argentina: a strategic investment destination in the new global …invest+in... · 2011-10-12 ·...

Argentina's Investment Development Agency 11

Argentina: A Strategic Investment

Destination in the New Global Scenario

Argentina: A Strategic Investment

Destination in the New Global Scenario

March 2010


I

A strategic investment destination to meet global

market needs


The path towards recovery

The global economy is recovering and bouncing back faster than anticipated, led by growth

in emerging countries. However, important challenges still remain.

2010p

World 3.9

Developed economies 2.1

United States 2.7

Euro Area 1.0

Emerging economies 6.0

Asia 8.4

China 10.0

India 7.7

South America + Mexico 3.7

Middle East 4.5

GDP growth projections 2010

(Annual % change)

Source: ProsperAr en based on IMF, Weo, January 2010

Remaining risks and vulnerabilities

� The impact of fiscal stimulus packages is

weakening. Risks of a disorderly or

anticipated exit.

� Financial system has not yet fully

recovered.

� High unemployment rates in the main

economies.

� Widening budget deficits in several

countries with consequences on the cost of

consumer and business credit.

�Persisting global imbalances

Trade growth: estimated increase in trade volumes of 5,8% in 2010


Growing participation of emerging marketsEmerging markets are leading the global recovery

Source: World Bank, Global Economic Prospects, 2007

Share in the global economy

PB

I, 20

01, t

rillo

nes

$

110% growth

0

10

20

30

40

50

60

70

80

2005 2010 2020 2030

High income countries

Low/ middle income countries

�China is leading the new growth cycle,

followed by other emerging economies

(India, Brazil)

�Increase in commodity prices

�Stock market recovery and narrowing of

spreads

� Stabilization of main currencies and

recovering of international reserves in

emerging markets

� Rising institutional importance of G-20

countries in global macroeconomic

coordination


A new global opportunityThe global economic recovery and the new international scenario provide Argentina with a new opportunity for sustainable development

Four long term global trends of particular relevance for Argentina:

Trends Opportunities

1.

Growth in Asian economies (change in

consumption patterns)Opportunity for sustained growth in food industry given

structural increase in global demand + new business

opportunities for value added food production Trend in developed economies: growing

demand for gourmet, ecological and

organic food

2.Environmental sustainability as a top

priority in the global agenda

New profitable investment opportunities in clean and

renewable energies (biofuels, eolic energy)

3.

Trend for growing outsourcing of higher

value added activities (production &

services) due to competition

Opportunity for emerging markets like Argentina to

integrate into more sophisticated segments of global

value chains

4. Trend for increasing localization of R&D

activities in emerging markets

Important opportunities in R&D given Argentina's

outstanding scientific and technological capabilities


A regional opportunityGrowing opportunities with Brazil to further complement and specialize production

•Brazil is likely to become one of the most

important economies in the world. Growth is

supported by:

�Huge oil reserves (Pre-Sal oilfield)

�Infrastructure works and income from the

Football World Cup (2014) and the Olympic

Games (2016)

�Downward trend of interest rates and real

estate development

�Increasing FDI inflows

• In this context, Brazil’s currency is expected to

appreciate, favoring the relative competiveness of

various segments of Argentine industries and

opening opportunities for greater

complementarities and production specialization

Source: ProsperAr en based on IMF

MERCOSUR: Common market

GDP: US$ 1.9 trillion

Population: 241 million

people

Members: Argentina, Brazil,

Uruguay, Paraguay

Associates: Bolivia, Chile, Colombia,

Ecuador, Peru, Venezuela


IIArgentina's investment

profile


� Annual GDP growth of 8.5% over the

six year period of 2003-2008

� Six years of twin fiscal and current

account surpluses

�Accumulation of reserves and

sustained increase in foreign reserves

�Reduction of public debt to GDP and

exports

� Exports of goods and services doubled

over a six year period to hit a historical

high of US$82.1 billion in 2008

�Steady rise in savings (26.7% in 2008)

Argentina: vigorous expansion 2003 - 2008

Between 2003-2008, Argentina has taken advantage of a favorable global environment to

consolidate growth and expand its production, export capacity and employment based on

solid macroeconomic fundamentals

Selected Economies: GDP growth 2003-2008

4.2

5.7

4.0

13.0

9.3

5.75.1

7.7

3.2

8.9

5.3

8.9

10.7

8.7

5.8

4.0

1.8

6.8

4.5

7.3

9.0

China India Argentina Brazil Chile Colombia Mexico

Average 2003-2006 2007 2008

Source: ProsperAr based on IMF and INDEC


Rapid investment growth

Investment has grown significantly reaching record-high levels in 2008 (23,1%). “Reproductive”

investment was the fastest growing component with an annual increase of 23,5% for the 2002-

2008 period.

Source: ProsperAr en based on INDEC and own estimations

1993-

1998

2002-

2008

GFCF 6.2% 22.2%

Reproductive investment 6.5% 23.5%

Residential investment 5.5% 20.0%

Investment in construction

(not residential)

4.9% 15.9%

GFCF and Productive Investment

(average annual growth)

15.1

19.2

21.523.4 24.2 23.3

14.3

17.719.8

21.622.6 23.1

0

5

10

15

20

25

2003 2004 2005 2006 2007 2008

GFCF/GDP current prices GFCF/GDP constant prices

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


Foreign Direct Investment (FDI

(million of US$)

* The extraordinary amount of FDI received in 1999 (USD 24 billion) is due to Repsol’s purchase of oil and gas company YPF, the largest company in the country. This unique operation accou nted for more than 60% of FDI flows that year and in cluded the purchase of outstanding shares still held by the public sector and the associated purchase of YPF’s publicly traded shares dispersed among minority shareholders.** Figure corresponding to average annual inflows n et of privatizations and net of 1999 Repsol’s associ ated purchase of YPF publicly traded shares. Source: ProsperAr based on INDEC

1,8583,499

6,369 6,957

2,149 1,652

4,1255,265 5,537

9,726

8,899

10,388

2,087368

2,141

6,4738,268

4,496

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

FDI net of priv and Total FDI23,988*

4,4312,7933,635

5,609

6,949

9,160

7,291

10,418

2,166 1,652

4,125

5,265

6,473

9,726

2,149

5,537

828

US$ 4.870**

Rapid increase in foreign direct investmentFDI recorded great dynamism since 2004 growing at an annual average rate of 42.6%. In 2008, for the fourth consecutive year, FDI flows surpassed their 1990s average (net of privatizations)


FDI destination

In 2008, Argentina was the 3rd Latin American investment destination for FDI greenfield

projects. The UK Ministry of Trade and Investment identified the country as one of tomorrow’s

key “high-growth markets”.

FDI: MAIN DESTINATION COUNTRIES, GREENFIELD PROYECTS, 2008

FDI: MAIN DESTINATION CITIES, GREENFIELD PROJECTS AND JOBS, 2008

Source: FDI Magazine, Special Report, FDI Intelligence

*The global report is based on the opinions and views of more than 560 high level business executives, more than 200 of whom are headquartered in emerging markets. Source: Tomorrow’s Markets , UK Trade and Investment Minister 2008.

Ranking Country1 Vietnam2 Mexico3 United Arab Emirates4 Ukraine5 Indonesia6 Singapore7 Poland8 South Africa9 Argentina

10 Saudi Arabia

Emerging economies identified by the UK Ministry of Trade and

Investment as high growth and high investment potential markets*

C o u n t ry # o f p ro je ct sM e x ic o 3 4 6B ra zi l 2 4 5A r g e n t i n a 1 1 5C olom bia 73C hi le 64O t he rs 2 6 3

City # of projects # of jobsSao Paulo 52 12,164Buenos Aires 43 9,585México City 38 7,590Monterrey 25 7,933Bogotá 28 n.a.


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

vision and commitment

Multinationals with a presence in Argentina

Nearly 2,000 multinationals (half of

the Fortune 100).


CLISA

Top 50 Local Multinationals

Going globalLeading Argentine companies operating internationally


Global crisis, global impact

The financial and economic crisis severely impacted the global economy through two main

channels: commercial and financial.

Assessing the impact of the global crisis

• Considered the worst economic crisis since the Great Depression

• 2.2% fall in world GDP in 2009 (WB, 2010)

• 14% contraction in global FDI flows in 2008 and estimated fall of 39% in 2009

(UNCTAD, 2010)

• Estimated fall of 66% in M&A operations on a global scale in 2009 (UNCTAD,

2010)

• 14.4% contraction in world trade volumes in 2009 (WB, 2010)

• Sharp drops in commodity prices in 2009: - 36% in oil prices and -22% in non-

energy commodity price index (IMF, 2010)

Impact on the Argentine Economy

• While Argentina registered a slowdown in economic growth, the country did not

face an economic crisis. In 2009 GDP grew 0,9%.

• Unemployment levels increased but remained below the two digits

• Continuity of macroeconomic regime

Source: ProsperAr based on UNCTAD, IMF and WB 2010.


Impact of the global crisis on domestic investmentInvestment in Argentina contracted for the first time in the IVQ 2008, and again in 2009 in

line with developments in the rest of the world. In 2009 investment contracted 10.2%

Gross Fixed Capital Formation(% Change, IIQ 2009)

35.9%

4.2%

-15.0%

-15.2%

-16.0%

-16.6%

-18.8%

-19.8%

-20.8%

-2.8%

-8.4%

-10.7%

-0.3 -0.2 -0.1 0 0.1 0.2 0.3 0.4

China

India

Korea

Germany

Argentina

Japan

Mexico

Brazil

USA

Russia

Chile

Peru

Source: ProsperAr based on INDEC, OECD, Instituto Nacional de Estadísticas Chino, The

Central Bank of Russia, Banco Central de Chile, IBGE de Brasil, Banco Central del Perú and

the Ministry of Statistics of India.

• In Q4 2008, GFCF declined for the first time since Q1 2003.

• The crisis impacted investment negatively in Argentina and the world.

GFCF: annual % change

In Argentina:

Period % Change

Q1 08 20.3

Q2 08 13.8

Q3 08 8.5

Q4 08 -2.6

Q1 09 -14.2

Q2 09 -10.7

Q3 09 -12.7

Q4 09 -3.4

2009 -10.2


Impact of the Global Crisis on Foreign Direct Investment FDI in Argentina contracted for the first time in the IVT 2008 and again in 2009 In line with

the rest of the world. In 2009 FDI to Argentina contracted 49.7%. UNCTAD estimates an

annual fall of 39% at the global level.

Source: ProsperAr based on INDEC, and UNCTAD Trends Monitor

• FDI inflows to Argentina reached US$ 4895 millionin 2009, 50% contraction relative to 2008

In Argentina:

FDI inflows to Argentina 2008-2009

per quarter (USD millions)

Foreign Direct Investment(Annual % change, 2009)

-18.6

-19

-23

-35.5

-36

-39

-40.8

-41.1

-49.5

-49.7

-53.4

-57

-60.6

-92.7

-2.6 China

Colombia

India

Chile

France

Indonesia

World

Mexico

Russia

Brazil

Argentina

Japan

USA

Spain

UK

3483

2265 2353

1625 1700

313

1624

1258

Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09


Selected M&As and greenfield announcements (2009)

New investments In spite of the global crisis, several companies have reaffirmed their investment

commitments in the country, motivated by attractive and profitable business opportunities


Balance

2010 outlook and challenges

Argentina’s economy has been relatively resilient to the global economic crisis, due to

strong macroeconomic fundamentals, although it has not remained immune.

Investment in Argentina has contracted in line with the decline observed worldwide.

Investment is expected to recover and grow in 2010 as economic activity expands and

investment projects that were postponed because of the global crisis are resumed. New

investment projects are expected as businesses take advantage of the good match

between Argentina's competitive and comparative advantages and structural demand

trends in the world.

The completion of Argentina's debt normalization process in 2010, which begun in 2005,

will strengthen the growth perspectives for GDP and investment.


IIIPublic support for your

investments


Welcoming InvestorsProtection and equal rights for foreign investors

Equal treatment and rights extended to foreigners, guaranteed by the Argentine

Constitution

✓Equal treatment for local and foreign investors

✓Bilateral Reciprocal Investment Promotion and Protection Agreement with UK: Law 24,184

✓Agreement to avoid double taxation withUK: Law 24,727

✓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


✓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)

Horizontal IncentivesFor all economic sectors or activities


✓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

Regional IncentivesSector incentives, local stimulus programs and support for infrastructure investments


What can ProsperAr do for you?Provide professional assistance for your business to succeed in Argentina

✓Timely and relevant information on business

sectors and geographical locations in Argentina

✓Identification of investment and innovation

opportunities in strategic sectors

✓Troubleshooting red tape and obstacles;

facilitation of the whole investment process

✓Building partnerships between foreign investors

and local companies

Our group of professionals will gladly assist you with:

To learn more about how investing

in Argentina can benefit you,

please contact us:

www.prosperar.gov.ar

[email protected]

+ 5411-4328-9510

argentina: a strategic investment destination in the new global …invest+in... · 2011-10-12 ·...

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