Federal Capital (Paco Urondo Agency, published in Journal 01/21/2011 BAE)
often measure the success of an economic model from increased foreign direct investment. Indeed, some Orthodox and heterodox economists consider a model of accumulation in a positive way by increasing the amount of investment of multinational companies. Therefore, there is little critical positions of the effects of foreign investment on the national economy.
However, foreign investment has some negative implications that deserve some attention because it could generate at present some "bottlenecks" to Argentina's economy. One of these negative consequences have to do with the external sector in general and the remittance of profits to subsidiaries of multinational companies to their headquarters permanently in particular.
In this sense, one of the pillars of the new development model introduced in 2003 is positive trade balance that allows a current account surplus in balance of payments. The cumulative 2003 - 2009 current account was U.S. $ 50.058 million.
For its part, the positive balance on current account is what allowed one of the fundamental policies of the new economic and social model: the policy of accumulating reserves by the Central Bank of the Republic
Therefore, the current account surplus in the balance of payments that allows the entry of foreign exchange is essential for the accumulation of reserves by the Central Bank at the same time is essential to continue exchange rate policy of managed exchange rate and make reservations freely available to extend its policy of reducing indebtedness that has been recorded with the new model of development. The way is simple: to export more than what is imported, the trade surplus also allows the current account surplus generated by foreign exchange inflows, which enables the increase in reserves which in turn is essential to further reduce debt public sector external support from the Central Bank exchange rate competitive so that they result in a deepening process of re-industrialization of the national economy.
In this context, one can understand certain negative effects generating foreign direct investment in the external sector. It is true that foreign investment has a significant positive impact on the capital account by entering a large amount of foreign exchange. However, the positive effect on the balance of the capital account is contrasted with the strongly negative effect is verified in the current account.
For example, TNCs exhibit a greater tendency for local firms to experience trade deficits. Except TNCs export oriented, the other foreign firms have tendency to run trade deficits. One of the key reasons we can explain this behavior is the ease with which foreign firms have to obtain imported products from other subsidiaries of the corporation.
But the negative effect on the external sector is more important than foreign investment due to increased remittance of profits and dividends by transnational corporations embedded in the national economy, which implies an outflow of foreign exchange the country.
| Table: Evolution current account balance of payments, 2003-third quarter of 2010 (million dollars) | |
| previous | Utilities and dividends |
| 2003 | -633 |
| 2004 | 2286 |
| 2005 | -3.895 |
| 2006 | -4.939 |
| 2007 | -5.241 |
| 2008 | -6.094 |
| 2009 | -6.627 |
| Accumulated the first three quarters of 2010 | 5375 |
| Source: INDEC | |
In this sense, the total of the remittance of profits and dividends from 2003 - 2009 was 29.715 million dollars, that is, more than half the cumulative current account balance of payments during the same period. For his part, accumulated in the first three quarters of 2010 showed 5,375 billion.
Even since 2003 grew steadily and year after year, the remittance of profits by foreign companies. While in 2003 was $ 633 million in 2009 was 6.627 million dollars. On the other hand, in the first three quarters of 2010, the remittance of profits was always above 1,500 million.
Thus, the remittance of profits ends up resenting the surplus global current account generated mainly by the surplus on the trade balance. Furthermore, if the remittance of profits is also growing requires increasing the trade balance is favorable to continue holding a current account surplus in the balance of payments.
To this we add other problems of transnational corporations with respect to the external sector such as that foreign firms experience a concentration of exports in primary products, particularly farm products. Also, within the industrial products exported by foreign firms highlighted the resource-based goods natural. In conclusion, by analyzing the characteristics of exports of TNCs can establish that they are concentrated in less sophisticated products and low value added in Argentina's economy which traditionally had comparative advantages and therefore do not contribute to improve export profile of Argentina's economy.
In this context, it is essential for deepening the current economic model re-discuss the role of transnational corporations and in particular discuss and reformulate the foreign investment law have been dragging since the early nineties. The new model of development and requires A new law on financial institutions need a new legislative framework for foreign direct investment.
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