Macri has impressed investors but whether they will walk the walk remains to be seen

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Mauricio Macri, Argentina’s new president, has won his country renewed interest among foreign investors after quickly turning the page on the turbulent years of his predecessor Cristina Fernández de Kirchner and, before her, her husband Néstor Kirchner.

The amount of greenfield foreign direct investment (FDI) announced in the first nine months of this year surpassed $4.1bn, more than the totals for the full years of 2015 and 2014 and ending a downward trend that began in 2011, according to fDi Markets, an FT data service.

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Global corporations including Telefónica and Nissan have committed hundreds of millions of dollars to scale up their Argentine operations to meet the needs of an expanding market. US companies Stoneway Energy and General Electric have won tenders to add more than 845 megawatts of thermal power generation capacity to the country’s deficient energy network in the next two years.

After years of relative isolation and a delusional approach to economic data, Argentina is one of the few bright spots on Latin America’s otherwise bleak landscape. Mr Macri has let the currency float, lifted capital controls and export taxes, restored credibility to official data and brought Argentina back to international capital markets after 15 years in exile following its 2001 default.

The latest investment figures reflect the potential of Argentina’s massive endowment of natural resources and its educated, skilful population of 41m people. With next-door heavyweight Brazil struggling to emerge from a deep recession, Argentina has more than doubled to 10 per cent its share of regional FDI in the past year.

There should be much more to come. General Electric said this month it would invest $10bn in Argentina over the coming decade, with a focus on energy infrastructure. That was shortly after Siemens of Germany said it would help generate investment and provide financing for $5.6bn in infrastructure projects. Added to these are another $23bn of possible investments from 130 foreign companies that the country’s Investment and Trade Promotion Agency has identified since it was set up in February.

Greenfield FDI to South America, $m*
  Jan-Sept 2016 Jan-Sept 2015 % change
Brazil 6,181 14,436 -57%
Argentina 4,139 2,255 84%
Chile 3,987 7,805 -49%
Peru 1,332 1,362 -2%
Ecuador 1,216 657 85%
Colombia 606 1,456 -58%
Venezuela 65 114 -43%
 Source: fDi Markets *includes estimates

But it remains to be seen whether investors will really walk the walk. Mr Macri’s immediate measures extended his honeymoon with the international community, but they also further weakened an already fragile economy, at least in the short term.

Annual inflation reached 43.5 per cent in August and the economy is expected to contract 1.4 per cent this year. Alfonso Prat-Gay, finance minister and former JPMorgan currency strategist, is trying to convince investors that the economy has already touched bottom and will grow from 2017, while inflation will settle at around 20 per cent. But Argentine governments have a long record of broken promises, a legacy not even Mr Macri can shrug off.

He has quickly regained investors’ interest and attention. Now he needs to regain their trust. He will only do that when the economy stabilises.

Jacopo Dettoni is deputy editor of fDi Magazine, an FT publication.

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