The official numbers show a logical consequence: Argentine factories are not using all their production capacity, so they do not have great reasons to invest in the expansion of their business. The “invisible growth” weighted by President Mauricio Macri before the Legislative Assembly reaches some items, such as the construction or the agroindustrial chain, but the general photo shows that part of the manufacturing infrastructure is inactive.
These statements arise from the monthly survey of the Indec, which shows that in January the use of the installed capacity of the industry was 61.6% (latest data available), just one percentage point above the record of the same month of 2017. Said otherwise, almost 40% of the productive resources of the country were out of activity in the first month of the year. Factory utilization in December was 64% and in November, 69.2%. “If there is so much idle capacity at the end of the day, it’s a problem,” says José Urtubey, a papermaker and leader of the Argentine Industrial Union (UIA), who last week participated in a controversy with the Casa Rosada. “In order for new investments to arrive, you must first occupy what you have,” he adds.
The analysis of Dante Sica, director of Abeceb, relativizes the diagnosis: “The current number is relatively good, you can never be 100%, there are technical stops and plant issues that make a certain margin.” For the former Secretary of Industry of the Nation, an index of between 75% and 80% would reflect “full expansion”.
The industry still has not recovered from the fall that it experienced in the first year of the change management. According to the Monthly Industrial Estimator (EMI), prepared by the Indec, the activity fell by 4.8% in 2016, and in 2017 it rebounded by 1.8%.
Items such as oil (81.7% of capacity use), tobacco (77.8%), paper production (73.5%) and chemistry (70.8%) are above average general and seem to be among those favored by the economy. On the other side are metal-mechanic activity (48.6%), textiles (57.2%) and plastic (58.2%). “Between 2011 and 2015 little was invested and since 2016 it is recovering, but there are sectors that concentrate this process,” Sica says, referring to agriculture, energy, construction or the automotive industry.
Expectations do not look auspicious either in terms of the general expansion of the industrial sector. According to the companies surveyed by the Indec in the latest EMI publication, seven out of 10 companies do not expect to increase their staffing in the first quarter of the year and only 23% plan to increase their stock of finished products.
The UIA estimates that the activity will grow together this year between 2% and 3%, with favorable factors such as the improvement of the exchange rate and the recovery of Brazilian demand. “There will be heterogeneity between segments and it depends on factors that go beyond the dollar, it has to do with logistical issues, public programs such as the Buy Argentino, productive financing projects and tax aspects,” explains Tomás Canosa, head of the Pymi Department of the entity .
The automotive sector shows a particular situation. Despite the low level of activity in January (25.6% of installed capacity use), which is explained by technical shutdowns and renovation of plants, it recovered in February and accumulates a 30.7% increase in production in the first bimestre versus 2017. “Between the terminals and the autoparts, the average investment in the coming years will be between US $ 500 and US $ 800 million,” says Sica. Mining (based on regulatory changes and the exploitation of lithium), the production of materials for construction and oil are added to the list of sectors that will concentrate investment this year.
“The feeling is that the uncertainty was eliminated.” In the previous administration, the tension between the government and the businessmen was strong, but there were many gains and little investment, but the weather improved, but to invest there are still doubts. logistic costs, rigidities in the labor market and impact the rate hike.The productive apparatus is operating at a level of activity that is slowly recomposed, accompanied by a reduction in operating margins, “explains economist Bernardo Kosacoff.
In turn, the sector maintains the cost of financing as a claim. “It is very expensive, an SME has to finance itself above 30%,” says Urtubey.