By Hilary Burke
BUENOS AIRES, Dec 15 (Reuters) - Argentina will have to offer more incentives to companies to invest in the context of a global credit crisis and slowing growth in local projects, the head of the government's investment agency said on Monday.
At the same time, Argentina is moving ahead with a plan to pay off some $6.7 billion in defaulted debt to the Paris Club of creditor nations, once financial markets stabilize, said Beatriz Nofal, director of the ProsperAr investment agency.
This would improve companies' access to export credits, particularly those granted by European financial institutions.
But she also hopes to convince the government to give tax breaks to companies that reinvest profits at a time when local interest rates have soared and external financing has dried up.
'This could be a powerful mechanism for reversing some companies' decisions to delay investment projects, based solely on the problem of access to credit,' Nofal told reporters.
'It would be an important incentive, particularly at a time when local units of international companies will in some cases feel greater pressure to send dividends abroad to help their headquarter offices,' she added.
Nofal said fixed gross investment in Argentina, Latin America's No. 3 economy, could end 2008 at around 22 percent of GDP, down from 22.6 percent in 2007 and 22.8 percent in the first half of this year.
This would be the first annual decline after five straight years of growth, which coincided with an economic expansion of at least 8.5 percent a year.
Argentina's economy grew 7.4 percent from January through September, according to the latest official data, but analysts are forecasting a sharp slowdown starting in the fourth quarter of this year, and some even foresee a recession in 2009.
Foreign direct investment should fall worldwide as many industrialized economies suffer recessions and companies in Europe and the United States will likely reduce flows to Latin America, the Argentine investment agency said in a report.
Argentina attracted foreign direct investment of $6.46 billion in 2007.
Regarding the Paris Club debt, President Cristina Fernandez said in September her government would pay it off using the central bank's foreign reserves.
The commitment to pay still stands, Nofal said, although the reserves must be used strategically as a buffer against what could turn into a global recession.
'It's a time for protecting our reserves, they are our main tool for defending the country from this crisis. As it waits for financial markets to stabilize, the government is making progress technically, conciliating debts and talking more about the possibility of a financed accord,' Nofal said. Keywords: ARGENTINA ECONOMY/INVESTMENT (Editing by Gary Crosse; e-mail: hilary.burke@thomsonreuters.com; +5411-4318-0663; Reuters Messaging: hilary.burke.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
BUENOS AIRES, Dec 15 (Reuters) - Argentina will have to offer more incentives to companies to invest in the context of a global credit crisis and slowing growth in local projects, the head of the government's investment agency said on Monday.
At the same time, Argentina is moving ahead with a plan to pay off some $6.7 billion in defaulted debt to the Paris Club of creditor nations, once financial markets stabilize, said Beatriz Nofal, director of the ProsperAr investment agency.
This would improve companies' access to export credits, particularly those granted by European financial institutions.
But she also hopes to convince the government to give tax breaks to companies that reinvest profits at a time when local interest rates have soared and external financing has dried up.
'This could be a powerful mechanism for reversing some companies' decisions to delay investment projects, based solely on the problem of access to credit,' Nofal told reporters.
'It would be an important incentive, particularly at a time when local units of international companies will in some cases feel greater pressure to send dividends abroad to help their headquarter offices,' she added.
Nofal said fixed gross investment in Argentina, Latin America's No. 3 economy, could end 2008 at around 22 percent of GDP, down from 22.6 percent in 2007 and 22.8 percent in the first half of this year.
This would be the first annual decline after five straight years of growth, which coincided with an economic expansion of at least 8.5 percent a year.
Argentina's economy grew 7.4 percent from January through September, according to the latest official data, but analysts are forecasting a sharp slowdown starting in the fourth quarter of this year, and some even foresee a recession in 2009.
Foreign direct investment should fall worldwide as many industrialized economies suffer recessions and companies in Europe and the United States will likely reduce flows to Latin America, the Argentine investment agency said in a report.
Argentina attracted foreign direct investment of $6.46 billion in 2007.
Regarding the Paris Club debt, President Cristina Fernandez said in September her government would pay it off using the central bank's foreign reserves.
The commitment to pay still stands, Nofal said, although the reserves must be used strategically as a buffer against what could turn into a global recession.
'It's a time for protecting our reserves, they are our main tool for defending the country from this crisis. As it waits for financial markets to stabilize, the government is making progress technically, conciliating debts and talking more about the possibility of a financed accord,' Nofal said. Keywords: ARGENTINA ECONOMY/INVESTMENT (Editing by Gary Crosse; e-mail: hilary.burke@thomsonreuters.com; +5411-4318-0663; Reuters Messaging: hilary.burke.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.