Sven Smit of McKinsey & Company on Argentina’s potential

The financial crisis which has sent shock waves through Argentina in the past year is due to a national ‘reset’ and subsequent transition period between two economic systems, according to McKinsey & Company’s Sven Smit.

While McKinsey Amsterdam’s Senior Partner Sven Smit was in Buenos Aires for the Business 20 2018 summit, he spoke to local newspaper La Nacion about Argentina’s financial crisis and growth potential. Smit attended the summit – which addressed pressing questions on the future of work, sustainability and international trade – and sat as an expert on the panel of the discussion about Infrastructure and Energy: the two powerhouses for development.

Smit believes that Argentina is the land of opportunities. “You just need to be connected to those opportunities. It has a culture of creation that is found in multiple sectors, but the whole system must be taken to a place where it can be captured financially. Now the country is going through a process of transition from one financial model to another.”

“There are many emerging markets which have a lot of potential. But here [in Argentina] there are opportunities in infrastructure, energy, banks, digitization. The issue is not the opportunities, but putting the whole system in the right place so that the opportunity can be unleashed,” said the consultant. 

The Argentinian currency has stabilised at roughly 37 pesos per US$1 after having reached a low in early September. The peso’s recent gains of 11% show that the Argentinian government’s fiscal measures are beginning to take hold of the situation. With that said however, inflation is still above the 50% mark, leaving Argentinians considering their options. 

Smit argues that whilst austerity measures and the high level of inflation are painful, they are signs that the country is heading in the right direction. The McKinsey partner urges Argentines who are feeling this stress not to leave the country but to instead wait out the crisis and use digital transition and innovation to drive the economy in the right direction.

“If you live in a tighter context, the answer is that you have to do more. You have to work to correct the negative issues. Create new strategies for example, the world is becoming digital. It is influenced by the digital. That game has to be played now. These sectors have to be looked at for investments.”

In particular, Smit finds that the Argentine market has entered into a process of rearrangement. “Countries like Turkey go through similar situations, all for different reasons. I do not think anyone doubts that here you can find opportunities. With time, confidence will come and they will all be more optimistic about the possibility of doing business.”

“It is difficult to see it now, but the problems are being addressed and the important thing is not to leave. I understand that for people, inflation matters and it will not be easy, but I think it is a moment of transition. I do not see a disconnection with what happens with the rest of the emerging markets.

The B20 summit took place at the beginning of this month bringing together business leaders from around the world. The event was sponsored by big names in the private sector including Accenture, Ernst Young, Unilever and BBVA. 

Related: Argentina crisis affects tourism across Latin America.