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

Argentina: A Strategic Investment Destination to Meet the Demand of Global Markets. Alejandro Zothner Meyer Undersecretariat for Investment Development  Ministry of Foreign Affairs, International Trade and Worship September 2011. Argentina at a glance.

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

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  1. Argentina: A Strategic Investment Destination to Meet the Demand of Global Markets Alejandro Zothner Meyer Undersecretariat for Investment Development  Ministry of Foreign Affairs, International Trade and Worship September 2011

  2. Argentina at a glance • 8th largest country in terms of surface area, 2nd in Latin America. • High level of Human Development (HDI – UNDP): 2ndplace in Latin America • One 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. 2

  3. Fastest growing economy in the region Argentina 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) GDP growth in Argentina: 9.9% in 1st quarter 2011 Source: SUINV based on IMF

  4. Sound fundamentals for sustainable growth Between 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) • 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 Source: SUINV based on World Bank, BCRA and INDEC

  5. Growth fueled by investment growth Investment grew steadily since 2003 and reached record-high levels in 2008. Fast recovery in 2010 with FDI flows growing 58% Gross Fixed Capital Formation (GFCF) as % of GDP(in current and constant prices) Foreign Direct Investment (FDI) (in million of US$) +21% +58% • 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 • High-saving, high-investment model, with a positive saving-investment gap Source: SUINV based on INDEC

  6. FDI across sectors The 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 country of origin FDI stock by activity sector (2009) Source: SUINV based on Central Bank of Argentina

  7. Attractive business profitabilityFirms based in Argentina reached high levels of profitability in historic terms Net margin of the top 500 companies in Argentina(as a % of sales) FDI return on assets (profits as a % of FDI Stock) Source: SUINV based on Balance of Payments data and Survey of Big Companies INDEC

  8. 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 • Nearly 2,000 multinationals • Total FDI stock of US$ 86 billion • Ranked 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 8

  9. Strong regional links There are growing business opportunities with Brazil, Argentina's main trading partner, to complement and specialize production MERCOSUR: Common market • 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 Members: Argentina, Brazil, Uruguay, Paraguay Associates: Bolivia, Chile, Colombia, Ecuador, Peru, Venezuela Source: SUINV based on IMF and World Bank 9

  10. The opportunity Global trends are well aligned with Argentina's comparative and competitive advantages, making the country a strategic investment location in the new global scenario Argentina's advantages to meet global demand: key sectors Global trends • Population growth • Climate change • (Food & energy demand expansion) • Manufacturing and services outsourcing • R&D in emerging markets • Food & Beverages • Renewable Energies • Value added manufacturing and services outsourcing • New technologies and R&D Why Argentina? 10

  11. Diversified economy to meet global market needsArgentina presents profitable investment opportunities in a variety of strategic sectors for the world economy Pharmaceutical Industry and Biotechnology Agro Industry Renewable Energies Agricultural machinery Biotechnology Value added and design manufactures Professional services, software and IT Tourism Creative Industries 11

  12. Food and Beverages Leading producer and exporter of commodities and aggregate value food Resources and leadership Industrial and innovation capacity Argentina’s share in global exports and global position (2008) Rising manufactured exports of agricultural origin (in billion of US$) 1st 1st 3rd 2nd 2nd 2nd 2nd 1st 3rd Source: SUINV based on FAO and INDEC 12

  13. Food and BeveragesDiversity of investment opportunities • High potential segments: • Gourmet foodstuffs • Health food • Organic foodstuffs • 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 13

  14. Wine industryUnique terroir, exceptional cost-quality ratio, attractive investment opportunities • Argentina is one of the fastest growing exporters in the world 5th global producer Wine exports (million of US$) Annual average growth 2002-2010: 24% 8th domestic market 9th global exporter Source: Instituto Nacional de Vitivinicultura (INV) and International Organization of Vine and Wine (OIV) 14

  15. 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 • 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 Source: SUINV based on Fondo Estratégico de la Vitivinicultura Argentina. 15

  16. 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 16

  17. 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 • Capability to expand exports • Internationalization of Argentinean companies in Latin America and the emerging countries is promoted by the National Government 17

  18. Renewable Energies Outstanding 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) Biodiesel production 2010 (In million liters) 3rd Source: SUINV based on OCDE-FAO Agricultural Outlook 18

  19. Renewable EnergyDiversity of investment opportunities Geothermal energy: • There are four locations in Argentina with high potential for production Biomass and biogas: • Obtained from agriculture and forestry, including rice husks, peanut hulls and waste from the forestry, sugar and edible-oil industries Solar energy: • High potential for the installation of photo-voltaic panels in 11 provinces Biofuels: • Biodiesel: global leadership • Bioethanol: growing production • Second generation biofuels Wind energy: • Six new eolic parks under construction Hidroelectric energy: • Specially in small hydroelectric developments (up to 30 MW) Source: SUINV based on OCDE-FAO Agricultural Outlook 19

  20. BiotechnologyScientifictradition 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.

  21. 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)

  22. 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 22

  23. BaPIPAccessing the Productive Investment Opportunities Database www.inversiones.gov.ar 23

  24. 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

  25. 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) Public sector incentives • 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

  26. The Undersecretariat for Investment Development is your strategic partner Providing professional assistance for your business to succeed in Argentina 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. Our group of professionals will gladly assist you with: • 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

  27. Thank You! To learn more about how investing in Argentina can benefit you, please contact us: www.inversiones.gov.ar suinv@mrecic.gov.ar (5411) 4328-9510

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