Analysts are split on whether this mini-recovery can last and help the impoverished majority without jobs, land or dollars. Optimists note that industrial production is surging, and the economy is expected to grow this year by a respectable 4 percent. Bears counter that Argentina is hamstrung by debt and volatile commodity prices, and lacks a long-term growth strategy. Even the most sanguine foresee sluggish growth and a widening wealth gap if presidential front-runner Nestor Kirchner pursues a populist agenda. “Under Kirchner we won’t have the 8 percent growth we’re capable of,” says Aldo Abram, a Buenos Aires-based economist with the consultancy Exante. He thinks that the unemployment rate, now about 20 percent, won’t fall to even 12 percent until 2009.
Though emerging-market funds are now smitten with Argentina, most institutional investors and multinationals haven’t returned yet. “You need a far tighter fiscal policy to attract foreign direct investment,” says Jules Mort, a Latin American fund manager at Threadneedle Investments in London. “We’re a long way from seeing improvement there.” Still, new South American trade deals should boost exports even further, and the knock-on effects could be considerable. Pacts with Chile and Mexico are in the works. “Argentina needs a true domestic economy with much more internal production of value-added goods,” says Jose Luis Garcia, head of Latin America equity investments at MFS Investment Management in Boston, Massachusetts. “Now it’s got a better shot.”