and, for the first time in many years, actually has an export surplus.

Few people believe that Argentina will be forced to default on its loan repay - ments or de-peg against the dollar. With most of the coun - try mortgaged one way or another in dollars, devalua - tion would cause unthinkable pain. And memories of past hyper-inflation make the nation highly sensitive to the issue.

And there are sectors, such as telecoms, agrochemicals and rail freight, that are grow - ing as Argentina moves away from the supply of raw materials and towards valueadding activity.

Add to this the vast and so far highly untapped tourism opportunities in Argentina and there is huge optimism for success.

British Gas, for example, has already invested $750M (£470M) in its gas distribu - tion business since 1992 and sees opportunities for this to continue as the economy expands. P&O has also ploughed $250M (£157M) into ports and is looking to continue investing.

Key to driving this commercial, industrial and export growth is the need for better transportation and communication infrastructure across the vast country.

Finding ways of generating the funds not only to maintain but also to develop the nation's road and rail infrastructure is seen as vital to long-term growth and has led to the Infrastructure Ministry being absorbed into eco-

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