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Agri-Business in Argentina: A Strategic Investment Destination

to Meet the Demand of Global Markets

Agri-Business in Argentina: A Strategic Investment Destination

to Meet the Demand of Global Markets

Argentine EmbassyInvestmentsMinistry of Foreign Affairs and International Trade

London, December 14th 2011

Abundant and diverse natural resourcesSize, abundance and variety to enjoy and develop

8th largest country in the world, 2nd in Latin 

America

9th largest agricultural area in the world

32 million Ha of forests 

4,500 km of mining resources

4,700 km along the Atlantic Coast with rich 

fisheries

3rd largest fresh water reservoir in the world, the 

Guaraní Aquifer (shared with Brazil, Paraguay and 

Uruguay)

Source: ProsperAr based on United Nations Food and Agriculture Organization (FAO), CIA World Factbook, and other sources

✓Vast oil and gas resources with exploration opportunities

✓Hydraulic energy generates 38% of the total electricity

✓Growing wind and solar energy production

✓Three nuclear power generation plants

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Modern infrastructure and quality connectivityModern infrastructure connecting Argentina within and beyond its borders

Source: ProsperAr based on CIA world fact book and Ministry of Federal Planning, Public Investment and Services

Well‐developed transport and infrastructure system: more than 38,700 kilometers of national roads; one of the longest rail road networks in the world (35,753 kilometers); 43 authorized ports; and 53 airports.

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Ranked second in the Logistics Performance Index in the region (World Bank, 2010).

Fixed‐line and mobile density among the highest in Latin America (World Bank). 

Ranked 16th worldwide in terms of internet hosts with 6 million hosts in 2010 (CIA Factbook).

Buenos Aires: WiFi capital with the highest wireless density per inhabitant in Latin America, surpassing Sao Paulo, Mexico City and Santiago (2009)

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Highly skilled, innovative and talented human resourcesA labor force with outstanding capabilities

Source: ProsperAr based on World Bank, MINCYT and other sources

Internationally renowned for the quality, creativity and versatility of its human resources.

Highest ratio of researchers to the economically active population in Latin America.

English level among the highest in the developing world.

Ranked 7th worldwide in quantity of Think Tanks.

Highest level of patents registered at the U.S. Patent Trademark Office in the region (measured as total number per million inhabitants for a 40‐year period).

Almost 95,000 graduates from higher education programs and more than 7,600 postgraduate students from 107 universities across the country enter the labor market each year.

Country 1990‐2005

United States 4,605

Spain 2,195

Argentina 720

Chile 444

Brazil 344

Mexico 268

Colombia 109

Researchers (per million inhabitants)

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Remarkable quality of lifeExcellent living standards

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Buenos Aires, together with Berlin and Montreal, was appointed as City of Design under the UNESCO Global Alliance's Creative Cities Network

The country offers world‐class health services at the most competitive costs and caters for international education with bilingual schools and universities responding to numerous cultures.

Ranked forth among developing countries in the Quality of life Index (International Living, 2010)

Argentina is ranked in the High Development category o the Human Development Report and is ranked 2nd in Latin America (UNDP 2009)

Buenos Aires was nominated as the best city to live in Latin America (The Economist 2009)

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The opportunityGlobal trends are well aligned with Argentina's comparative and competitive advantages, making the country a strategic investment location in the new global scenario

Global trends‐Population growth

‐Food & energy demand expansion

‐Climate change

‐Manufacturing and services outsourcing

‐R&D in emerging markets

Argentina's comparative & competitive advantages

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Diversified economy to meet global market needsArgentina presents profitable investment opportunities in a variety of strategic sectors for the world economy

AgroIndustry

Value added and design manufactures

Renewable Energies

Professional services, software and IT

Automotive and Auto parts

Agricultural machinery

Forest Industry Tourism

Biotechnology

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Food and BeveragesLeading producer and exporter of commodities and value added foods

Source: SUINV based on FAO and INDEC

Argentina’s share in global exports and global position (2008)

64.7%

44.9%

27.7%

24.0%

22.9%

19.4%

17.8%

17.3%14.9%

Lemon juice concentrate

Soybean oil

Safflower oil

Sunflower oil

Grape juice

Pears

Lemons and limes

Honey

Soy seeds

1st

1st

3rd

2nd

2nd

2nd

2nd

1st

3rd

Rising manufactured exports of agricultural origin (in billions of US$)

10 12 13 1519

24 21 23

2003 2004 2005 2006 2007 2008 2009 2010

Resources and leadership Industrial and innovation capacity

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Agro-Industry:Diversity of investment opportunities

Consolidated segments:

Vegetable oils (sunflower, soybean, olive, etc.)

Cereals and milled cereal products

Meat: cattle, pork, goat and poultry

Fish and shellfish

Fruits (+ berries) and vegetables

Dairy products (with added value)

Spices

Wines

High potential segments:

Gourmet Foodstuffs

Healthy Foodstuffs

Organic Foodstuffs

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Paper, Carboard, boxes33%

Charcoal6%

Others13% Cel lulose  Pulp

27%

Paper and Printing15%

Medium Dens i ty Fibreboard (MDF)

6%

Agroindustry: Forest IndustryNatural conditions and availability of genetics

Source: SUINV based on FAO and Ministry of Agriculture

Temperate climates and good water availability

1.2 million hectares of mature planted forests

Potential to increase the cultivated area and to process natural resources

2020 Industrial Plan: an annual rise of the 9% in the forest industry and a trade surplus of more than US$ 540 million is predicted by 2020

Law 25,080 (Investments in Forestry)Tax Benefits (Tax exemptions, Tax

stability for 30 years, Early refund of VAT, Accelerated depreciation in income Tax, among others)

Non-refundable contribution

Top Argentina’s forestry exportsTotal exports US$ 514 million (2009)

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Agroindustry: Forest industryA wide range of investment opportunities

Design and technology opportunities

Furniture industry: this sector generates high value added and jobs

Construction with industrialized solid wood

Increasing interest in Europe and Scandinavia for this type of building system.

Possible linkage with the machinery and the equipment industry

Investment in roundwood crushing industry

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Agroindustry: Wine IndustryUnique Terroir, exceptional cost-quality ratio and attractive investment opportunities

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005 2006 2007 2008 2009 2010

Millione

s de

 US$

Wine Exports (In millions of US$)

5th Global Producer

8th Domestic Market

9th Global Exporter

Source: National Institute of Grape Industry (INV) and International vine and wine (OIV)

Annual average growth: 24%

Argentina is one of the fastest growing exporters in the world

Mill

ions

of U

$S

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Agroindustry: Wine ProductionDiversity of investment opportunities

Potential Segments:Sophisticated varietals (with high

consistence and quality)Supplies for production (agricultural

machinery, traceability techniques, bottles, corks and capsules)

Grape juice concentrateWine tourism

Source: SUINV based on the Strategic Content of the Argentine Wine Indus

Opportunities:Great ability to adapt to the

demand requirements in developed countries

Emergence of new markets with increasing purchasing power (China, Brazil)

increasing tastes tastes of the domestic demand

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Renewable EnergyDiversity of investment opportunities

Biofuels:Biodiesel: global leaderBioethanol: growing productionSecond generation Biofuels

Wind EnergySix new wind farm are being built

Hydroelectric:Specially in small hydroelectric

developments (up to 30 MW)

Geothermal:There are four areas in Argentina with

great potential for productionBiomass y biogas:

Obtained from agriculture and forestry, animal droppings and urban solid wasteSolar Energy

High Potential for the installation of photo-voltaic panels in 11 provinces

Source: SUINV based on OCDE-FAO Agricultural Outlook

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9.920

2.405

2.178

953

886

640

258

315

European Union

Brazil

Argentina

United States 

Malaysia

Australia

Canada

India

Renewable EnergiesOutstanding performance and expansion opportunities

Public Support Biofuel Law (2006) and Biothanol

Law(2008)

Mandatory blends: E5 (5% of ethanol) and B7 (7% of biodiesel)

The Secretary of Energy establishes biofuel prices based on international prices

Under Law 26,190 renewable sources are to account for 8% of the electric energy consumed in 2016(GENREN)

Biodiesel production during 2010(In millions of liters)

Source: SUINV based on OCDE-FAO Agricultural Outlook

3rd

9,920

2,178

2,405

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BiotechnologyWorld-class scientists, diversity and specialization

Regional Leader

120 firms, including successful

multinational firms and leading local firms.

More than 3,000 jobs

Annual exports: over US$ 260 million per

year

3rd largest world producer of

biotechnological crops (GMOs)

Long tradition in biomedicine

The largest biotechnological Pole in Latin

America is located in Rosario (Santa Fe)

Multi-species cloning

Competitive advantages in various segments such as agricultural, food as well as human and animal health.

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BiotechnologyDiversity of investment opportunities

Applications in Agricultural Production

Micropropagation of crops, biotechnological seeds and inoculants

Applications in Food ProductionBioengineering (production and improvement of enzymes)

Applications to Animal ReproductionTransgenic and multi-species cloning

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Agricultural MachineryInvestment opportunities

Innovative Agricultural machinery industry

Argentina is leader in NO TILL FARMING

A growing production of high-tech precision agro- Know-how to produce innovative components equipment

Over 600 plants

Innovative cluster with a long-standing tradition Agro Machinery 40,000 employees (80% skilled labor)

US$850 million production in 2007

.

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Foundations for success:

This opportunity is supported by different factors and outstanding 

capabilities

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10.7%

8.1%

3.8%

0.9%1.6%

7.4%

3.5%

1.8% 1.8%

3.0%

10.3% 10.1%9.2%

5.2%

7.5%

5.4%

3.8%

7.8%

9.5%

1.5% 1.6%

8.0%

3.8%

6.5%

4.6%

9.0%

7.5%

4.7%

3.6% 3.6%

1.8%

1.1%

China  India Argentina Chile Brasil México Estados Unidos UE

Prom. (2003‐2009) 2010 2011 (p) 2012 (p)

Selected economies: GDP growth rates (2003-2012)

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Argentina: sustainable growthThe country has been showing a strong economic performance. The IMF projections for 2011 and 2012 and confirm this trend

Source: SUINV based on IMF

World GDP Growth

4.0% (2011P)

4.0% (2012P)

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An economy integrated with the region and the worldLeading multinational companies operate in Argentina, most of them with a long‐term vision and commitment

Examples of multinationals with a presence in Argentina

Nearly 2,000 multinationals Total FDI stock of US$ 80 billionRanked 15th among emerging

countries in FDI stock (2009)Foreign affiliates account for:

- + than 405,000 jobs (2007)- + than US$ 121 billion in sales (2007)- 330 of the 500 largest non-financial companies in Argentina

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CLISA

Examples of local multinationals

A growing global playerLeading Argentine companies operate internationally

Stock of Argentine FDI abroad: US$ 28 billion

Top 19 Argentine multinationals have: - USD 19 billion in foreign assets- 42,400 in employees abroad- U$S 21 billion in foreign sales- 315 foreign affiliates in 42 countries- Presence in a diversity of sectors

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UK companies investing in ArgentinaSeveral companies have reaffirmed there investment commitment in Argentina as reflected by some of the recent announcements in the country

Top investors by number of Greenfield projects announced

(2003-2010)

Source: FDI Markets, Financial Times

Other recent investment announcements (2007-2010)

NB Developer

International Port Holdings (IPH)

Source: ProsperAr, Investment Observatory

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Strong regional linksThere are increasing business opportunities with Brazil, Argentina's main trading partner, to complement each other and to specialize in specific manufactured goods

•As a member of MERCOSUR, Argentina has tariff free market access of more than 240 million consumers and a combined GDP of US$ 2,9 trillion (PPP 2010)

•Remarkable industrial complementarities with Brazil and further opportunities for specialization

Source: SUINV based on IMF and World Bank

MERCOSUR: Common market

Members: Argentina, Brazil, Uruguay, ParaguayAssociates: Bolivia, Chile, Colombia, Ecuador, Peru, Venezuela

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Horizontal incentives

Investment Promotion Law (No. 26,360): early VAT return and/or accelerated depreciation allowances for investment on capital goods and infrastructure.

0% tariff on imports of capital goods.

0% tariff on imports of goods which are part of a large investment project.

For every new job created, 50% reduction on employers’ contributions during the first year of employment and a 25% reduction in the second year.

Others: FONTAR, FONSOFT, SEPyME programs, incentives to foster employment and exports (for further details please see  “Investment Incentives”published by ProsperAr).

Public sector incentivesIncentives across sectors to boost investment

Sector incentives

Specific benefits and incentives for diverse sectors: automotive and autoparts, software, biofuels, biotechnology, mining, forestry, public infrastructure and hydrocarbons.

Exemptions from provincial taxes for a determined period of time.

Gross income

Stamp taxes

Property tax

Financial support for infrastructure investments and purchase of relevant equipment.

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Public sector supportive of investorsWelcoming investors: protection and equal rights for foreign investors

The Argentine Constitution guarantees equal treatment and rights for local and foreign investors.

The Foreign Investments Act (No. 21382) defines the legal framework for foreign investments.

Foreign investors may:

Remit abroad liquid profits arising as a return on their investment as well as repatriate their investment.

Make use of the legal forms of incorporation foreseen by Argentine legislation.

Access all sectors of economic activity as there are no activities reserved exclusively for local enterprises.

Make use of domestic credits and loans with the same rights and under the same conditions as domestic companies of domestic capital.

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Open to FDI According to the OECD, Argentina is the least restrictive country in the region when it comes to FDI

FDI Restrictiveness Index by country 2010

Source: ProsperAr based on OECD

Four types of measures are covered by the FDI Restrictiveness Index: (i) foreign equity restrictions (ii) screening and prior approval requirements (iii) rules for key personnel(iv) other restrictions on the operation of foreign enterprises.

The highest score for any measure is 1 (the measure fully restricts foreign investment ) and the lowest is 0 (there are no regulatory impediments to FDI).

Closed = 1 Open = 0

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To learn more about how investing in Argentina can benefit you, please contact :

Cristián H. Miguens

investments@argentine-embassy-uk.org

www.argentine-embassy-uk.org

www.prosperar.gov.ar+ 44 020 7318 1300

Thank You

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