Argentina: A Strategic Investment Destination to

Meet the Demand of Global Markets

Argentina: A Strategic Investment Destination to

Meet the Demand of Global Markets

Cecilia NahónUndersecretariat of Investment Development Ministry of Foreign Affairs, International Trade and WorshipMay 2011

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•Annual GDP growth of 7.4% over the seven year period of 2002-2009

•2010 GDP growth 9.2%

•Twin fiscal and current account surpluses (1.7% and 1.0% of GDP, respectively in 2010) provide strong foundations for continued economic growth

•Unprecedented accumulation of international reserves (US$ 52 billion in May 2011)

•Significant public debt reductions

•Earnings as a percent of FDI stock averaged 10.0% in 2006-2010

Sound fundamentals for sustainable growthThe Argentine economy has grown steadily since 2003. Argentina is among the fastest growing economies in the region.

GDP 2002-2010(billion AR$, constant prices)

Source: SUINV based on World Bank, BCRA and INDEC

-50

50

150

250

350

450

2002 2003 2004 2005 2006 2007 2008 2009 2010

+ 7.4%:

+ 9.2%:

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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 54%.

Source: SUINV en based on INDEC

15,1

19,2

21,5

23,4 24,2 23,322,0

20,9

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 current prices 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

6.193

2003 2004 2005 2006 2007 2008 2009 2010

Foreign Direct Investment (FDI) (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 were up 54% in 2010.

+ 54%

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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 worldLeading multinational companies operate in Argentina, most of them with a long-term vision and commitment.

Examples of multinationals with a presence in Argentina

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Italy is a prolific investor worldwideItaly is the 11th foreign direct investor in the world

•Italy is the 11th foreign direct investor

in the world with a total FDI stock of

US$ 578 billion and outflows of US$ 44

billion in 2009

•Italian FDI abroad grew in recent

decades

•Italian FDI in the world is concentrated

in the European Union (79% of total FDI

stock in 2007), while looking for new

emerging markets destinations

Evolution of Italian FDI abroad (In millions of US$)

Source: SUINV based on UNCTAD

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Italy is a significant investor in ArgentinaItalian FDI stock in Argentina grew at an annual average rate of 4.2% between 2004 and 2009

Evolution of Italian FDI stock in Argentina (In millions of US$)

Source: SUINV based on BCRA

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Italian FDI stock in Argentina is diversified Argentina captures 22% of Italian investments in the region

Italian FDI Stock by sectors(In %)

Source: SUINV based on BCRA

8

Leading Italian companies operate in Argentina

Examples of Italian companies with projects or presence in ArgentinaExamples of Italian companies with projects or presence in Argentina

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Most encouraging country in the region to FDIAccording to the OECD, Argentina is the least restrictive country in the region when it comes to FDI.

• FDI Restrictiveness Index by country 2010

Source: SUINV 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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Attractive business profitabilityFirms 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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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

Food & energy

demand expansion

Climate change

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

IT and Software Creative

Industries

Professional Services

Pharmaceutical

Industry and

Biotechnology

Tourism

Automotive and Auto

parts

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Sound fundamentals for sustainable growth

Attractive business profitability

Globally and regionally integrated economy Diversified economy to meet global market needs

Highly skilled, innovative and talented human resources

Abundant and diverse natural resources

Modern infrastructure and quality connectivity

Vibrant culture

Remarkable quality of life

Public sector supportive of investment

Foundations for successArgentina offers investors:

A winning formula to succeed in your business

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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)

Sector 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 incentivesIncentives across sectors to boost investment

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The Undersecretariat of 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 of 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!