Advantages of Investing Today
ARGENTINA
See: www.biasca.com ; www.vrg-ar.com
Advantages of Investing Today
ARGENTINA
Advantages of Investing
Today
Secretariat of Industry, Commerce, and
SMEs
Ministry of Economy and Production
Advantages of Investing Today
The Argentine Economy
Advantages of Investing Today
Argentina at a Glance
Surface Area
2.8 million km²
Argentina is the 2nd largest country in Latin America
and the 8th largest worldwide in terms of surface area
Population (2005 est.)
38,592,150
GDP (2005 est.)
US$ 162 billion
Growth (2005 est.)
6.3%
Per Capita GDP
(2005 est.)
US$ 4,195
Form of Government
Republican, Representative, and Federal
Political Subdivisions
24 autonomous States with political, administrative and
economic powers
(23 provinces and the City of Buenos Aires)
Currency, Exchange rate
Argentine Peso (Arg$); 2.92 Arg$ / US$.
Language
Spanish
Advantages of Investing Today
In terms of purchasing power, Argentina boasts the highest per
capita income among major Latin American economies.
GDP per capita in major economies of the Region
(Purchasing Power Parity, US$)
11.981
10.981
9.726
Latin America
& the Caribbean: 7.900
8.593
6.743
4.726
Venezuela
Colombia
Brazil
Mexico
Chile
Argentina
Source: ADI based on World Economic Outlook 2004 (IMF).
Advantages of Investing Today
The Argentine economy is highly diversified …
GDP by Economic Sector, 2004
Services, 54%
Goods, 46%
Wholesale, Retail,
and Repairs; 21%
Transport,
Warehousing, and
Communications;
17%
Education, Social,
and Health
Services; 12%
Public Administration,
Defense, and
Extraterritorial Activities;
10%
Real Estate, Rental,
and Other Business
Activities, 21%
Manufacturing
Industry; 52%
Fisheries; 1%
Hotels and
Restaurants; 4%
Other Services; 7%
Financial
Intermediation:
8%
Agriculture,
Fishing,
Hunting, and
Silviculture;
22%
Electricity,
Gas, and
Water Supply;
4%
Construction;
9%
Mining and
Quarrying; 12%
Source: ADI based on National Accounts
Advantages of Investing Today
with an ample supply of skilled labor …
S c h o o l a tte n d a n c e e x p e c ta n c y
(y e a rs )
OECD
16
A rg en tin a
16
U ru g u ay
15
B razil
15
13
C h ile
M exico
12
V en ezu ela
11
C o lo m b ia
11
C o sta R ica
11
S o u rce: A D I b ased o n U N E S C O d ata.
The relative high school attendance
expectancy is reflected on the
literacy rate and the primary,
secundary and tertiary education
enrollment rates. Attendance
expectancy at educational
establishments in Argentina is the
highest in Latin America and
compares with developed countries
(i.e members of the Organisation for
Economic Co-operation and
Development).
Advantages of Investing Today
… high availability of natural resources …
•
Argentina has just under 250,000 km² of arable land.
•
This wealth of fertile land and a competitive industry makes Argentina:
 The world’s leading producer and exporter of sunflower oil
 The world’s leading exporter and third largest producer of soybean oil
 The world’s leading exporter and second largest producer of honey
 The world’s leading exporter of horse meat
 The world’s second largest exporter of corn
 The world’s third largest producer of soybeans
 The world’s third largest producer and world’s leading exporter of
lemons
 The world’s five largest producer of beef
 The world’s sixth largest producer of wine
Source: ADI based on FAO (2004)
Advantages of Investing Today
… and considerable energy resource reserves.
CONFIRMED RESERVES as at 12/31/2003
Confirmed
Basin
Probable
Oil (Mm )
Gas
3
(MM m )
Oil (Mm )
Gas
3
(MM m )
North West
19,308
124,511
8,355
52,599
Cuyana
28,879
516
7,300
220
Neuquen
161,934
311,172
54,602
99,277
San Jorge Gulf
195,887
38,048
46,871
23,431
19,206
138,248
21,059
113,479
425,213
612,495
138,187
289,006
Southern
TOTAL
3
3
Source: ADI based on Energy Secretariat data.
Advantages of Investing Today
Domestic industry is modern and competitive …
• Argentine industrial structure is broad and • Annual capability of production at domestic
industrial sector includes:
diversified.
• Highly competitive industrial sectors boast
world class enterprises.
• The sectoral and regional active policies
along with the general economic policy
favors the development of the sector.
• Companies including Exxon, Ford, Coca-
Cola, Fiat, Bayer, Renault, Siemens,
Nestlé, Firestone, BASF, Pirelli and Abbot
have been operating in Argentina for over
50 years.
– 7 million tons of oilseed oils and more
than 20 million tons of related products.
– 15 million hectoliters of wine.
– 2 million tons of sugar.
– 400,000 tons of tanned leather.
– 1.2 million tons of paper.
– 200,000 tons of PVC and more than 1.5
million tons of derivates like
polyetyhlene and propiline.
– 275,000 tons of aluminium.
– 5 million tons of steel.
– 4.15 million tons of seamless and seam
pipes.
– 550,000 automobiles.
Advantages of Investing Today
… with a highly developed infrastructure.
• A 38,744 km national road
network
• This extends to 500,000 kms if
the provincial and municipal
networks are included
• A 35,753 km railway network
• 38 maritime ports and 25 river
ports
TELECOMMUNICATIONS
per 1000 inhabitants Argentina Brazil
Latin Am. &
Telephone Lines
220.2
182.1
124.7
the Caribbean
145.9
Cellular Phones
168.8
136.6
142.4
70.5
91.1
62.9
68.7
59.3
PCs
• 52 airports, 21 of which are
international
• Over 25 airlines operate flights
from Argentina to 40
international destinations in
five continents
Mexico
Source: World Bank (2002)
•
Installed electrical energy generating capacity
totals 21,300 MW.
Advantages of Investing Today
Social conditions are above the average of Latin America.
S o c io e c o n o m ic In d ic a to rs
R e g io n
A rg e n tin a
B ra z il
M é x ic o
0 ,8 5 3
0 ,7 7 5
0 ,8 0 2
0 ,7 7 7
7 4 ,3
6 8 ,6
7 3 ,6
7 0 ,7
16
30
24
27
1130
573
544
567
B irth s a tte n d e d b y sk ille d h e a lth p e rso n n e l (% )
98
88
86
83
D o c to rs p e r 1 ,0 0 0 In h a b ita n ts
2 ,7
1 ,3
1 ,6
1 ,6
A d u lt ilite ra c y ra te (% a g e s 1 5 a n d a b o v e )
2 ,3
1 3 ,6
9 ,5
1 1 ,4
G ro ss e d u c a tio n e n ro llm e n t ra tio
94
92
74
81
H u m a n D e v e lo p m e n t In d e x (H D I)
L ife E x p e c ta n c y a t B irth (y e a rs)
In fa n t M o rta lity R a te (0 /0 0 )
H e a lth e x p e n d itu re p e r c a p ita (P P P U S $ )
A v e ra g e
S o u rc e : W o rld B a n k . H u m a n D e v e lo p m e n t R e p o rt 2 0 0 4 .
H D I: M e a su re s th e a v e ra g e a c h ie v e m e n ts in th re e b a sic d im e n sio n s o f h u m a n d e v e lo p m e n t: a lo n g a n d h e a lth y life ,
k n o w le d g e a n d a d e c e n t sta n d a rd o f liv in g .
L ife E x p e c ta n c y a t B irth (y e a rs): N u m b e r o f y e a rs a n e w b o rn in fa n t w ill liv e if th e m o rta lity p a tte rn s a t th e tim e o f
b irth re m a in c o n sta n t th ro u g h o u t th e e n tire life sp a n .
In fa n t M o rta lity R a te (0 /0 0 ): N u m b e r o f in fa n t d e a th s in th e first y e a r o f life p e r 1 ,0 0 0 liv e b irth s.
H e a lth e x p e n d itu re p e r c a p ita : T h e su m o f p u b lic a n d p riv a te e x p e n d itu re in p u rc h a sin g p o w e r p a rity (U S $ ).
G ro ss e d u c a tio n e n ro llm e n t ra tio : T h e n u m b e r o f stu d e n ts e n ro lle d in p rim a ry ,se c o n d a ry a n d te rtia ry le v e ls o f
e d u c a tio n ,re g a rd le ss o f a g e , a s a p e rc e n ta g e o f th e p o p u la tio n o f o ffic ia l sc h o o l a g e fo r th e th re e le v e ls.
Advantages of Investing Today
As a MERCOSUR Member State, Argentina enjoys preferential
access to a market totalling 274 million consumers.
MERCOSUR +
ASSOCIATES
GDP: US$ 975
billion
Population: 355
million people
MERCOSUR
GDP: US$ 722
billion
Population:
223 million
people
Source: ADI based
on IMF data (2005)
• The MERCOSUR (Southern Cone Common Market) is a common market comprising
Argentina, Brazil, Paraguay and Uruguay.
• Bolivia, Chile and Peru are MERCOSUR Associate States, recently it was approved the
incorporation of Colombia, Ecuador and Venezuela with the same status.
• At the same time, Mercosur’s calendar of external negotiations includes agreements and
negotiations with different blocs and countries like Mexico, India and EU.
Advantages of Investing Today
Since the creation of MERCOSUR, there has been strong growth in
trade between Argentina and the other Member States ...
A rg e n tin a -M E R C O S U R T ra d e
in M illio n s o f U S $
E xp o rts
Im p o rts
T ra e B a la n c e
1 0 .0 0 0
In 2004, 4,800
companies
registered exports to
the value of US$
6,650 million to
8 .0 0 0
6 .0 0 0
4 .0 0 0
MERCOSUR.
2 .0 0 0
0
´91 ´92 ´93 ´94 ´95 ´96 ´97 ´98 ´99 ´00 ´01 ´02 ´03 ´04
-2 .0 0 0
S o u rce: A D I b ased o n IN D E C d ata.
• Argentine exports to the bloc increased by 236% between 1991 and 2004 (34% more
than sales to the rest of the world). Imports from MERCOSUR practically quintupled over
the same period.
Advantages of Investing Today
… resulting in a higher value added export profile.
IM
22%
PP
21%
MERCOSUR
477
Other Markets
354
PP: Primary Products
F&E
19%
IM
53%
US$/ ton (2004)
Exports
to other Markets
2004
Exports
to MERCOSUR
2004
PP
16%
AM
40%
F&E
17%
AM: Agricultural Manufactures
IM: Industrial Manufactures
F&E: Fuel and Energy
AM
12%
Source: ADI based on INDEC
• 37% of total industrial manufacture exports go to MERCOSUR.
• The export value per-ton to MERCOSUR is 35% higher than to other markets.
Advantages of Investing Today
Argentina ranks as an integrated economy...
• Since the late 80s and as a result of a significant reduction in tariff and non-tariff
barriers, foreign trade has been particularly dynamic, a phenomenon that does not
exclude trade with the region.
Non-MERCOSUR Trade
(in millions of US$)
Exports
Imports
Trade Balance
25.000
20.000
15.000
10.000
5.000
0
´91
´92
´93
´94
´95
´96
´97
´98
´99
´00
´01
´02
´03
´04
-5.000
Source: ADI based on INDEC data.
Advantages of Investing Today
… and with its doors open to the world.
FOREIGN
FLOWS
F O R E IGDIRECT
N D IR EINVESTMENT
C T IN V E S T M
E N T F(FDI)
L O W S (F D I)
T O A R G E N T IN A – IN M IL L IO N S O F U S $ 1 9 9 3 -9 8
1999
2000
2001
2002
2003
2004
IE D
5 .9 0 6
2 3 .9 8 8
1 0 .4 1 8
2 .1 6 6
2 .1 5 5
1 .8 8 7
4 .2 5 4
IE D in % G D P
2 ,3 %
8 ,6 %
3 ,8 %
0 ,8 %
2 ,1 %
1 ,5 %
2 ,9 %
So urce: A D I b ased o n M inistry o f E co no m y and IM F.
• Diferent factors influenced in order to
make Argentina attractive to numerous
Foreign Direct Investment
By Economic Sector (1992-2002)
Oil
20%
foreign direct investment projects in
various sectors of the economy.
• The good performance of last year allows
to glimpse the beginning of a new
growing cycle, in which Argentina will be
among the major FDI host countries.
Electricity, Gas,
and Water
14%
Banks
10%
Transport and
Communications
9%
Manufacturing
Industry
34%
Mining
1%
Trade
4%
Others
8%
Source: ADI based on Ministry of Economy data
Advantages of Investing Today
Argentina in the
new economic context
Advantages of Investing Today
The economy staged a gradual recovery following the crisis that
began in mid-1998 and ended with the abandonment of the
Convertibility Regime in January 2002.
N o n -se a so n a lly a d ju ste d G D P
(in m illio n s o f p e s o s - a t 1 9 9 3 p ric e s )
2 9 5 .0 0 0
2 .7 %
2 8 5 .0 0 0
1 0 co n secu tive q u arters o f g ro w th w ere reco rd ed as
fro m 2 Q 2 0 0 2 . O ver th e year '0 3 th e A rg en tin ean
3 .3 %
eco n o m y reg istered a g ro w th rate o f 8 ,8 % w h ile last
2 7 5 .0 0 0
year it reach ed 9 % .
2 6 5 .0 0 0
2 5 5 .0 0 0
2 4 5 .0 0 0
2 3 5 .0 0 0
2 2 5 .0 0 0
I 02
II 0 2
III 0 2
IV 0 2
I 03
II 0 3
III 0 3
IV 0 3
I 04
II 0 4
III 0 4
IV 0 4
S o u rce : M in istry o f E co n o m y.
Advantages of Investing Today
The manufacturing industry led the recovery, reaching the 1998 level
in March 2004, only 1.2% below the historical record (June 1998).
M o n th ly In d u s tria l E s tim a to r (M IE )
N o n -se a so n a lly a d ju ste d B a se Y e a r 1 9 9 7 = 1 0 0
110
105
+39%
100
95
90
85
80
75
70
1998 1999 2000 2001
I-0 2
II-0 2
III-
IV -0 2 I-0 3
II-0 3
02
Annual
A v e ra g e s
III03
Q u a rte rly
D a ta
IV -0 3 I-0 4
II-0 4
III-
IV -0 4
04
S o u rce : M in istry o f E co n o m y
Advantages of Investing Today
There was renewed growth in the construction industry,
surpassing 2000 and 2001 levels.
Building permits and Construction Activity Indicator
(CAI Base Year 1997=100)
100
7000
Building permits (thousands of M
6000
80
5000
60
4000
3000
40
Indicator 1997=100.
2
)
8000
2000
20
1000
0
0
96
97
98
99
00
M2 to be built (thousands)
01
02
03
04
05 (e)
Construction Activity Indicator
Source: ADI based on Ministry of Economy data
Advantages of Investing Today
There has been a gradual recovery in investment as from 4Q
2002. Renewed growth in investment represented a significant
contribution to GDP.
S e a so n a lly a d ju ste d G ro ss D o m e stic F ix e d I n v e stm e n t a n d
I n v e stm e n t R a te (G D F I / G D P )
G D FI (M illio n s o f P e so s)
6 0 .0 0 0
In v e stm e n t R a te (% )
1 9 ,1 %
20%
5 5 .0 0 0
18%
5 0 .0 0 0
4 5 .0 0 0
16%
4 0 .0 0 0
14%
3 5 .0 0 0
3 0 .0 0 0
12%
2 5 .0 0 0
1 0 ,5 %
2 0 .0 0 0
10%
I 02
II 0 2 III 0 2 IV 0 2
I 03
II 0 3 III 0 3 IV 0 3
I 04
II 0 4 III 0 4 IV 0 4
S o u rce: A D I b a sed o n M in istry o f E co n o m y d a ta .
Advantages of Investing Today
Following devaluation, consistent monetary and fiscal policy led
to price stability.
• 2002 inflation marked a break
with the price stability of the
previous decade and was the
result of abandoning the
Convertibility Regime,
introduced in April 1991,
establishing exchange rate
parity at $ 1= US$ 1.
• Nevertheless, following the
adjustment involving a minimal
pass-through of devaluation to
prices, a single-digit inflation
rate was once again achieved
in 2003.
Price Indexes and Exchange Rate
Base Year 1999 = 100
ER ($/US$)
IPIM
IPC
350
300
250
200
150
100
50
I
II
III
IV
I
II
III
IV
I
II
III
IV
I
II
III
IV
01
01
01
01
02
02
02
02
03
03
03
03
04
04
04
04
Source: ADI based on Ministry of Economy data
Advantages of Investing Today
The recovery in economic activity led to a significant increase in
jobs.
Employment Rate¹ (%) performance
40,4
+11%
U n e m p lo y m e n t R a te ² ( % ) p e rfo rm a n c e
2 0 ,4
-4 1 %
1 2 ,1
36,3
I-03
II-03
III-03
IV-03
I-04
II-04
III-04
IV-04
I-0 3
II-0 3
III-0 3
IV -0 3
I-0 4
II-0 4
III-0 4
IV -0 4
S ou rce: A D I b ased on IN D E C d ata.
1. Employment Rate: Employed/ Total Population
2. Unemployment Rate: Unemployed/ Economically Active Population
• Almost 2 million new jobs were created between 2Q 2002 and 3Q 2004 in the
private sector.
• The albeit still high unemployment levels began to drop following the recovery in
economic activity, it is falling as the economy recovers, and a further decline can be
expected.
Advantages of Investing Today
A robust trade surplus was maintained in 2004 despite the
recovery of economic activity and a slight appreciation of the
peso in real terms.
FOREIGN TRADE
• Export performance is highly
favourable and the upward
trend is expected to continue.
• There has been a gradual
expansion in exports as from
2003. Last year reached a new
historical record.
• Imports have recovered
strongly following the drop in
2002. Since then has registered
an increase of 163%.
Millions of US$
35.000
+29%
30.000
25.000
+163%
20.000
15.000
10.000
5.000
0
-5.000
1999
2000
Exports
2001
2002
Imports
2003
2004
Trade Balance
Source: ADI based on Ministry of Economy data.
Advantages of Investing Today
The Current Account Balance has turned positive following ten
years of deficits.
C u rre n t A c c o u n t B a la n c e
( In m i llio n s o f U S $ )
1 0 .0 0 0
7 .5 0 0
5 .0 0 0
2 .5 0 0
0
-2 .5 0 0
92
93
94
95
96
97
98
99
00
01
02
03
04
-5 .0 0 0
-7 .5 0 0
-1 0 .0 0 0
-1 2 .5 0 0
S o u rc e : A D I b a s e d o n M in is try
o f E c o n o m y d a ta .
-1 5 .0 0 0
• The 2004 balance is slightly down on 2003 due to a 60% rise in imports and the net
expenditure of earnings and dividends following the economic recovery.
Advantages of Investing Today
The trade surplus and the reduction in the financial account deficit
have significantly boosted Central Bank reserves.
B C R A In te rn a tio n a l R e s e rv e s
(in B illio n s o f U S $ )
25
R e co ve ry o f re se rve s d u rin g th e ' 0 4 , a llo w e d to
re a ch a su p e rio r le ve l to th e o n e o f ' 0 1 . T h e
re g iste re d in cre a se co n stitu te d a h isto rica l re co rd .
+40%
20
15
10
5
D ic- D ic
94
95
D ic
D ic
D ic
D ic
D ic
D ic
D ic
D ic
F eb
Apr
Ju n
Ago
O ct
D ic
96
97
98
99
00
01
02
03
04
04
04
04
04
04
Advantages of Investing Today
Fiscal accounts have improved substantially since May 2002, as a
result of stabilized public spending and higher tax revenues.
Non-Financial Public Sector Primary Balance
(Cash Basis)
(in millions of US$)
6.000
5.000
The primary surplus in '04 was
140% above the level of the '90´s.
4.000
3.000
2.000
1.000
0
´97
´98
´99
´00
´01
´02
´03
´04
Source: ADI based on Ministry of Economy data
Advantages of Investing Today
A favorable monetary trend was established throughout the last
years.
C u rre n c y Is s u e a n d P ric e S ta b ility
M on th ly V a ria tion (% )
15%
B ro a d M o n e ta ry B a se
13%
In fla tio n (C P I)
11%
9%
7%
5%
3%
Source: ADI based
on Ministry of
Economy data
1%
-1 %
I-0 3
II-0 3
III-0 3
IV -0 3
I-0 4
II-0 4
III-0 4
IV -0 4
• The expansion of the broad monetary base and the issue of Central Bank Bills (LEBACs)
exemplified the continuity of a prudent and flexible monetary policy that accompanied economic
growth at no cost in terms of inflation.
Advantages of Investing Today
The drain on deposits was halted as from 2Q 2002 , with a
positive trend from that point onwards, together with banks
recovering liquidity.
Private Deposits in Pesos and Bank Liquidity
Deposits (millions of pesos)
Bank Liquidity (Bank Reserves / Total Deposits)
100.000
25%
22,4%
80.000
20%
Liquidity
Deposits (AR$ millions)
90.000
70.000
60.000
15%
11,7%
50.000
40.000
10%
I 02
II 02 III 02 IV 02
I 03
II 03 III 03 IV 03
I 04
II 04 III 04 IV 04
Source: ADI based on Ministry of Economy data
Advantages of Investing Today
Why invest in Argentina?
Advantages of Investing Today
Why invest in Argentina?
 Highly qualified population
 Availability of natural resources
 Modern diversified industry
 Competitive costs and services
 Developed infrastructure
 Investment incentives
 A legal framework that does not discriminate against foreign
investments
Advantages of Investing Today
A country with a highly skilled workforce
A comparison of the main education indicators reveals Argentina’s high ranking at both
regional and international level. Attendance expectancy at educational establishments is
the highest in Latin America and similar to the one observed for developed countries
such as Spain, Italy, and the United States.
Illite ra c y (2 0 0 1 )
School attendance expectancy
(% P o p u la tio n o v e r 1 5 y e a rs )
Italy
1 ,5
S p ain
2 ,3
U ru g u ay
2 ,4
A rg en tin a
C h ile
C o sta R ica
C o lo m b ia
M exico
Latin A m erica
B razil
(years)
2 ,6
4 ,1
4 ,3
Illiteracy in the City of Buenos
Aires, with a population similar
to Uruguay, is 0.5% and 1.3%
in the metropolitan region, with
a population similar to that of
Chile.
OECD
16
Argentina
16
Uruguay
15
Brazil
15
Mexico
8 ,1
8 ,6
1 0 ,8
1 2 ,7
13
Chile
12
Venezuela
11
Colombia
11
Costa Rica
11
Source: ADI based
on UNESCO data, 2004.
Source: ADI based on UNESCO data.
Advantages of Investing Today
Education is compulsory and free for the 5-14 year age group, thus ensuring high school
enrolment rates, not only at primary but also at secundary and tertiary education level.
N e t s e c o n d a ry e d u c a tio n e n ro lm e n t ra te
Gross tertiary education enrollment rate
(Y e a r 2 0 0 2 )
(Year 2002)
88
OECD
81
A rg en tin a
75
C h ile
Uruguay
U ru g u ay
72
Venezuela
57
V en ezu ela
C o lo m b ia
C o sta R ica
54
51
Net education enrollment rate: Number of
students enrolled in the correct age group level as a
percentage of the total population eligible for this age
group level.
38
Chile
72
60
56
Argentina
B razil
M exico
58
OECD
37
27
24
Colombia
Mexico
21
Costa Rica
21
Brazil
18
Gross education enrollment rate: Total number
of students enrolled in the level as a percentage of
the total population eligible for this age group level.
Source: ADI based on UNESCO data, 2004.
Advantages of Investing Today
The Argentine education system is also well developed at the
higher education level.
University Students
(per 100,000 inhabitants)
3,582
Spain
Argentina
3,123
Italy
3,022
Uruguay
2,400
Chile
2,100
Colombia
1,540
1,490
Mexico
Brazil
1,068
Source: ADI based on UNESCO data
• Argentina boasts a broad
network of public and private
universities attended by over
one million students.
• The university student/ total
population ratio is the highest
in Latin America and
compares with the ratio for
several developed countries.
Advantages of Investing Today
The strength of the education system is exemplified by the
number of scientists and engineers working in research and
development.
Scientists and Engineers working in R&D
(per 1,000,000 inhabitants)
1,921
1,128
713
533
370
Spain
Italy
Argentina Costa Rica
Chile
323
Brazil
225
Mexico
219
101
Uruguay Colombia
Source: ADI based on UNESCO data
Advantages of Investing Today
Availability of Natural Resources
•
Argentina is characterized by the abundance and quality of its natural resources
that provide competitive advantages in developing activities linked to these
resources.
•
Argentina is the eighth largest country in the world in terms of surface area and its
relevance is even greater if factors relating to the potential its surface area offers
are considered (i.e. the proportion of surface area suitable for agriculture, mining
resources, etc.).
Advantages of Investing Today
Agriculture: Argentina has some of the most suitable agricultural
land worldwide
Countries with the largest arable and cultivated with permanent
crops land*
(millions of hectares & hectares per capita)
200
2,4
150
1,6
100
50
0,8
0
0,0
USA
India
China
Brazil
Left Axis: Surface (millions of hec.)
Australia
Canada
Argentina
Right Axis: Hec. per capita
Land under temporary crops, temporary meadows for mowing or
pasture, land under market and kitchen gardens and land
cultivated with permanent crops (fruit trees, nut trees, vines, etc.).
The relevance of
Argentina’s
agricultural surface
area is not only due
to its size but also to
the excellent
agroecological
conditions, resulting
in high yields.
Source: ADI based on FAO data
Advantages of Investing Today
In Latin America, only Brazil has a greater surface area suitable for
agricultural use. However, if domestic market pressure on production
is considered, Argentina has a higher availability in relative terms.
L a tin A m e ric a n c o u n trie s w ith th e la rg e s t c u rre n t a g ric u ltu ra l
s u rfa c e a re a *
(m illio n s o f h e cta re s & h e cta re s p e r ca p ita )
300
4 ,8
Brazil and Argentina
250
4 ,0
200
3 ,2
represents 9% of the
world´s agricultural
surface area.
150
2 ,4
100
1 ,6
Furthermore, Latin
America has about 23%
of the world's potential
50
0 ,8
0
0 ,0
B ra zil
A rg e n tin a
M e x ico
Left A xis: S u rface (m illion s of h ec.)
C o lo m b ia
B o liv ia
R ig h t A xis: H ec. p er cap ita
* Land under temporary and permanent crops, temporary meadows for
mowing or pasture, gardens and land used permanently for herbaceous
forage crops, either cultivated or growing wild.
arable land.
Advantages of Investing Today
• In comparison with the major grain-producing
countries, Argentine yields are highly
competitive at international level.
• Similar conclusions are obtained when
comparing yields for other crops such as apples,
pears, lemons, beans, and garlic in which
Argentina also has a considerable global market
share.
Soybean Productivity
(Argentina =100)
Argentina
Brazil
USA
Australia
China
Russia
India
0
50
100
Wheat Productivity
(Argentina =100)
Corn Productivity
(Argentina =100)
China
USA.
USA
Argentina
India
Australia
Argentina
China
Brazil
Brazil
Australia
Russia
Russia
India
0
0
30
60
90
120
50
100
150
150
Source: ADI based on FAO data
200
Advantages of Investing Today
Agricultural production increased 103% in the period 1990-2004.
Principal crops include soybean, wheat, sunflower, and corn.
Cultivated surface area increased approximately 40% over the same
period, representing significant progress in terms of yields.
G ra in p ro d u c tio n
(in m illio n s o f to n s)
70
T h e p ro g re ss in te rm s o f yie ld s a n d th e
in co rp o ra tio n o f m o re la n d in to p ro d u ctio n
o ccu rre d in th e la st ye a rs a llo w to p ro je ct a n
60
a n n u a l p ro d u ctio n o f 1 0 0 m illio n to n s. b y e n d s o f
th e d e ca d e .
50
40
30
20
89/90
91/92
93/94
95/96
97/98
99/00
01/02
03/04
Source: ADI based on SAGPyA data.
Advantages of Investing Today
Silviculture: The availability of extensive areas promotes the
development of other activities including silviculture.
• The main factors determining competitive advantages in this activity (soil types,
climate, costs, human resources, etc.) are present in vast regions of Argentina.
• Of the 20 million hectares suitable for forestry, only 5% are currently used for this
purpose. Land suitable for forestry does not compete with other agricultural
activities.
• The diversity of climates and soil types makes it possible to cultivate a wide variety
of species.
• In addition to tree growth rates, the relatively low land value compared to countries
such as Brazil and Chile yields high rates of return and exceptional payback periods.
• High growth rates: 41 m3 / hectare/ year (Chile 35 m3) for eucalyptus and up to
32 m3 / hectare / year for pine (three times the growth rate in Canada and
twice that of the United States).
Advantages of Investing Today
High growth rates for conifers and eucalyptus
Conifers
Eucalyptus
Source: Simpson Timber Co., Aracruz Cellulose, Jaako Powry Investments. CIEF.
Advantages of Investing Today
Fishery Resources: The length of its Atlantic coastline (4,725 km)
and the variety of species found in the fishing zone make
Argentina one of the best fishing areas worldwide.
M a ritim e fish in g
(in th o u san d s o f to n s)
1 .0 0 0
Maritime fishing have
recovered strongly in
the last years. There
are also considerable
captures of molluscs
and crustaceans like
prawns and squids,
800
600
400
besides fish.
200
0
'9 0
'9 1
'9 2
'9 3
'9 4
'9 5
'9 6
'9 7
'9 8
'9 9
'0 0
'0 1
'0 2
'0 3
'0 4
Source: ADI based on SAGPyA data
Advantages of Investing Today
Mining in Argentina
 The estimated surface area with mining potential totals approximately
750,000 km2, 75% of which has still to be exploited. Consequently, the Mining
Journal Survey has ranked our country sixh in mining resources potential.
 Argentina has considerable gold, copper, lead, zinc, natural borate,
bentonite, clay, and ornamental stone deposits. Most mineral deposits lie along
the Andes range, wich extends over 4,500 km, bordering with Chile and Bolivia.
 The regulatory framework and current mining incentive regime play a key role in
attracting investment to this sector.
The positive impact of the new legal framework on the sector can be observed in
recent investments and exports that rose from practically zero to over US$ 1 billion
per year.
Advantages of Investing Today
The Mining Investment Law provides the following incentives:
• According to the Law, companies may file for a 30 year long fiscal stability period.
• Double deduction of prospecting, exploration, and technical/ economic feasibility
study expenses, for income tax purposes.
• Financing and reimbursement regime for VAT on capital goods and investments in
physical infrastructure projects.
• Accelerated depreciation of capital investments.
• Exemption from import duties on capital goods and equipment, spare parts, and
accessories.
• Exemption from assets tax.
• Provincial royalties are limited to 3% of the pit-head value of mineral extracted.
• An income tax deduction of up to 5% of extraction operating costs and a tax
deduction for environmental conservation allowances.
Advantages of Investing Today
Notable growth in mineral exports
The transformation and
M in in g e x p o rts
integration of the Argentine
(in m illio n s o f U S $ )
mining industry into
1 .2 0 0
international markets is
1 .0 0 0
reflected in the tripling of
exports over the last seven
800
years. The upward trend is
600
expected to continue due to
400
Argentina’s geological
potential, the availavility of
200
potential areas that remains
0
'9 6
'9 7
'9 8
'9 9
'0 0
'0 1
'0 2
'0 3
'0 4
Source: ADI based on INDEC data
unexplored and high rates of
return.
Advantages of Investing Today
Investment growth in the sector
The positive impact of the new legal framework on the sector can be observed
in recent investments that rose from practically zero to over US$ 1 billion in 2002.
Investment has remained robust despite the economic crisis.
 Leading global mining
A c c u m u la te d m in in g in v e s tm e n t
(in m illio n s o f U S $ )
companies including
7 .0 0 0
Barrick - Homestake, BHP
6 .0 0 0
- Billiton, FMC Lithium,
5 .0 0 0
Anglogold, Weathon River
4 .0 0 0
Minerals, Xstrata, Rio
3 .0 0 0
Tinto and Minera Aguilar
2 .0 0 0
have already decided to
invest in Argentina.
1 .0 0 0
0
'9 4
'9 5
'9 6
'9 7
'9 8
'9 9
'0 0
'0 1
'0 2
'0 3
'0 4
Source: ADI based on CEP data
Advantages of Investing Today
Argentina ranks high internationally in terms of available mining
resources.
• The principal mining areas currently
in production include Bajo La
Alumbrera, El Salar del Hombre
Muerto, Farallón Negro, Mina Aguilar
and Cerro Vanguardia and important
projects involving significant
metalliferous mineral reserves in
1.China
2. Peru
3. Philippines
4. Brazil
5. Chile
6. Argentina
underway at locations including
7. Mexico
8. Bolivia
9. Venezuela
Pirquitas, Agua Rica, Pascua Lama and
10. Burma
various stages of exploration are
Pachón.
Source: ADI based on
Mining Journal
Advantages of Investing Today
Increased oil and gas production
• Argentina has a very gas-intensive economy, natural gas accounted for half of total
primary energy supply. Gas production has increased constantly since the early 90s,
doubling early 90s levels in 2004. Argentina is the second largest producer in the
Region.
O il a n d g a s p ro d u c tio n
• Although oil production
has fallen in recent
years, levels are still
50% above the levels
recorded 13 years ago.
At the same time, should
be pointed out that
Argentina is still one of
the major producers in
the region.
(in m illio n / b illio n m ³ re s p e c tiv e ly )
50
40
30
20
10
0
'9 1
'9 2
'9 3
'9 4
'9 5
'9 6
'9 7
'9 8
O il
'9 9
'0 0
'0 1
'0 2
'0 3
G as
Source: ADI based on Energy Secretariat data
'0 4
Advantages of Investing Today
Oil and Gas
• The oil reserves/ production ratio increased despite a 13% rise in production
during the period under review.
• Although the gas ratio decreased between 1994 and 2002, it should be pointed
out that production rose by 65.2% during this period.
Gas: Reserves/ Production ratio
Oil: Reserves/ Production ratio
(years)
(years)
10.6
10.2
19.3
19.8
17.8
9.2
1994
9.1
1996
8.9
1998
2000
2002
1994
1996
Source: ADI based on Energy Secretariat data
1998
14.8
14.5
2000
2002
Advantages of Investing Today
A Sustainable Environment
E n v iro n m e n ta l S u sta in a b ility I n d e x
• Argentina ranks 9 among 146
Year 2005
F in lan d
7 5 ,1
7 3 ,4
N o rw ay
U ru g u ay
7 1 ,8
S w ed en
7 1 ,7
7 0 ,8
Icelan d
countries in the University of Colombia
environmental sustainability rankings.
• The availability of vast areas with
optimal environmental conditions is
C an ad a
6 4 ,4
clearly a significant factor in attracting
S w itzerlan d
6 3 ,7
investment. Nowadays, Argentina is
G u ian a
6 2 ,9
A rg en tin a
6 2 ,7
highly considered noyt only because
A u stria
6 2 ,7
B razil
6 2 ,2
natural resources but also because of
G ab o n
6 1 ,7
its lowest vulnerability to
A u stralia
6 1 ,0
environmental stress, the functioning
N ew Z ealan d
6 0 ,9
of ecosystems and global stewardship.
The ESI is elaborated by a team of environmental
experts at Yale and Columbia Universities.
the abundance and quality of its
Advantages of Investing Today
Modern diversified industry
•
Capital Formation (2004)
Argentina boasts a relatively modern and
diversified industrial structure. There has been
Financial
Services
1%
substantial investment in machinery and
equipment in recent years and a nucleus of
state of the art companies has emerged.
•
In addition, Argentina’s industrial profile is
Industry
42%
characterized by:
Trade and
Services
11%
– Pronounced alignment with
Argentine factor endowment
– High labor productivity indices
– High capital intensity
– Export-oriented production
– Increases of scale
– Transnational enterprises
Extractive
Activities
27%
Infrastructure
19%
Source: ADI based on CEP data
The recovery is currently being boosted
by new investment, with flows aimed at
industry and other tradable goods
sectors playing a dominant role.
Advantages of Investing Today
Relatively higher prices for domestic products favor the production of
tradable goods, resulting in a higher industrial sector share in GDP.
•
The industrial sector is one of the pillars of the current economic recovery and growth in
production is the result of higher exports as well as import substitution.
•
The improvement in the structural sustainability of the economy, allows to settle down
competitiveness policies that will consolidate the strategies of quality, technological
development and productivity.
Sector Share in GDP at current prices
M a nufa c tur ing Indus tr y
2 1 ,9 %
1 7 ,8 %
1994
1996
1998
2000
2002
2004
Advantages of Investing Today
A modern diversified industrial sector integrated into the global
market
Economic opening has transformed the industrial sector, resulting in:
• A greater emphasis on exporting: Manufactured goods exports have increased their share
of industrial GDP.
• Increased international integration: Intermediate goods imports have increased their
share of industrial GDP.
Intermediate Goods Imports/
Industrial GDP
Exports / Industrial GDP
70%
26%
60%
28,7%
50%
40%
30%
10,1%
35,8%
IM
14%
IM
AM
11,8%
0%
´ 94
´ 96
22%
18%
20%
10%
26,2%
´ 98
´ 00
´ 02
13,6%
10%
´ 04
´ 94
´ 96
´ 98
Source: ADI based on INDEC and National Accounts data
´ 00
´ 02
´ 04
Advantages of Investing Today
The industrial sector displays continuous improvement in human
resource productivity.
• Argentina has recorded significant progress in human resource productivity with a
26% increase in labor producivity between 1995 and 2000.
In d u stria l se cto r h o u rly p ro d u ctiv ity
(B a s e y e a r 1 9 9 7 = 1 0 0 )
1 2 0 ,0
The relative labor productivity
gap with the United States is the
1 1 0 ,0
lowest in Latin America.
1 0 0 ,0
According to ECLAC statistics,
9 0 ,0
average Argentine industrial
8 0 ,0
sector labor productivity is 67%
7 0 ,0
of US levels, with Brazil at 37%,
and no other Latin American
6 0 ,0
country higher than 40%.
5 0 ,0
'9 5
'9 6
'9 7
'9 8
'9 9
'0 0
'0 1
'0 2
'0 3
'0 4
Source: ADI based on INDEC data
Advantages of Investing Today
A modern, diversified, and growing industrial sector
• Industrial production has developed favorably in recent months. The recovery in
domestic demand, the integration of Argentine world class producers of industrial
inputs and primary commodities into external markets is intensifying, accompanied by a
new process of import substitution in specific branches.
N o n -se a so n a lly a d ju ste d M o n th ly I n d u stria l E stim a to r
(B a s e Y e a r 1 9 9 7 = 1 0 0 )
110
The industrial activity is
100
currently at its highest level
for the last five years.
90
The cumulative increase
from January 2002 to
80
December 2004 is 38,5%.
70
I 02
II 0 2
III
IV
02
02
I 03
II 0 3
III
IV
03
03
I 04
II 0 4
III
IV
04
04
Source: ADI based on INDEC data
Advantages of Investing Today
There has been growth in all industrial sectors in recent months.
Industrial sector evolution
2004 average vs. 2003 average, % variation
• Of the industrial sectors currently
displaying increased growth,
Automotive
Editing and printing
special attention should be drawn
No metallic minerals
to the metalworking and
automotive industry, editing and
Other metalmechanics
printing products and other
Paper and cardboard
Chemicals
foodstuff and drinks sub-sectors.
Rubber and plastics
• Industrial growth over the past
General Level
two years has been generalized,
Textiles
irrespective of the various
Beverage and food
branches’ specific orientation
Petroleum refining
(domestic market, import
Basic metals
10%
20%
30%
40%
50%
60%
Source: CEP based on INDEC data
substitution, or exports).
Advantages of Investing Today
Argentina is among the most competitive economies in the
international market in terms of costs for producing a wide range
of products and services.
•
Some of the basic costs investors must take into consideration if they wish to set up
their business in Argentina are listed below.
Gross annual wages/ salaries by sector
(2004, in US$)
Financial
10.805
Intermediation
Manufacturing
6.320
Industries
Logistics and
6.460
Communications
Trade
Construction
Hotels and
Restaurants
4.310
3.755
3.163
Source: ADI based on Ministry of Economy and Production data
Advantages of Investing Today
Skilled labor costs for Buenos Aires are competitive vis-à-vis other
cities worldwide.
• Comparing City of Buenos Aires local labor costs with costs in other major urban
centers reveals that Argentine costs are highly competitive.
A n n u a l g ro ss sa la ry fo r en g in eers
(2003, in U S$)
M e x ico C ity
A n n u a l g ro ss sa la ry fo r in d u stria l sk ille d w o rk e rs
(2 0 0 3 , in U S$ )
9 .0 0 0
M e x ico C ity
P ra gue (C ze ch R e p.)
1 0 .2 0 0
B o g o ta
B ue no s A ire s (A rge ntina )
1 0 .5 0 0
Sha ngha i
Sha ngha i (C hina )
Sa o P a o lo (B ra zil)
1 2 .1 0 0
B u e n o s A ire s
1 3 .4 0 0
3 .6 0 0
4 .1 0 0
4 .6 0 0
5 .1 0 0
S a o P a o lo
6 .5 0 0
B o go ta (C o lo m bia )
1 4 .4 0 0
P ra g a
6 .8 0 0
C a ra ca s (V e ne zue la )
1 4 .9 0 0
L im a
6 .8 0 0
Sa ntia go (C hile )
1 5 .5 0 0
S a n tia g o
L im a (P e ru)
Singa po re
1 6 .8 0 0
C a ra ca s
2 6 .7 0 0
M ila n
M ila n (Ita ly )
3 2 .2 0 0
S in g a p o re
Sy dne y (A ustra lia )
3 2 .4 0 0
B a rce lo n a
B a rce lo na (Spa in)
3 2 .4 0 0
Sydne y
M ia m i (U SA )
5 4 .0 0 0
8 .3 0 0
1 0 .7 0 0
1 6 .1 0 0
1 7 .0 0 0
1 7 .7 0 0
1 8 .4 0 0
M ia m i
Source: ADI based on UBS, Prices and Earnings 2003.
4 0 .9 0 0
Advantages of Investing Today
Buenos Aires also offers clear advantages over the rest of the
world in terms of cost of living.
S e rv ic e s B a sk e t
(2 0 0 3 , in U S$ )
F o o d B a sk e t
(2 0 0 3 , in U S$ )
B ue no s A ire s
P ra g ue
B o g o ta
Sa ntia g o
B u e n o s A ire s
153
164
186
207
L im a
228
Sa o P a o lo
230
M e x ico C ity
C a ra ca s
162
P ra g u e
164
B o g o ta
165
M e x ico C ity
276
Sid ne y
349
B a rce lo na
351
Sha ng a i
S a o P a o lo
C a ra ca s
246
M ia m i
Sing a p o re
M ila n
A basket of 39 products with due consideration of
the preferences of Western European consumers
was taken as a reference.
S a n tia g o
207
L im a
208
Sydne y
417
422
202
206
B a rce lo n a
377
183
Sha ngha i
S in g a p o re
359
136
248
270
327
M ia m i
348
M ila n
A basket of 19 services including telephone, post
office, hairdressing, cinema, restaurant dining, dry
cleaning, etc. was taken as a reference.
Source: ADI based on UBS, Prices and Earnings 2003.
355
Advantages of Investing Today
Competitive costs for agricultural land combine with excellent
agroecological conditions that ensure high yields in the widest
variety of crops.
C o s t o f a ra b le la n d
B a se A rg e ntina = 1
12
A rg e n tin a = 1 .
10
8
6
4
2
0
A rg e n tin a
Canad a
A u s tra lia
USA
U .K .
S p a in
B e lg iu m
G e rm a n y
H o lla n d
Source: ADI
Advantages of Investing Today
Availability of office space at low rates
O ffic e re n ts a n d o c c u p a n c y c o s ts p e r y e a r*
* The rent quoted is the
2
(in U S $ p e r m )
B o g o ta
S a n tia g o
B u e n o s A ire s
R io d e Ja n e iro
M e xico C ity
Shanghai
B a rce lo n a
A m ste rd a m
S yd n e y
N e w Y o rk
M ila n
typical “achievable” rent for a
180
1,000 sq. m. unit in a top
quality (Class A) buildings in a
228
primer location. Class A:
253
Buildings generally used for
268
rental purposes. Located in
379
easy access areas. Modern
402
layouts with good natural light
432
and view. Well finished and
453
maintained. Tenants are
generally multinational
490
companies and/ or tenants
560
652
Source: ADI based on CBRE, Global Market Rents 2004.
with a high economic capacity.
Advantages of Investing Today
Low-cost electric power for industry
E le c tric ity ra te s fo r in d u stria l u se rs
2 0 0 4 , U S $ /kW h (in clu d in g ta xe s)
A u s tra lia
0 ,0 3 6
A rg e n tin a
0 ,0 4 8
S p a in
0 ,0 4 8
F ra n c e
0 ,0 5 0
T a iw a n
0 ,0 5 3
B ra zil
0 ,0 5 4
USA
0 ,0 5 8
M e x ic o
0 ,0 5 8
C h ile
0 ,0 8 1
T u rk e y
0 ,0 9 2
P o rtu g a l
0 ,0 9 3
Ja p a n
Ita ly
0 ,1 1 4
0 ,1 4 0
S o u rce: A D I b ased o n In tern atio n al E n erg y A g en cy d ata.
Advantages of Investing Today
Low-cost gas for industry
N a tu ra l g a s ra te s fo r in d u stra l u se rs
7
2 0 0 4 , U S $ /1 0 K ca l (in clu d in g ta xe s)
A rg e n tin a
F in la n d
P o la n d
M e x ic o
Canada
7 5 ,3
1 6 9 ,1
1 7 3 ,2
1 9 1 ,6
2 0 4 ,0
S p a in
2 1 3 ,2
B ra zil
2 1 4 ,2
S o u th A fric a
F ra n c e
USA
P o rtu g a l
T a iw a n
Ja p a n
2 3 3 ,4
2 3 8 ,3
2 5 3 ,4
2 7 1 ,1
3 0 7 ,8
3 5 7 ,0
S o u rce: A D I b ased o n In tern atio n al E n erg y A g en cy d ata.
Advantages of Investing Today
Competitive telecommunications costs
L o c a l c a ll ra te s
(in U S $ / 3 m in u te s)
C h in a
0 ,0 2 7
B ra zil
0 ,0 2 8
A rg e n tin a
0 ,0 2 9
O th er b asic telep h o n e services su ch as
telep h o n e in stallatio n , in stru m en t, an d lin e
co sts are h ig h ly co m p etitive. A t th e sam e tim e,
lo n g d istan ce an d in tern atio n al
K o re a
0 ,0 3 1
teleco m m u n icatio n s services h ad b een
S p a in
0 ,0 6 8
Ja p a n
0 ,0 6 8
S o u th A fric a
C h ile
P o rtu g a l
d ereg u lated an d exp o sed to g reater
co m p etitio n .
0 ,0 9 4
0 ,1 0 4
0 ,1 1 3
T u rk e y
0 ,1 2 5
F ra n c e
0 ,1 2 5
M e x ic o
0 ,1 5 8
S o u rce: A D I b ased o n In tern atio n al T eleco m m u n icatio n U n io n d ata.
Advantages of Investing Today
Developed infrastructure
• Argentina boasts considerable development in terms of road, rail, port, aeronautical,
and telecommunications infrastructure.
• In addition, modern regulatory frameworks ensure a high level of competition.
• Appropriate infrastructure provides a platform to boost production sector
competitiveness and ensure territorial and social integration.
• The development of new infrastructure projects was listed as among the major
priorities for the national government. The implementation of theses projects will be
carried out by the State or by local or foreigners private operators.
Advantages of Investing Today
Commercial Aviation infrastructure
• The National Airports System comprises 52
airports, 35 of which are managed by the private
sector in conjunction with recognized international
operators.
• Argentina has 21 airports equipped for
international traffic (see map).
Advantages of Investing Today
Port infrastructure
• Argentina has 38 maritime ports along the Atlantic
coastline and 25 river ports. Most of foreign trade
transactions passed out through these ports.
• Recognised international maritime cargo operators
operate out of Argentina.
• The Port of Buenos Aires is the main container port
in Latin America and the Caribbean.
• Argentina’s principal maritime and river ports are
featured on the map.
Advantages of Investing Today
Port Infrastructure
• Argentina’s main port has achieved considerable progress in recent years in
terms of operability. Buenos Aires was born and grew with a close relationship to
its role as a port, which would become, in time, a point of commercial and
communication ways concentration.
CATEGO RY
1991
2004
4 .0 0 0
7 .4 7 6
C o n ta in e rs (th o u s a n d s o f T E U s )
300
768
O p e ra tin g c a p a c ity (c o n ta in e rs )
400
1 .3 0 0
65
132
6 ,2
1 ,0
800
5 .9 8 4
G e n e ra l c a rg o (th o u s a n d s o f to n s )
O p e ra tin g a re a (h e c ta re s )
A v e ra g e la y d a y s
P ro d u c tiv ity to n s / p e rs o n n e l / y e a r
S o u rce : P o rt o f B u e n o s A ire s
Advantages of Investing Today
Paraguay - Paraná Waterway
• The Paraguay-Paraná Waterway is the main river transport lane along the
Paraguay-Paraná water system and measures 3,302 km in length.
• The importance of this project lies in the lower river navigation costs (the
approximate freight cost is US$ 0.010 per ton/ km) and the lower environmental
impact.
• Hidrovía S.A. is responsible for dredging to a draft depth of 32 feet, seamarking,
and maintaining the main access channel to the River Plate and the River Paraná
for the 779 km stretch to the port of Santa Fe.
• The waterway is navigated by tug-propelled barge convoys, each barge with a
loading capacity of 1,500 tons. Currently, the maximum convoy is generally 20
barges (30,000 tons) measuring approximately 300 meters between perpendiculars
with a 48 meter beam.
Advantages of Investing Today
Road Infrastructure
• The National Road Network spans 38,632 km,
81% of which are paved (see map).
• A further 180,000 km of roads are under
provincial and 280,000 km under municipal
jurisdiction.
Advantages of Investing Today
Railway Infrastructure
• The Argentine railway network is one of the most
extensive worldwide, covering a distance of 35,753
km.
• The federal government has decided to promote
regional integration though the railway system and
consequently decreed the reopening of branch lines
such as the Central Trans-Andean Railway via tender
and the rehabilitation and transformation of the
Belgrano Cargas freight line.
Advantages of Investing Today
Telecommunications
Argentina began developing telecommunications 123 ago, only 4 years following the
launch of the Bell Telephone Company.
Over the last 10 years, investments totalling more than 20 billion dollars have
increased the number of telephone lines in service by 74%, total digitalization of the
network has been achieved, and the mobile telephone service has grown from less
than half a million to 12 million phones in service.
PER 100
INHABITANTS
Telephone lines
Cellular phones
PCs
Internet users
Argentina
Latin Am.
& Carib.
Brazil
Mexico
22.0
16.9
9.1
18.2
13.7
6.3
12.5
14.2
6.9
14.8
12.2
5.9
8.8
4.6
3.7
5.0
Source: World Bank (2001)
Advantages of Investing Today
Telecommunications
• Various indicators give an overview of improvements in the telecommunications
sector in recent years.
CATHEGORY
Fixed lines installed (thousands)
Cellular phones (thousands)
1990
2004
3,097
9,894
15
12,480
Digitalization of network
13%
100%
Lines in service per 100 inhabitants
11.9
55.6
Public telephones (thousands)
22.5
150.7
Lines in service per employee
76.1
956.9
Investment in the sector 1991-2000
Source: National Communications Commission
US$ 21,150 Millones
Advantages of Investing Today
Telecommunications
Telephone lines in service
(in millions)
Even when the fixed telecommunication market
is madure, in the near future will be
substantially changed by the widespread use of
optic fiber and IP tecnology.
6,8
7,1
7,2
'98
'99
8,5
8,6
8,7
'02
'03
8,9
7,9
6,3
5,7
5,0
'94
'95
'96
'97
'00
'01
'04
Source: ADI based on National Communications Commission data .
Advantages of Investing Today
Telecommunications
Cellular telephone lines
(in millions)
12,5
Over the past year, Argentina was the fastest
growing cellular market in Latin America.
Competence among operators, technological
dinamism and demand recovering asocciated with
the high economic growth explain such process.
7,8
6,4
6,7
6,6
'01
'02
3,9
2,0
'97
2,7
'98
'99
'00
'03
'04
Source: ADI based on National Communications Commission data.
Advantages of Investing Today
Investment Incentives
•
Argentina has a number of regimes designed to promote investments by both
domestic and foreign investors alike:
– General incentives: Instruments and measures aimed at promoting
investment in any region or economic activity.
– Sectoral incentives: Promotion regimes aimed at a particular economic
sector.
– Regional incentives: Provincial investment promotion regimes and
investment support infrastructure.
Advantages of Investing Today
General Incentives
• Export promotion incentives including drawback, temporary admission, turnkey
plant exports, and customs-at-factory regimes.
• Instruments and regulations aimed at reducing initial investment costs: investment
Value Added Tax (VAT) financing; reduced VAT tax rate on capital, informatic and
telecommunications goods; zero import tariff on capital goods; zero tariff on all
goods destined for use in major investment projects.
• Measures that boost competitiveness by reducing operating costs, such as
deregulation of the electricity and long distance telecommunication markets, air
freight transport, etc.
Advantages of Investing Today
General Incentives: New tax measures to promote investments
• Since September 2004, the Executive Branch has implemented new mechanisms
designed to promote investment. The new promotion regime consists in the
accelerated reimbursement of VAT related to the investments and in an accelerated
depreciation regime under the income tax
– Accelerated depreciation for machinery, equipment, and infrastructure works
destined for investment projects. Capital goods purchases may be depreciated in the
balance sheets for the three years subsequent to purchase and infrastructure project
depreciation will be reduced by 50% vis-à-vis the usual depreciation period.
– Refund of VAT paid on the purchase of goods destined for use in investment
projects. All VAT not offset will be refunded in cash three months after purchase.
– The regime will remain in effect for 36 months. Until now 36 projects were included
in the regime covering a total investment of 1,800 billion us dollars.
Advantages of Investing Today
Sectoral Incentives
• Certain sectors including mining, forestry, tourism, and the automotive industry
have specific investment promotion regimes.
• Some of these regimes include the following incentives inter alia:
– Fiscal stability for 30 years (forestry, mining)
– Special depreciation regime for income tax purposes (forestry,
mining)
– Tax exemptions (forestry, mining, tourism, automotive industry)
– Compensated trade regime (automotive industry)
• On March 2004 the Argentine Government sent to Congress a bill containing a
series of measures aiming to promote investments in different sectors like
Biotechnology.
Advantages of Investing Today
Regional Incentives
•
Various provinces in Argentina have investment promotion regimes that generally
include the following incentives:
– Exemption from provincial taxes such as turnover tax, stamp duty,
real estate tax, etc.
– Reduced public utility rates
– Support for infrastructure and equipment projects
– Facilities for the purchase, rental, or lease without charge of public
property
•
Most provinces have business support infrastructure such as industrial parks and
free trade zones.
Advantages of Investing Today
Legal Framework
•
The legal framework currently in force was designed to attract foreing investment
trough the open up of its economy and the removal of barriers to foreign investor
acess to specific economic sectors.
•
The main aspects of the current legal framework with regard to FDI are based on:
– National treatment for foreign investors
– No prior approval or registration requirement for investments
– Access to all economic sectors
– Access to domestic incentive programs
– Unimpeded transfer of profits and repatriation of capital
Advantages of Investing Today
Attractive Sectors for
Investment
Advantages of Investing Today
Attractive sectors for investment
• The following include some of the most attractive sectors for investment:











Mining
Forest industry
Leather and leather products
Petrochemical industry
Agricultural machinery
Vegetable oils
Grape growing and wine
making
Cultural industries
Software
Outsourcing
Tourism
Mining
Advantages of Investing Today
Rates of return after taxes
(gold mine)
Strong increase in production
Exports tripled in the last 7 years (US$ 996
S. Africa
Chile
Argentina
Australia
millon in 2003)
USA
Strong foreign investment in the last 6 years
Peru
Bolivia
(US$ 3 billion)
Canada
Favorable legal framework
Geological potential: rich in mining resources
Mexico
China
0
(ranked sixth worldwide)
75% territory with potential still unexplored
Mining Integration Treaty with Chile
High profitability in copper and gold mines
Availability of production resources:
infrastructure, skilled labor and a growing
supply of local suppliers
5
10
15
20
Rates of return after taxes
(copper mine)
Chile
Argentina
S. Africa
USA
Australia
Peru
China
Bolivia
Mexico
Source: Colorado School of Mines
Canada
0
5
10
15
20
Advantages of Investing Today
Forest Industry
• The Forestry Law provides an attractive
legal framework for investments
• Fiscal and economic incentives for the
development of the sector
• High growth rates and lower harvesting
maturities
• Abundant supply of suitable low-cost land
PAPER INDUSTRY
• Unmet domestic demand
• Growing per capita consumption
WOOD INDUSTRY
• New project potential
• Cost of wood lower than in Nordic countries
• High expansion potential due to relatively low
consumption
and extensive tracts available
• 20 million hectares of suitable virgin land,
P ro d u ctiv ity p er w o rker in p ap er an d
p ap er p ro d u cts in d u stry
only 5% of which is currently being
cultivated
(1993= 100)
200
• High potential for industrial development
• PULP INDUSTRY
• Abundant supply of forest raw material
• Extensive use of recycled fibers with
definite growth potential
150
100
50
93
94
95
96
97
98
99
00
01
02
Source: ADI based on CEP data.
03
Leather and leather
products
Advantages of Investing Today
Production has increased notably in recent
years.
The sector produces tanned leather, semifinished and finished leather, and upholstery
The largest firms produce up to 5,000/6,000
covers with an annual turnover of US$ 1 billion.
pelts per day (in Italy average-sized
Argentina is the world’s fourth largest producer
and exporter of leather goods and claims 9%
companies produce approximately 200/300
pelts per day).
of the global leather market.
The industry is moving forward in terms of
80% of total production is exported and 50%
upholstery covers for the automotive industry
of these exports go to the USA, China, and
(US$ 200 million in exports).
upstream integration, basically by producing
Brazil.
P r o d u c ti v i ty p e r m a n h o u r
P r o d u c tiv ity p e r w o r k e r
(1993= 100)
(1993= 100)
230
180
180
130
130
80
80
30
30
93
94
95
96
97
98
99
00
01
02
03
93
94
95
96
97
98
99
00
01
02
03
Source: ADI based on CEP data.
Advantages of Investing Today
Petrochemical Industry
The petrochemical industry has been operating for more than fifty years in Argentina and
petrochemical plants process and add value to raw materials in the form of locally extracted
hydrocarbons (oil derivatives and natural gas compounds).
U r e a p r o d uc ti o n
43 plants with installed capacity on an international
scale produce primary, intermediate, and final products,
and in the five-year period 1996-2000, the
petrochemical industry invested approximately US$ 3
billion and doubled its installed capacity to 6.2 million
tons per annum.
( in t h o u s a n d s o f t o n s )
1 .4 0 0
1 .2 0 0
1 .0 0 0
800
600
400
200
0
Demanding domestic market: one of the most notable
92
93
examples is the increase in apparent consumption in the
agricultural sector.
97
98
99
00
01
02
03
02
03
(1993= 100)
platform to supply MERCOSUR markets.
250
tripled in 10 years.
96
350
300
chemical products for agricultural use has practically
95
P r o d u c ti v i ty p e r w o r k e r
The industry has the potential to become a production
Human resource productivity in the manufacture of
94
200
150
100
50
93
94
95
96
97
98
99
00
01
Advantages of Investing Today
Agricultural Machinery
This sector has been industrially active for over 100 years and has the capacity to adapt
to changes in agricultural practices (e.g. the adaptation of seeders to the direct seeding
system).
Argentine seeder production statistics
 An ever-expanding and important domestic
market: Agricultural production is displaying
marked growth, while current profitability allows
producers to procure suitable equipment.
 The industry is able to support domestic
1991
1992
1993
1994
1995
purchasers in the post-sales phase.
1996
 National equipment can be adapted perfectly
1998
to Argentine soil characteristics.
 Applied knowledge export potential.
3,278
1990
2,562
2,080
3,100
3,600
3,400
5,880
4,740
1997
1999
2000
2001
2002
2003
4,640
4,178
3,894
3,420
5,100
5,350
Vegetable Oils
Advantages of Investing Today
• SOYBEANS:
Average production unit capacity: 5,000
• Argentina’s prominence in the global market:
tons Principal global producers: USA (1,500
 12% of global soybean production
tons), Brazil (2,500 tons)
 30% of vegetable oil exports and 10% of
Crush cost US$ 4/ ton (USA –US$ 10-,
seed exports
Brazil -US$ 14-)
 22% of global sunflower production
 Leading exporter of sunflower oil
• GPV: US$ 4.2 billion.
• Low cost of arable land.
• A high incidence of leading-edge technology
in use in the industrial sector.
• Capacity to produce bio-fuels from vegetable
oils.
• High geographic concentration of primary and
S y b e a n o i l e x p o r ts
( in millio n s o f US $ )
industrial production.
2500
• Availability of futures markets for agricultural
producers.
• Growing global demand for vegetable oils and
vegetable oil by-products.
2000
1500
1000
500
0
94
95
96
97
98
99
00
01
02
03
04
Source: ADI based on INDEC data
Grape Growing and Wine
Making
Advantages of Investing Today
• High availability of raw materials: eighth
• Argentina is the world’s fifth largest
largest global producer of fresh grapes
producer of wine
• High competitiveness of Argentine wine
• High domestic consumption (world’s sixth
largest consumer of wine)
producers: excellent price/quality ratio
• Argentine wine exports have risen by more
than 400% in the last ten years
• Low cost of land in the context of a global
reduction in planted area
• High quality wines account for over 80% of
exports in this sector
• Available technology similar to that used
by the major producing countries
A r g e n tin e w in e e x p o r ts
• Capacity to export high-value wines amid
( in m illio n s o f U S $ )
240
growing foreign demand
200
• Capacity to produce organic products
160
120
• Ongoing improvement in the quality of
80
grape and wine products
40
0
94
95
96
97
98
99
00
01
02
03
04
Source: ADI based on INDEC data
Cultural Industries
Advantages of Investing Today
• The book industry was one of the first to develop in Latin America, while there is also a long
history of film production.
• Cultural industry professionals and technicians are high-quality, and human resources working
in these industries display a high degree of flexibility in adapting to work-related developments
and adverse scenarios.
• A large number of training centers are available for professionals in the various specialist fields
covered by these industries.
• Argentina boasts talented writers, musicians, actors, authors, scriptwriters, directors, and
advertisers of world renown.
• High-level equipment in graphic design, film studios, television and music production ensures
high-quality productions.
• Argentine cinema is always represented and performs well at international film festivals, and
Argentina was among the top five creative leaders worldwide in advertising in the 90s.
• Argentina has a wide variety of landscapes and locations suitable for filmmaking, and a good
tourist infrastructure and transport system makes it easy for television, cinema, and advertising
production teams to stay in and move around the country.
Advantages of Investing Today
Software
• Human Capital: highly trained,
• Low production costs: the cost structure
specialized in technology and IT solutions
for this sector is highly competitive
at competitive costs, with socioeconomic
internationally
and cultural characteristics similar to those
in the most highly developed countries

3,500 computer and IT graduates/
year

20,000 AMBA professionals
• Potentially significant domestic
markets for specific applications:

Agribusiness, industrial automation,
• Argentina: A highly competitive base for
producing and exporting software and IT
services to Latin America and the Spanishspeaking world
• Legal framework: Software Development
Bill:

Fiscal stability

Extrazone import duty exemption for
educational and entertainment software
(edutainment)
hardware imports

Income tax reduction in the amount
• Exportable software development
of a percentage to be invested in
capability
R&D

VAT credit
Outsourcing
Advantages of Investing Today
• Argentina is in a position to become one of the main beneficiaries of this growing
corporate trend. Various multinational companies (Ernst & Young, Delloite, KPMG, HP, IBM,
Teleperfomance, Siemens, SAP, Motorola, Accenture) have selected Argentina as their base
for operations ranging from basic services (such as telemarketing or call-centers) to software
development, engineering, financial analysis, design, and R&D.
• The main reasons for Argentina’s attractiveness are the level of qualification of the
population, the critical mass of professionals and university students, labor cost levels, and
telecommunications infrastructure availability.
“Proficiency
• Potential to provide the US market
with call center services. A growing
"
(% of successful candidates)
70
60
number of Argentines are training
50 global average:
and qualifying in English.
40
Qualifications obtained abroad by
30
Argentine students are among the
20
highest.
in English” examination
46%
No data
available: less
than 40
candidates
10
0
Chile
Brazil
Uruguay
Argentina
Italy
Source: University of Cambridge, EFL
Spain
Tourism
Advantages of Investing Today
• The number of foreign tourists visiting Argentina
rose by 27% in 2003 compared to a 15% increase
Hotel supply:
Number of establishments
in 2002.
• Foreign tourism displays a high degree of diversity
in terms of countries of origin and average
spending, accompanied by longer average stays.
• There has been strong investment in hotel
infrastructure in recent years, although there are
still a considerable number of locations available
7,800
7,500
7,200
6,900
6,600
6,300
1998
1999
2000
2001
for developing tourist services.
Tourist countries of origin
• Skilled labor is low-cost and tourist tariffs are
2003
attractive.
• The diversity of Argentine landscapes makes it
possible to tailor products to international demand
(ecotourism, rural tourism, cultural tourism, sport
tourism, etc.).
Others
13%
Brazil
17%
Chile
17%
Uruguay
26%
USA &
Canada
10%
Europe
17%
Source: INDEC
2002
Advantages of Investing Today
Perspectives and Challenges
Advantages of Investing Today
Market expectations consensus: improved Argentine economic
performance
Market Expectations Survey
GDP
2004
9.0%
Industrial Activity
2004
8.9%
(Interannual variation)
2005
6.5% (Interannual variation)
2005
7.5%
Nominal Exchange Rate
End 2004
2.97
($/US$)
End 2005
3.00 (Interannual variation)
Investment
Consumer Prices
Dec 04
6.9%
(Interannual variation)
Dec 05
8.3% (US$ billion)
Trade Balance
Average Salary
2004 10.5%
Current Account Balance
(Interannual variation)
2005
Unemployment Rate
2004 13.5%
(% of Workforce)
2005 11.1% (US$ billion)
10.3% (US$ billion)
International Reserves
2004 34.1%
2005 17.3%
2004
11.2
2005
10.1
2004
3.1
2005
2.1
2004
19.8
2005
22.1
Source: BCRA
This survey is conducted by the Central Bank of Argentina to obtain a systematic follow-up of the
principal short- and medium-term macroeconomic projections made by Argentine and foreign
analysts and academics on Argentine economic performance.
Advantages of Investing Today
Argentina was among the leading countries in Latin America in
2003 / 2004 in terms of growth.
A n n u a l G D P V a ria tio n (% )
8 ,8 9 ,0
2003
2004
P ro je ctio n 2 0 0 5
6 ,3
5 ,8
5 ,5
5 ,2
4 ,7
4 ,1
3 ,5
3 ,3
3 ,6
3 ,2
1 ,9
1 ,2
0 ,6
A rg e n tin a
B ra zil
C h ile
M e xico
La tin A m e rica
Source: ADI based on World Economic Outlook (IMF)and BCRA.
• Argentina recorded the highest growth in Latin America in 2003 and, exceeding all
expectations, the economy grew 9.0% last year. This trend is expected to continue in
the years to come.
Advantages of Investing Today
On the domestic front, Argentina aims to intensify the current
economic growth process
• To achieve this goal, Argentina must ensure continuity in the
processes already underway:
– Lowering unemployment
– Boosting investment flows
– Strengthening the financial system
– Fiscal consolidation
– Restructuring the social security system
– Stabilizing prices
Advantages of Investing Today
While on the international front, the main objective is to intensify
Argentina’s quantitative and qualitative international integration
by ...
• Deepening regional integration schemes and moving
forward in the foreign trade negotiations agenda (WTO,
FTAA, MERCOSUR, etc.)
• Ensuring the ordered and sustainable restructuring of
public and private debt with a view to achieving a
solution in accordance with Argentina’s payment
capacity.
Advantages of Investing Today
Secretariat of Industry, Commerce, and SMEs
Ministry of Economy and Production
Av. Julio A. Roca 651 – 5th Floor, Office 22
(C1067AAB) Buenos Aires
Republic of Argentina
Tel. (+54 11) 4349-3442 / 3313 / 3315
Fax (+54 11) 4349-3453
E-mail: [email protected]
http://www.inversiones.gov.ar
Advantages of Investing Today
ARGENTINA
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