Argentina: A Strategic Investment Destination to Meet the Demand of Global Markets

Alejandro Zothner MeyerUndersecretariat for Investment Development 

Ministry of Foreign Affairs, International Trade and Worship

September 2011

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Argentina at a glance

Surface 3.8 million km2 (2.8 million km2 continental surface)

Population 40.1 million inhabitants

GDP (2010) US$ 368,400 million

GDP per capita (PPP – 2010) US$ 15.854

Literacy rate 98%

Life expectancy 76 years

Urbanization rate 92%

Unemployment rate 7.3 % 8th largest country in terms of surface area, 2nd in Latin America. High level of Human Development (HDI – UNDP): 2nd place in Latin AmericaOne of the highest rates of literacy (98 %) and school-life expectancy (15.6 years) in Latin America.English level among the highest in the developing world. Argentina the Latin American country with the highest number of Nobel prizes in sciences (three), ranking fourth among developing countries.Density of fixed and mobile lines (152 subscriptions per 100 inhabitants): highest in Latin America.

10,4%

7,5%

5,5%5,9%

1,6%0,9%

10,7%

8,1%7,4%

3,8% 3,5%

1,8%

2,8%1,7%

10,3%

5,3%

9,2%

6,0%

4,5% 4,6%

2,8%

1,6%

9,6%

8,2%

China India Argentina Chile Brazil Mexico UnitedStates

UE

Average (2003-2009) 2010 2011 (p)

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Fastest growing economy in the regionArgentina has been among the fastest growing economies in the world in the period 2003-2010. IMF 2011 growth projections further confirm this trend.

Selected Economies: GDP growth 2003-2011 (p)

Source: SUINV based on IMF

GDP growth in GDP growth in

Argentina: Argentina:

9.9% in9.9% in

11stst quarter 2011 quarter 2011

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Sound fundamentals for sustainable growthBetween 2003-2011, Argentina has taken advantage of a favorable global environment to consolidate growth and expand its production

Primary balance and current account results 2003-2010

(as a % of GDP)

Source: SUINV based on World Bank, BCRA and INDEC

•Twin fiscal and current account surpluses

•Unprecedented accumulation of

international reserves

•Significant public debt reductions

•Exports of goods and services more than

doubled between 2003 and 2010

-15%

-10%

-5%

0%

5%

10%

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

GDP

National primarybalance - as a % of GDP

Current account - as a% of GDP

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Growth fueled by investment growthInvestment grew steadily since 2003 and reached record-high levels in 2008. Fast recovery in 2010 with FDI flows growing 58%

Source: SUINV based on INDEC

22.8

20.6

14.3

17.7

19.8

21.622.6 23.1

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008 2009 2010

GFCF/GDP constant prices

Gross Fixed Capital Formation (GFCF) as % of GDP(in current and constant prices)

1,652

4,1255,265 5,537

6,473

9,726

4,017

6,337

2003 2004 2005 2006 2007 2008 2009 2010

Foreign Direct Investment (FDI) (in million of US$)

•High-saving, high-investment model, with a positive saving-investment gap

+21%

•FDI grew at an annual average rate of 43% between 2003-2008 •In 2009 FDI contracted in line with FDI flows to the region and the rest of the world as a consequence of the global crisis. •FDI up 58% in 2010

+58%

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FDI across sectorsThe manufacturing industry is the leading sector, concentrating 37% of FDI stock in the country. Spain, the USA, The Netherlands, Brazil and Chile are the top five foreign investors.

FDI stock by activity sector (2009) FDI stock by country of origin

Other Services, 11.7%

Communications, 6.3%

Trade, 4.3%

Chemical, Rubber & Plastic Industry;

9.6%

Automotive Industry, 6.2%

Finantial Private Sector 5.0%

Oilseeds & Cereals, 3.1%

Other Natural Resources, 2.5%

Mining, 6.0%

Oil & Gas, 24.1%

Metals, 5.6%

Food, Beverage & Tabacco Industry ,

5.1%

Other Manufacturing,

7.5%

Electricity, 2.9%

Source: SUINV based on Central Bank of Argentina

N° Country Share1 Spain 28.3%2 United States 16.8%3 Netherlands 8.5%4 Brazil 5.4%5 Chile 5.3%6 Germany 3.2%7 Luxemburgo 3.2%8 Uruguay 3.1%9 Canada 3.1%10 Switzerland 2.9%11 France 2.9%12 United Kindom 2.0%13 Caiman Island 2.0%14 Mexico 1.8%15 Italy 1.7%62 New Zeland 0.01%

Other countries 9.9%Total 100.0%

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Attractive business profitabilityFirms based in Argentina reached high levels of profitability in historic terms

Source: SUINV based on Balance of Payments data and Survey of Big Companies INDEC

Net margin of the top 500 companies in Argentina(as a % of sales)

FDI return on assets(profits as a % of FDI Stock)

6.1

1.2

6.0

10.9

10.09.5 9.8 10.0

8.9

9.5

11.9 11.5

14.613.8

11.4

12.5

20032004

20052006

20072008

2009

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Nearly 2,000 multinationals Total FDI stock of US$ 86 billionRanked 15th among emerging countries in FDI stock (2009)Foreign affiliates account for:

• + than 442,000 jobs (2009)• + than US$ 123 billion in sales

(2009)• 324 of the 500 largest non-financial

companies in Argentina

An economy integrated with the region and the worldNearly 2,000 leading multinational companies operate in Argentina, most of them with a long-term vision and commitment

Examples of multinationals with presence in Argentina

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Strong regional linksThere are growing business opportunities with Brazil, Argentina's main trading partner, to complement and specialize production

•As a member of MERCOSUR, Argentina has

tariff free access to a market of more than

240 million consumers and a combined GDP

of US$ 2,8 trillion (PPP 2010)

•Great 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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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 trendsPopulation growth

Climate change

(Food & energy

demand expansion)

Manufacturing and

services outsourcing

R&D in emerging

markets

Argentina's advantages to meet global demand: key sectors

Why Argentina?

Food & Beverages

Renewable Energies

Value added manufacturing

and services outsourcing

New technologies and R&D

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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

Agro Industry

Value added and design manufacture

s

Renewable Energies

Professional services, software and IT

Creative Industries

Agricultural machinery

Pharmaceutical

Industry and

Biotechnology

Tourism

Biotechnology

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Food and BeveragesLeading producer and exporter of commodities and aggregate value food

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 concentrateSoybean oil

Safflower oilSunflower oil

Grape juicePears

Lemons and limesHoney

Soy seeds

1st

1st

3rd

2nd

2nd

2nd

2nd

1st

3rd

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

10 12 13 1519

24 21 23

2003 2004 2005 2006 2007 2008 2009 2010

Resources and leadership

Industrial and innovation capacity

Food and BeveragesDiversity of investment opportunities

Consolidated segments :

Vegetable oils (sunflower, soybean,

peanut, olive, etc.)

Cereals and milled cereal products

Meat: bovine, swine, goat and avian

Fish and shellfish

Fruits (+ berries) and vegetables

Dairy products (with aggregate

value)

Spices

Wines

High potential segments:

Gourmet foodstuffs

Health food

Organic foodstuffs

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Wine industryUnique terroir, exceptional cost-quality ratio, attractive investment opportunities

0

100

200

300

400

500

600

700

800

2002 2003 2004 2005 2006 2007 2008 2009 2010

US$

mill

ions

Wine exports (million of US$)

5th global producer

8th domestic market

9th global exporter

Source: Instituto Nacional de Vitivinicultura (INV) and International Organization of Vine and Wine (OIV)

Annual average growth 2002-2010: 24%

Argentina is one of the fastest growing exporters in the world

Wine industryDiversity of investment opportunities

Outstanding opportunities: Sophisticated varietals (high consistence and quality) Supplies for production (agricultural machinery, traceability techniques, glass bottles, corks and capsules) Grape juice concentrate Wine tourism

Source: SUINV based on Fondo Estratégico de la Vitivinicultura Argentina.

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Great ability to adapt to the demand requirements in developed countries Emergence of new markets with increasing purchasing power (China, Brazil) Increasingly sophisticated tastes of domestic demand

0

5,000

10,000

15,000

20,000

25,000

30,000

2003 2004 2005 2006 2007 2008 2009 2010

Total sales Domestic sales

Agricultural MachineryInnovative and dynamic industry

Cluster with more than 100 years of experience

720factory plants

Over 40,000 employees

Development of innovative equipment adapted to modern practices (direct sowing, precision instruments, silobag)

Going global: Growing exports Internationalization

Agricultural machinery sales (In units)

Source: SUINV based on INDEC

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Agricultural Machinery Diversity of investment opportunities

High potential segments:Tractors

Harvesters

Agricultural machinery parts (engine parts, hydraulic brakes, drive belts, tyres, forging and casting, etc.)

Consolidated segments:Seeders

Tools and equipment

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Capability to expand exports

Internationalization of Argentinean companies in Latin America and the emerging countries is promoted by the National Government

Renewable EnergiesOutstanding performance and growth opportunities

Public support

Biofuel Law (2006) and Bioethanol Law (2008)

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

The Secretary of Energy sets biofuel prices aligned with international prices

The National Promotion Act for use of renewable energy sources (Law 26,190) stipulates that 8% of electricity must be generated from diverse renewable sources by 2016 (GENREN Program)

9,920

2,405

2,178

953

886

640

258

315

European Union

Brazil

Argentina

United States

Malaysia

Australia

Canada

India

Biodiesel production 2010(In million liters)

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Source: SUINV based on OCDE-FAO Agricultural Outlook

3rd

Renewable Energy Diversity of investment opportunities

Biofuels:Biodiesel: global leadershipBioethanol: growing productionSecond generation biofuelsWind energy: Six new eolic parks under constructionHidroelectric energy: Specially in small hydroelectric developments (up to 30 MW)

Geothermal energy:There are four locations in Argentina with high potential for productionBiomass and biogas:Obtained from agriculture and forestry, including rice husks, peanut hulls and waste from the forestry, sugar and edible-oil industriesSolar 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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BiotechnologyScientific tradition and innovation in biotechnology

Regional leadership

120 firms, including leading domestic

companies and successful

multinational companies

More than 3,000 employees

Annual exports: over US$ 260

millions

3rd largest global producer of

biotechnological crops (GMOs)

Long tradition in biomedicine

The largest biotechnological Pole in

Latin America is in Rosario (Santa Fe)

Multi-species cloning

Competitive advantages already set in various segments: agricultural, food as well as human and animal health.

BiotechnologyDiversity of investment opportunities

Applications in agricultural production Micropropagation of crops, biotechnological seeds and inoculants

Applications in food production

Bioengineering (production and improvement of enzymes)

Applications to animal reproduction Transgenic and multi-species cloning

Applications in human health Pharmacogenetics (recombinant proteins, monoclonal antibodies, vaccines, medicines

and diagnostic reagents) Regenerative medicine and assisted human reproduction

Potential area for future development Biomaterials (bioplastics)

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Productive Investment Opportunities Database (BaPIP)

The BaPIP is a database designed by the Ministry of Foreign Affairs to promote

the development and growth of investment in Argentina

The Ministry of Foreign Affairs gathers investment projects throughout the

country

The BaPIP is a strategic tool to match and connect investors around the world

with the broad range of investment opportunities available in Argentina

¿Who can benefit from BaPIP?

Foreign companies

Investment Funds and Banks

Corporate Groups

Investors Representatives

International Organizations

Promoters of investment projects:

Provinces, Ministries, Local governments

Firms

Cooperatives

Institutional Intermediaries

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BaPIPAccessing the Productive Investment Opportunities Database

www.inversiones.gov.ar

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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. 21,382) 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

Avail themselves of any of the legal forms of incorporation foreseen by Argentine legislation

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

companies of domestic capital

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

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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 SUINV)

Sectorial incentives

Specific benefits and incentives for diverse

sectors: automotive and auto parts, 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

Public sector incentives

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The Undersecretariat for Investment Development is your strategic partner Providing professional assistance for your business to succeed in Argentina

✓Timely information and relevant advise on business sectors and geographical locations in Argentina

✓Identification of investment and innovation opportunities in strategic sectors

✓Facilitation of the whole investment process (generation, growth and after-care)

✓Building partnerships between foreign investors and local companies

Our group of professionals will gladly assist you with:

We are Argentina’s Undersecretariat for Investment Development within the Ministry of Foreign Affairs, International Trade and Worship.

Investment development activities are supported by a network of 130 permanent representations throughout the world.

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

www.inversiones.gov.arsuinv@mrecic.gov.ar

(5411) 4328-9510

Thank You!