ARGENTINA

1. ARGENTINA See: www.biasca.com ; www.vrg-ar.com

2. ARGENTINAAdvantages of Investing Today Secretariat of Industry, Commerce, and SMEs Ministry of Economy and Production

3. The Argentine Economy

4. Argentina at a Glance

5. In terms of purchasing power, Argentina boasts the highest per capita income among major Latin American economies.

6. The Argentine economy is highly diversified … GDP by Economic Sector, 2004 Services, 54% Goods, 46% Wholesale, Retail, and Repairs; 21% Manufacturing Industry; 52% Real Estate, Rental, and Other Business Activities, 21% Transport, Warehousing, and Communications; 17% Fisheries; 1% Hotels and Restaurants; 4% Electricity, Gas, and Water Supply; 4% Other Services; 7% Education, Social, and Health Services; 12% Agriculture, Fishing, Hunting, and Silviculture; 22% Construction; 9% Mining and Quarrying; 12% Financial Intermediation: 8% Public Administration, Defense, and Extraterritorial Activities; 10% Source: ADI based on National Accounts

7. with an ample supply of skilled labor … The relative high school attendance expectancy is reflected on the literacy rate and the primary, secundary and tertiary education enrollment rates. Attendance expectancy at educational establishments in Argentina is the highest in Latin America and compares with developed countries (i.e members of the Organisation for Economic Co-operation and Development).

8. … high availability of natural resources … • Argentina has just under 250,000 km²of arable land. • This wealth of fertile land and a competitive industry makes Argentina: • The world’s leading producer and exporter of sunflower oil • The world’s leading exporter and third largest producer of soybean oil • The world’s leading exporter and second largest producer of honey • The world’s leading exporter of horse meat • The world’s second largest exporter of corn • The world’s third largest producer of soybeans • The world’s third largest producer and world’s leading exporter of lemons • The world’s five largest producer of beef • The world’s sixth largest producer of wine Source: ADI based on FAO (2004)

9. … and considerable energy resource reserves. CONFIRMED RESERVES as at 12/31/2003 Confirmed Probable Basin Gas Gas 3 3 Oil (Mm ) Oil (Mm ) 3 3 (MM m ) (MM m ) North West 19,308 124,511 8,355 52,599 Cuyana 28,879 516 7,300 220 Neuquen 161,934 311,172 54,602 99,277 San Jorge Gulf 195,887 38,048 46,871 23,431 Southern 19,206 138,248 21,059 113,479 TOTAL 425,213 612,495 138,187 289,006 Source: ADI based on Energy Secretariat data.

10. Argentine industrial structure is broad and diversified. Highly competitive industrial sectors boast world class enterprises. The sectoral and regional active policies along with the general economic policy favors the development of the sector. Companies including Exxon, Ford, Coca-Cola, Fiat, Bayer, Renault, Siemens, Nestlé, Firestone, BASF, Pirelli and Abbot have been operating in Argentina for over 50 years. Annual capability of production at domestic industrial sector includes: 7 million tons of oilseed oils and more than 20 million tons of related products. 15 million hectoliters of wine. 2 million tons of sugar. 400,000 tons of tanned leather. 1.2 million tons of paper. 200,000 tons of PVC and more than 1.5 million tons of derivates like polyetyhlene and propiline. 275,000 tons of aluminium. 5 million tons of steel. 4.15 million tons of seamless and seam pipes. 550,000 automobiles. Domestic industry is modern and competitive …

11. … with a highly developed infrastructure. • A 38,744 km national road network • This extends to 500,000 kms if the provincial and municipal networks are included • A 35,753 km railway network • 38 maritime ports and 25 river ports • 52 airports, 21 of which are international • Over 25 airlines operate flights from Argentina to 40 international destinations in five continents TELECOMMUNICATIONS Latin Am. & per 1000 inhabitants Argentina Brazil Mexico the Caribbean Telephone Lines 220.2 182.1 124.7 145.9 Cellular Phones 168.8 136.6 142.4 70.5 PCs 91.1 62.9 68.7 59.3 Source: World Bank (2002) • Installed electrical energy generating capacity totals 21,300 MW.

12. Social conditions are above the average of Latin America.

13. As a MERCOSUR Member State, Argentina enjoys preferential access to a market totalling 274 million consumers. MERCOSUR GDP: US$ 722 billion Population: 223 million people • The MERCOSUR (Southern Cone Common Market) is a common market comprising Argentina, Brazil, Paraguay and Uruguay. • Bolivia, Chile and Peru are MERCOSUR Associate States, recently it was approved the incorporation of Colombia, Ecuador and Venezuela with the same status. • At the same time, Mercosur’s calendar of external negotiations includes agreements and negotiations with different blocs and countries like Mexico, India and EU. MERCOSUR + ASSOCIATES GDP: US$ 975 billion Population: 355 million people Source: ADI based on IMF data (2005)

14. Since the creation of MERCOSUR, there has been strong growth in trade between Argentina and the other Member States ... • Argentine exports to the bloc increased by 236% between 1991 and 2004 (34% more than sales to the rest of the world). Imports from MERCOSUR practically quintupled over the same period. In 2004, 4,800 companies registered exports to the value of US$ 6,650 million to MERCOSUR.

15. … resulting in a higher value added export profile. • 37% of total industrial manufacture exports go to MERCOSUR. • The export value per-ton to MERCOSUR is 35% higher than to other markets. US$/ ton (2004) MERCOSUR 477 Other Markets 354 PP:Primary Products AM:Agricultural Manufactures IM:Industrial Manufactures F&E:Fuel and Energy Source: ADI based on INDEC

16. Argentina ranks as an integrated economy... • Since the late 80s and as a result of a significant reduction in tariff and non-tariff barriers, foreign trade has been particularly dynamic, a phenomenon that does not exclude trade with the region.

17. … and with its doors open to the world. FOREIGN DIRECT INVESTMENT FLOWS (FDI) • Diferent factors influenced in order to make Argentina attractive to numerous foreign direct investment projects in various sectors of the economy. • The good performance of last year allows to glimpse the beginning of a new growing cycle, in which Argentina will be among the major FDI host countries. Foreign Direct Investment By Economic Sector (1992-2002) Oil Manufacturing 20% Industry 34% Electricity, Gas, and Water Mining 14% 1% Banks Trade 10% 4% Transport and Others Communications 8% 9% Source: ADI based on Ministry of Economy data

18. Argentina in thenew economic context

19. The economy staged a gradual recovery following the crisis that began in mid-1998 and ended with the abandonment of the Convertibility Regime in January 2002.

20. The manufacturing industry led the recovery, reaching the 1998 level in March 2004, only 1.2% below the historical record (June 1998).

21. There was renewed growth in the construction industry, surpassing 2000 and 2001 levels. Source: ADI based on Ministry of Economy data

22. There has been a gradual recovery in investment as from 4Q 2002. Renewed growth in investment represented a significant contribution to GDP.

23. Following devaluation, consistent monetary and fiscal policy led to price stability. • 2002 inflation marked a break with the price stability of the previous decade and was the result of abandoning the Convertibility Regime, introduced in April 1991, establishing exchange rate parity at $ 1= US$ 1. • Nevertheless, following the adjustment involving a minimal pass-through of devaluation to prices, a single-digit inflation rate was once again achieved in 2003. Source: ADI based on Ministry of Economy data

24. The recovery in economic activity led to a significant increase in jobs. 1. Employment Rate: Employed/ Total Population 2. Unemployment Rate: Unemployed/ Economically Active Population • Almost 2 million new jobs were created between 2Q 2002 and 3Q 2004 in the private sector. • The albeit still high unemployment levels began to drop following the recovery in economic activity, it is falling as the economy recovers, and a further decline can be expected.

25. Export performance is highly favourable and the upward trend is expected to continue. There has been a gradual expansion in exports as from 2003. Last year reached a new historical record. Imports have recovered strongly following the drop in 2002. Since then has registered an increase of 163%. A robust trade surplus was maintained in 2004 despite the recovery of economic activity and a slight appreciation of the peso in real terms. Source: ADI based on Ministry of Economy data.

26. The Current Account Balance has turned positive following ten years of deficits. • The 2004 balance is slightly down on 2003 due to a 60% rise in imports and the net expenditure of earnings and dividends following the economic recovery.

27. The trade surplus and the reduction in the financial account deficit have significantly boosted Central Bank reserves.

28. Fiscal accounts have improved substantially since May 2002, as a result of stabilized public spending and higher tax revenues. Source: ADI based on Ministry of Economy data

29. A favorable monetary trend was established throughout the last years. • The expansion of the broad monetary base and the issue of Central Bank Bills (LEBACs) exemplified the continuity of a prudent and flexible monetary policy that accompanied economic growth at no cost in terms of inflation. Source: ADI based on Ministry of Economy data

30. The drain on deposits was halted as from 2Q 2002 , with a positive trend from that point onwards, together with banks recovering liquidity. Source: ADI based on Ministry of Economy data

31. Why invest in Argentina?

32. Why invest in Argentina? • Highly qualified population • Availability of natural resources • Modern diversified industry • Competitive costs and services • Developed infrastructure • Investment incentives • A legal framework that does not discriminate against foreign investments

33. A country with a highly skilled workforce A comparison of the main education indicators reveals Argentina’s high ranking at both regional and international level. Attendance expectancy at educational establishments is the highest in Latin America and similar to the one observed for developed countries such as Spain, Italy, and the United States. Illiteracy in the City of Buenos Aires, with a population similar to Uruguay, is 0.5% and 1.3% in the metropolitan region, with a population similar to that of Chile. Source: ADI based on UNESCO data, 2004.

34. Education is compulsory and free for the 5-14 year age group, thus ensuring high school enrolment rates, not only at primary but also at secundary and tertiary education level. Net education enrollment rate: Number of students enrolled in the correct age group level as a percentage of the total population eligible for this age group level. Gross education enrollment rate: Total number of students enrolled in the level as a percentage of the total population eligible for this age group level. Source: ADI based on UNESCO data, 2004.

35. The Argentine education system is also well developed at the higher education level. University Students (per 100,000 inhabitants) • Argentina boasts a broad network of public and private universities attended by over one million students. • The university student/ total population ratio is the highest in Latin America and compares with the ratio for several developed countries. 3,582 Spain Argentina 3,123 Italy 3,022 Uruguay 2,400 Chile 2,100 Colombia 1,540 1,490 Mexico 1,068 Brazil Source: ADI based on UNESCO data

36. The strength of the education system is exemplified by the number of scientists and engineers working in research and development. Scientists and Engineers working in R&D (per 1,000,000 inhabitants) 1,921 1,128 713 533 370 323 225 219 101 Spain Italy Costa Rica Chile Brazil Mexico Uruguay Colombia Argentina Source: ADI based on UNESCO data

37. Availability of Natural Resources • Argentina is characterized by the abundance and quality of its natural resources that provide competitive advantages in developing activities linked to these resources. • Argentina is the eighth largest country in the world in terms of surface area and its relevance is even greater if factors relating to the potential its surface area offers are considered (i.e. the proportion of surface area suitable for agriculture, mining resources, etc.).

38. Agriculture: Argentina has some of the most suitable agricultural land worldwide The relevance of Argentina’s agricultural surface area is not only due to its size but also to the excellent agroecological conditions, resulting in high yields. Source: ADI based on FAO data • Land under temporary crops, temporary meadows for mowing or pasture, land under market and kitchen gardens and land • cultivated with permanent crops (fruit trees, nut trees, vines, etc.).

39. In Latin America, only Brazil has a greater surface area suitable for agricultural use. However, if domestic market pressure on production is considered, Argentina has a higher availability in relative terms. Brazil and Argentina represents 9% of the world´s agricultural surface area. Furthermore, Latin America has about 23% of the world's potential arable land. * Land under temporary and permanent crops, temporary meadows for mowing or pasture, gardens and land used permanently for herbaceous forage crops, either cultivated or growing wild.

40. In comparison with the major grain-producing countries, Argentine yields are highly competitive at international level. • Similar conclusions are obtained when comparing yields for other crops such as apples, pears, lemons, beans, and garlic in which Argentina also has a considerable global market share. Soybean Productivity (Argentina =100) Argentina Brazil USA Australia China Russia India 0 50 100 Wheat Productivity Corn Productivity (Argentina =100) (Argentina =100) China USA. USA Argentina India Australia Argentina China Brazil Brazil Australia Russia Russia India 0 50 100 150 200 0 30 60 90 120 150 Source: ADI based on FAO data

41. Agricultural production increased 103% in the period 1990-2004. Principal crops include soybean, wheat, sunflower, and corn. Cultivated surface area increased approximately 40% over the same period, representing significant progress in terms of yields. Source: ADI based on SAGPyA data.

42. Silviculture: The availability of extensive areas promotes the development of other activities including silviculture. • The main factors determining competitive advantages in this activity (soil types, climate, costs, human resources, etc.) are present in vast regions of Argentina. • Of the 20 million hectares suitable for forestry, only 5% are currently used for this purpose. Land suitable for forestry does not compete with other agricultural activities. • The diversity of climates and soil types makes it possible to cultivate a wide variety of species. • In addition to tree growth rates, the relatively low land value compared to countries such as Brazil and Chile yields high rates of return and exceptional payback periods. • High growth rates: 41 m3 / hectare/ year (Chile 35 m3) for eucalyptus and up to 32 m3 / hectare / year for pine (three times the growth rate in Canada and twice that of the United States).

43. High growth rates for conifers and eucalyptus Conifers Eucalyptus Source:Simpson Timber Co., Aracruz Cellulose, Jaako Powry Investments. CIEF.

44. Fishery Resources: The length of its Atlantic coastline (4,725 km) and the variety of species found in the fishing zone make Argentina one of the best fishing areas worldwide. Maritime fishing have recovered strongly in the last years. There are also considerable captures of molluscs and crustaceans like prawns and squids, besides fish. Source: ADI based on SAGPyA data

45. Mining in Argentina • The estimated surface area with mining potential totals approximately 750,000 km2, 75% of which has still to be exploited. Consequently, the Mining Journal Survey has ranked our country sixh in mining resources potential. • Argentina has considerable gold, copper, lead, zinc, natural borate, bentonite, clay, and ornamental stone deposits. Most mineral deposits lie along the Andes range, wich extends over 4,500 km, bordering with Chile and Bolivia. • The regulatory framework and current mining incentive regime play a key role in attracting investment to this sector. • The positive impact of the new legal framework on the sector can be observed in recent investments and exports that rose from practically zero to over US$ 1 billion per year.

46. The Mining Investment Law provides the following incentives: • According to the Law, companies may file for a 30 year long fiscal stability period. • Double deduction of prospecting, exploration, and technical/ economic feasibility study expenses, for income tax purposes. • Financing and reimbursement regime for VAT on capital goods and investments in physical infrastructure projects. • Accelerated depreciation of capital investments. • Exemption from import duties on capital goods and equipment, spare parts, and accessories. • Exemption from assets tax. • Provincial royalties are limited to 3% of the pit-head value of mineral extracted. • An income tax deduction of up to 5% of extraction operating costs and a tax deduction for environmental conservation allowances.

47. Notable growth in mineral exports The transformation and integration of the Argentine mining industry into international markets is reflected in the tripling of exports over the last seven years. The upward trend is expected to continue due to Argentina’s geological potential, the availavility of potential areas that remains unexplored and high rates of return. Source: ADI based on INDEC data

48. Investment growth in the sector • The positive impact of the new legal framework on the sector can be observed in recent investments that rose from practically zero to over US$ 1 billion in 2002. • Investment has remained robust despite the economic crisis. • Leading global mining companies including Barrick - Homestake, BHP - Billiton, FMC Lithium, Anglogold, Weathon River Minerals, Xstrata, Rio Tinto and Minera Aguilar have already decided to invest in Argentina. Source: ADI based on CEP data

49. The principal mining areas currently in production include Bajo La Alumbrera, El Salar del Hombre Muerto, Farallón Negro, Mina Aguilar and Cerro Vanguardia and important projects involving significant metalliferous mineral reserves in various stages of exploration are underway at locations including Pirquitas, Agua Rica, Pascua Lama and Pachón. 1.China 2. Peru 3. Philippines 4. Brazil 5. Chile 6. Argentina 7. Mexico 8. Bolivia 9. Venezuela 10. Burma Argentina ranks high internationally in terms of available mining resources. Source: ADI based on Mining Journal

50. Increased oil and gas production • Argentina has a very gas-intensive economy, natural gas accounted for half of total primary energy supply. Gas production has increased constantly since the early 90s, doubling early 90s levels in 2004. Argentina is the second largest producer in the Region. • Although oil production has fallen in recent years, levels are still 50% above the levels recorded 13 years ago. At the same time, should be pointed out that Argentina is still one of the major producers in the region. Source: ADI based on Energy Secretariat data