Postcards from Buenos Aires

A billboard for Argentine President-elect Mauricio Macri, viewed from La Recoleta Cemetery, Buenos Aires, Argentina. Photo / Michael Craig

Argentines like to think everything happens in their capital city.

"We say God is everywhere, but we say God's office is in Buenos Aires," says our tour guide, Jonatan.

But whether you're admiring French-inspired architecture in Recoleta, the colourful buildings of La Boca, or the tango parlours of San Telmo, one thing you're unlikely to find in Buenos Aires is any trace of a New Zealand business.

The reason is simple: there aren't many of them in this city of almost 3 million.

Of the 80 Kiwi businesses our trade officials support in South America, just seven are active in Argentina, the continent's second-largest economy.

Exports from New Zealand were worth $22.3 million last year, compared with the $172 million worth of goods sent to Peru and $161 million to Brazil.

It's not as if Kiwi firms don't want to export to Argentina, says Rhianon Berry, New Zealand's trade commissioner to the region. It's just that it's been too hard to do so under the regime of outgoing president Cristina Fernandez de Kirchner.

As well as facing problems in extracting money from the country, foreign companies grappled with complex restrictions designed to protect their domestic counterparts.

High-end brands such as Louis Vuitton closed shops because the Government said everything in their stores had to be made in Argentina.

"Unless you have a long-standing relationship and an importer who was able to balance their export/import ratio under the regulations, you were basically not able to get products into the country," says Berry.

This is tipped to change, if president-elect Mauricio Macri has his way. Air New Zealand's new three-times-a-week service to Buenos Aires may also boost business links.

Among other changes, the incoming leader, who takes power today, is expected to remove currency controls that have propped up the Argentine peso.

Early morning shoppers and commuters, Florida, Buenos Aires, Argentina. photo / Michael Craig

Through official channels, US$1 is worth about 9.7 pesos, but the rate is closer to 15 pesos when trading on the black market (euphemistically known as the "blue market").

The move, seen as part of Macri's plans to abandon more than a decade of left-wing policies, could attract more foreign investment to the country.

On news of his election win, ratings agency Moody's lifted Argentina's credit outlook from stable to positive.

"Mr Macri has consistently and increasingly made clear his administration's policies will represent a major market-friendly break from those observed during the last 12 years," Moody's said last month.

The agency's analysts also believe Macri's Government will try to reach a deal with Argentina's creditors, overcoming one barrier to it borrowing from overseas.

"We expect the new administration to devote efforts to improving the economic and institutional environment over the coming months, through a series of reforms aimed at tackling persistently high levels of inflation and lack of data accountability," said analysts Gabriel Torres and Anne Van Praagh.

"At around 25 per cent, Argentina's inflation rate is one of the highest in the region and among sovereigns rated by Moody's. The new Government aims to install new central bank leadership, make inflation reduction a key policy goal, and legally establish central bank independence."

Berry, who is based in Santiago, in Chile, but is responsible for Argentina as trade commissioner, believes the 56-year-old president-elect will introduce pro-business policies. She sees his election as a positive opportunity for New Zealand firms.

"Macri's got a lot of issues he's got to deal with, like the inflation, he needs to get that under control, but the kind of policies he's talking about bringing in will have a positive effect on foreign investors," she says.

"Argentinians themselves are going to be more inclined to invest there and that will bring in the foreign dollars that they're so desperately needing to grow their economy.

"If we start seeing some of this happening, I would expect Argentina does bounce back as a country New Zealand will want to look at and evaluate," Berry predicts.

The kind of policies [new President Macri] is talking about bringing in will have a positive effect on foreign investors.

Trade commissioner Rhianon Berry

Under its new leader, Argentina may part company with the inward-looking bloc of the continent's nations and become a country that accepts the capitalist nature of the world economy. If it does, it would join Pacific Alliance countries such as Mexico, Peru, Colombia and Chile, says Matthew O'Meagher, president of the Latin America New Zealand Business Council.

"Until this election, Argentina was of the opposite bloc which features Brazil, Ecuador and Venezuela and Bolivia - once upon a time you would have said Cuba too - which are governed by leaders who think capitalism as a whole and business as a whole hasn't always brought good things - rather, it's brought exploitation. So rather than accept the rules and try to assert themselves and trade like a New Zealander or Chilean does, they've made it difficult," says O'Meagher, who set up the University of Auckland's Centre for Latin America Studies.

"Argentina has been a difficult place to do business," he says. "It shouldn't be, the country's incredibly fertile ... they have very well educated people ... we should be speaking about a country here which is one of the richest in the world - it was once, 100-odd years ago," he says.

Elsewhere in the region, Chile is where New Zealand has the most investment but O'Meagher says that Colombia is also turning heads.

In September New Zealand revealed plans to open a new embassy in Bogota, the capital of Colombia, which is seen as a place with a lot of potential for New Zealand businesses.

"A lot of attention is going to Colombia," O'Meagher says.

"Brazil, of course, is the ultimate prize but, a little bit like Argentina, it's a difficult place to do business. To go to Brazil you have to go for the long haul and with your eyes open." Brazil is also in the financial doldrums.

"Its gross domestic product is expected to shrink by 3 per cent and household consumption has dropped for the first time since 2003.

Given the importance of Brazil's economy to the region, its health affects its neighbours, says Hayden Montgomery, New Zealand's ambassador to Argentina.

"Argentina is going through a period of no growth, or even negative growth," he says.

Shoeshine worker and customer in the Florida neighbourhood. photo / Michael Craig

Even so, Montgomery is positive that things will pick up.

"Argentina's a market that has huge potential for return to New Zealand; it's just a market you need to commit to," he says.

Most of that opportunity involves selling machinery or technology to support the production of primary goods in Argentina.

Berry, too, believes agribusiness and food technology are markets where New Zealand businesses can make inroads in South America's second-biggest economy.

"Argentina's a significant producer and exporter of food, although they have had these export restrictions in place on their own industry, but I would expect that would bounce back under Macri and they would become a strong food exporter again," she says.

Berry mentions Auckland-based Compac Sorting Equipment as one possible benefactor of such a move.

"They've got a manufacturing base in Uruguay and would be very well placed to do well in Argentina as things improve," she says.

One New Zealand company that used to operate in Argentina is T&G - formerly Turners & Growers - which served the country from Peru until about 2012, when things "got too hard".

"We weren't able to make it work," says Nick Fitzpatrick, T&G's general manager for the Americas.

"It's a very hostile climate towards, generally speaking, the agricultural industry and a lot of the fruit and vegetable industry. We watched Argentina go from probably a medium-sized player in that business to becoming a small player," he says.

Even with any changes Macri has in store, that industry will take years to turn around, Fitzpatrick says.

"We'll be watching with cautious optimism, but I don't see any immediate changes to our strategy in the next year or so until we see some significant improvements."

Another possible target for New Zealand businesses is the Argentine health sector, given that the country is Latin America's second-biggest market for medical devices.

"So there's definitely opportunity for companies like Fisher & Paykel Healthcare and maybe Orion Health and others," Berry says.

Colourful buildings in the Recoleta area. Pictures / Michael Craig

Fisher & Paykel Healthcare, which already operates in Argentina through a distributor, says the regulatory situation in the country can be tricky, but believes things may improve with the new leader.

"We already have quite a good business in Argentina", says corporate affairs manager Marcus Driller.

"We're not thinking this [Macri's election] is going to suddenly, automatically change how easy it is to do business in Argentina, but we're hopeful it could be helpful."

Although bullish on the prospects for New Zealand firms, Berry also says things aren't about to change overnight.

And O'Meagher suggests that Argentines may not take Macri's policies lying down.

"A lot of people are predicting quite a difficult next year as he tries to make changes which will inevitably create pain, which will inevitably create protest. What happens then?"