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R. Biasca & Associates December , 2002

Chamber of the Americas Denver, Co. USA. A R G E N T I N A ECONOMIC OUTLOOK BUSINESS OPPORTUNITIES AND FOREIGN INVESTMENT. R. Biasca & Associates December , 2002. ANALYSIS. One Framework: Biasca´s Model. PROPOSALS. CHANGE. Current Situation in Argentina.

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R. Biasca & Associates December , 2002

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  1. Chamber of the Americas Denver, Co. USA ARGENTINA ECONOMIC OUTLOOK BUSINESS OPPORTUNITIES AND FOREIGN INVESTMENT R. Biasca & Associates December, 2002

  2. ANALYSIS One Framework: Biasca´s Model PROPOSALS CHANGE Current Situation in Argentina Argentina: Forecast Business Opportunities Information Sources

  3. ANALYSIS PROPOSALS CHANGE ONE FRAMEWORK: Biasca´s Model Chamber of the Americas R. Biasca & Associates Inc.

  4. Business Transformation Analogy MEDICINE ORGANIZATION DIAGNOSIS ANALYSIS IDEAS PRESCRIPTION THERAPY ACTION • CONTRIBUTIONS: • INTERDISCIPLINARY APPROACH • HOLISTIC, PRACTICAL INTEGRATION OF • CONCEPTS AND FADS

  5. Current Situation in Argentina How much change is needed?

  6. Current Situation in Argentina SITUATION IN ARGENTINA • MAIN EVENTS ( December, 2001 – March, 2002) • Five Presidents in One Month • Default • Devaluation US$ 1 = $ 1 to US$ 1 = $ 3.7 • Deposits confiscation • Legal uncertainty • Social Unrest Chamber of the Americas R. Biasca & Associates Inc.

  7. Current Situation in Argentina • CURRENT SITUATION • GNP decrease After the largest recession in history (1998 – 2001) a brutal GNP decrease in 2002 (13%) Consequences: • Decrease in real income per capita: 23% • Decrease in investment per capita: 61% • Investment destruction 1991-98: 18% GNP 2002: 10% • Capital Outflow 16% GNP is migrating • Debt: 170% GNP. No agreement with IMF. • Inflation • 2001: -1% • 2002: 70% ? • High unemployment (official figure: 22%). • 53% of population under “poverty line” (25% under “survival line”). Chamber of the Americas R. Biasca & Associates Inc.

  8. Current Situation in Argentina • Violence and crime at unprecedent levels. • Legal mess. • Corruption. • Weak government. • Assets (in US$) at lowest levels. • Increased migration to other countries. SUMMARY Competitive Deterioration: 10/10 Inmediate Action Requiered R. Biasca & Associates Inc. Chamber of the Americas

  9. Competitiveness IMD World Competitiveness Scoreboard Source: www.imd.ch Another source. World Economic Forum R. Biasca & Associates Inc. Chamber of the Americas

  10. ARGENTINA FORECAST Which are the proposals? Are the ideas easy to implement? Chamber of the Americas R. Biasca & Associates Inc.

  11. The Formula NO YES ? ? “REMEDY” (Proposals) Chamber of the Americas R. Biasca & Associates Inc.

  12. Argentina: Forecast 2003 OUTLOOK • POLITICAL OUTLOOK • Political Turmoil There is the risk of political violence and increased tensions during the primaries and the election campaign itself. • Uncertain Elections Surveys indicate that, today no candidate would have more than 20% of votes. Elections will take place before May, 2003. • A Weak New Government The heavy agenda of reform needed to raise political effectiveness and promote a sustainable recovery will be extremely difficult for the incoming government. Chamber of the Americas R. Biasca & Associates Inc.

  13. Argentina: Forecast • ECONOMIC POLICY OUTLOOK • Risk of default in official loans An IMF agreement has remained elusive as a result of lack of progress towards resolving the deposit freeze and other issues. Unless the government secures an IMF agreement, there will be a risk of default on official loans. • Quasi - Currencies Continued issuance of quasi – currencies, means inflation in the future. • External and Internal Debt Argentina needs umprecedent growth rates and extraordinary Budget Balanced surplus to pay some of the external debts. R. Biasca & Associates Inc. Chamber of the Americas

  14. Argentina Forecast • ECONOMIC FORECAST • Exports Exports will be lifted by the devaluation and decreased consumption. • Growth Little prospect exists of a significant recovery before the second half of 2003. Downward revisions to the forecast for global growth provide a less promising backdrop to Argentina’s economy in the medium term. • Retrenchment Strategies Companies will continue to limit their investment and marketing efforts and increase cost reduction measures. R. Biasca & Associates Inc. Chamber of the Americas

  15. Business Opportunities R. Biasca & Associates Inc. Chamber of the Americas

  16. Business Opportunities OPPORTUNITIES for • Exporters • Tourism industry • Companies that manufacture previously imported goods • Investors that want to buy cheap (at hight risk) KEY ECONOMIC SECTORS • Agriculture • Oil, energy and mining • Food manufacturing • Tourism R. Biasca & Associates Inc. Chamber of the Americas

  17. SYNTHESIS Chamber of the Americas R. Biasca & Associates Inc.

  18. MORE INFORMATION Visit our Website! http://www.biasca.com

  19. Information Sources SOURCES OF INFORMATION Chamber of the Americas R. Biasca & Associates Inc.

  20. INFORMATION SOURCES Chamber of the Americas R. Biasca & Associates Inc.

  21. Appendix APPENDIX • ARGENTINA. Factsheet. • ARTICLE. “Anxious in Argentina” • COMPETITIVENESS World Competitiveness Scoreboards (IMD and WEF), • www.biasca.com • Website home page. • R. BIASCA & ASSOCIATES INC. • Short description • R. BIASCA • Brief Resume Chamber of the Americas R. Biasca & Associates Inc.

  22. Appendix. Argentina. Factsheet A R G E N T I N A Factsheet Background Protectionist and populist economic policies in the post-war era led to economic stagnation and hyperinflation in the 1980s. Carlos Menem of the Partido Justicialista (PJ, known as the Peronist Party), who was elected president in 1989, abandoned the party’s statist ideology in favour of market economics and liberalisation, resulting in a period of rapid growth. Mr. Menem´s failure to deepen fiscal and structural reforms in his second term (1995-99) left the economy vulnerable to a series of external shocks in 1997-99. Fernando de la Rua’s centre-left government, which was unable to halt the economic decline, collapsed after two years in office in December 2001 amid violent protests. A Peronist, Eduardo Duhalde, was elected president by Congress at the start of 2002. Chamber of the Americas R. Biasca & Associates Inc.

  23. Appendix. Argentina. Factsheet A R G E N T I N A Factsheet Political structure A strong presidential system is checked by a bicameral Congress comprissing a 257-member Chamber of Deputies, representatives which are elected for four-year terms, and a 72-member directly elected Senate. The President serves a four-year terms. Mr. Duhalde is due to serve out the remainder of Mr. de la Rua’s term until December 2003. He has promised to call for elections in April and not to run for re-election. The Peronists control the Senate and have a majority in the Chamber of Deputies. In addition, the PJ controls 14 of the 24 provinces, including the most important ones. Mr. Duhalde lacks authority owing to the deep divisions within the PJ. The loss of credibility of mainstream political parties threatens governability beyond the next elections. The central government’s lack of control over the provinces has brought the issue of fiscal federalism to the fore. Chamber of the Americas R. Biasca & Associates Inc.

  24. Appendix. Argentina. Factsheet Policy issues A new policy framework needs to be formulated following the abandonment of the Convertibility Plan, the currency board introduced in 1991, at end-2001 and the shift to a floating exchange rate in February 2002. A disciplined fiscal stance will be important if the authorities are to stabilise the economy and to secure the support of the IMF, so paving the way for a formal restructuring of defaulted debt and a recovery of confidence. A collapse in tax revenue will complicate fiscal policy, leading the government to rely on heterodox measures such as taxes on exports. The currency board having been abandoned, the Banco Central de la Republica Argentina (BCRA, the Central Bank) has reassumed responsibility for monetary policy, including the functions of lender of last resort. Concerns exists that because it lacks independence the Central Bank will print money to finance the fiscal deficit. The heavy issuance of quasi-currencies by provinces to meet salary payments is also causing concern. Chamber of the Americas R. Biasca & Associates Inc.

  25. Appendix. Argentina. Factsheet Economic data Sep. 20th 2002 From the Economist Intelligence Unit Source: Country Data Chamber of the Americas R. Biasca & Associates Inc.

  26. Foreign trade The trade surplus widened and the current-account deficit narrowed in 2001 in response to depressed domestic demand and the lack of financing. Taxation The value-added tax (VAT) rate is 21%. Exports are exempted from VAT. The corporate and individual income-tax rates are both –35%. A tax on financial transactions instituted in April 2001 as an emergency fiscal measure will remain in force at least until late 2002. An additional tax on exports was introduced in March 2002. Chamber of the Americas R. Biasca & Associates Inc.

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