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Jorge Safar, sales chief at one of the city's OPPEL real estate franchises, agreed the market has changed. "We're hopeful that something will clear up the doubts generated by the currency controls, but the political news hasn't been ideal." The smart money is rapidly flowing out of Argentina, said former economy minister Roberto Lavagna, who presided over the first years of the current expansion. "If $23 billion that should have been invested in Argentina fled the country (in 2011), it was for a reason," he told reporters. Castineira said Argentina no longer has the macroeconomic strength to withstand a global crisis like that of 2008, when it had positive balances in trade and revenues and a more competitive exchange rate to encourage exports. For the first time in years, Argentina is now spending more than it takes in, closing 2011 with a budget deficit of 1.6 percent, according to official data. Argentina has vast untapped oil and natural gas resources, but production hasn't kept pace with the country's economic growth. The government has only recently begun removing some of the price controls imposed nearly a decade ago. Cheap energy gave Argentine businesses a huge advantage, but dissuaded Repsol and other leading oil companies from digging hard for oil and gas that they would have to sell at a loss. The government's seizure of Repsol SA's controlling stake in Argentina's YPF energy company creates the possibility of more domestic production, but that will require major investment, so it could take years before significant oil and gas starts flowing. As a result, the government may have to spend $5 billion for fuel imports this year, up from $3 billion last year, Castineira said. "These problems are beginning to reach critical mass," said Fausto Spotorno, an economist with the Orlando J. Ferreres y Asociados consultancy. "The energy crisis, which holds back much of the productive capacity, is generating budgetary problems, which in turn create the need for currency controls and problems with the money supply." Meanwhile, annual inflation could reach 25 percent this year, nearly three times the official rate, private analysts say. Unions, once the government's reliable allies, are pushing for even larger pay increases to keep pace, despite evidence of a slowdown. Fernandez has urged both business and union leaders to avoid ruining an increasingly delicate economic balancing act. "A very difficult world is coming," she warned, urging unions in particular to act responsibly. "They kick up a storm and everybody shouts to see who can get more (but) when everything turns rotten, the leaders split, and those who are left without a job are the workers."
[Associated
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