CONFIDENTIAL
FOR INTERNAL USE WITHIN
CLIENT COMPANY ONLY
CAPTURE THE
OPPORTUNITY IN
ARGENTINA
BUSINESS SWEDEN
August 2015
Santiago
BUSINESS SWEDEN
10 FEBRUARY, 2016
ARGENTINA – CAN BE CHALLENGING BUT REMAINS A
RICH MARKET WITH MANY OPPORTUNITIES
EXECUTIVE SUMMARY
 Argentina is one of the most developed economies in
Latin America, with a business culture similar to Europe.
 The Argentine economy has been one of the more
volatile in the region the past 10 years, with a strong
presence of Authorities. The growth has always
remained with positive however.
 Argentina’s economy has picked up speed during 2015,
mainly due to an increase in governmental spending,
ahead of the Presidential elections in October 2015.
Industrial production has also shown signs to rebound,
particularly in the automobile industry. The opportunities
for exploration in the shale oil & gas rich area of Vaca
Muerta, will certainly bring with it more growth.
 Argentina is a relatively stable export market for
Sweden, in 2014 the total value of goods exported to
Argentina was 1.6 billion SEK, equivalent of 7% of the
total export value to Latin America.
 Around 20 companies have local establishments and 50
Swedish companies have Argentine distributors or
agents.
BUSINESS SWEDEN
BUSINESS SWEDEN IN ARGENTINA
Business Sweden had an office in Buenos Aires, 20062014. Since then, the Argentine market is covered by the
Business Sweden team of senior advisors located in
Santiago, Chile.
The detailed market knowledge of Argentina is
nevertheless up to date, as the team has, over the past
years, supported business entries and carried out several
consultancy projects in the Argentine market, covering
various sectors, i.e. Mining, Healthcare, Transport, Energy
and ICT.
The Argentine economy is expected to continue its positive
growth path and remains an attractive market to Swedish
products with around 42 million inhabitants.
Bienvenidos a Argentina!
Tomas Korseman
Trade Commissioner
Argentina
10 FEBRUARY, 2016
2
ARGENTINA IS THE THIRD LARGEST ECONOMY IN
LATIN AMERICA
POPULATION
Million
GDP
USD Billion
Brazil
120
Colombia
48
Argentina
42
GDP GROWTH
%
2 353
203
Mexico
GDP PER CAPITA
USD
11 604
1 283
10 715
385
31
203
6 458
Venezuela
30
206
6 757
Ecuador
16
101
Bolivia
11
34
Paraguay
7
30
Uruguay
3
55
4,6%
12 873
Peru
18
2,1%
8 076
540
Chile
0,1%
258
0,5%
2,4%
-4,0%
14 477
6 286
1,8%
3,6%
3 061
5,4%
4 305
4,4%
16 199
3,3%
ARGENTINA REMAINS AS A PROMISING FUTURE MARKET WITH A HIGH MARKET POTENTIAL
SOURCE: IMF WEO, FOR YEAR 2014
BUSINESS SWEDEN
NOTE: DUE TO ITS HIGH INFLATION, ARGENTINA POSSIBLY SHOWS SOME ELEVATED GPD FIGURES
10 FEBRUARY, 2016
3
COMPARING SWEDEN WITH ARGENTINA
MACRO ECONOMIC INDICATORS (2014)
Sweden
Argentina
571
42
540
48,646
2.7%
14,477
9.8
-0.3%
Population (million)
GDP (BUSD)
GDP/capita (USD)
4x
1x
3x
Est Growth 2015
SOURCE: IMF, EUROMONITOR INTERNATIONAL; US DOLLARS IN CURRENT PRICES - FIXED 2014
EXCHANGE RATES
BUSINESS SWEDEN
10 FEBRUARY, 2016
4
POLITICAL AND ECONOMICAL EVENTS
 Economic and
 New economic
political crisis
 Military

The
peso
is
program, resulted
 Raúl Alfonsin
 Default on
coup,

substituted
with
in
hyper
inflation
elected
international
power is
new currency
President,
obligations
taken

1984
loan
end of military
 Limited access  Five presidents
from
agreement
was
dictatorship
during the
to international
Peronist
reached with IMF
course of one
capital markets
President
week
1976
1982 1983
1984
1991 1994 2008
 Stagnation of economy, previous decades
 Argentina
of growth and development lost
occupy
 Real per capita income fell by more than
Falkland
20%
Islands, brief  Decline of manufacturing industry
armed conflict  Dependence on state support of many
with United
protected industries
Kingdom
 Inflation accelarates, reach an average of
more than 300% per year during the
1975–1991 period
BUSINESS SWEDEN
2001
2002
 Economy opened up
 Slight economic
recovery
 High dependence on
state funding for
weaker industries
 High interest rate
 Deflation
President
Duhalde
 Presidential
stabilize prices elections in
and exchange
October 2015
rate
2003
2015
 Peronist Kirchner is elected
President
 Export focus on agriculture
 2005 repayment of IMF loan with
aid of Venezuela
 Interference with inflation
estimates
 Recession and debt restructuring
 Nationalizations, capital controls
and import restrictions
10 FEBRUARY, 2016
5
ARGENTINA IS RENOWNED FOR ITS CYCLIC ECONOMY
AND HISTORICAL FLUCTUATIONS
% GDP GROWTH ARGENTINA AND LATIN AMERICA, 1999-2020
 The Argentine economy
recuperated relatively fast after
the crisis 2001-2002 and
experienced growth rates
similar to China past decade
10%
5%
-5%
-10%
-15%
Argentina
Latin America
2020e
2019e
2018e
2017e
2016e
2015e
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0%
 The 2008-2009 crisis was
different from 2014 as the high
inflation rate decreased with the
lower growth rates, in recent
years inflation remains high
 Argentina’s growth is projected
to be slightly negative in 2015,
followed by moderate growth,
due to stronger public spending
and higher private consumption
partly offsetting falling
investment and exports, albeit
the high inflation rate shows no
sign to decrease
ARGENTINA HAS EXPERIENCED POSITIVE GROWTH FOR MORE THAN 10 CONSECUTIVE YEARS
SOURCE: CIA, WORLD BANK, INDEC, MECON, IMF
BUSINESS SWEDEN
NOTE: FIGURES FOR ARGENTINA LIKELY TO BE LOWER IN REALITY
10 FEBRUARY, 2016
6
ARGENTINA’S FOREIGN RESERVES ARE SHRINKING DUE
TO ENERGY IMPORTS & UNSATISFIED NEED OF CREDIT
FOREIGN RESERVES AND EXCHANGE RATE
Million US dollar
ARS/USD exchange rate
60 000
14
50 000
12
10
40 000
8
30 000
6
20 000
4
10 000
2
0
0
US DOLLAR, A KEY INFLUENCER OF THE ECONOMY
 The Argentine middle class is the main reason for USD
reserves leaving the country as it prefers to save money
abroad to avoid inflation
 For example, in 2011, 21.5 billion USD was remitted
abroad, equivalent to one third of the reserves at the
time
 Inflation was estimated to around 40% 2014, although
official numbers claimed it to be around 15%
 The tax agency (AFIP) has implemented restrictions for
purchasing foreign currency, resulting in import
restrictions and a flourishing informal currency trade (“the
blue dollar”). At times 40% to 70% higher than the official
ARS/USD exchange rate
 Argentina remains with one of the lowest debt as a
percentage of GDP, 32%
Foreign Reserves
Exchange Rate
USD Blue
 Argentina has traditionally honoured payment obligations
DUE TO DECREASING EXPORTS, CONTINUED MEASURES TO MAINTAIN RESERVES ARE EXPECTED
SOURCE: CENTRAL BANK ARGENTINA, INDEC, INTERVIEWS, NEWS ARTICLES, FOCUS ECONOMICS
BUSINESS SWEDEN
10 FEBRUARY, 2016
7
ARGENTINA IS WELCOMING FURTHER FOREIGN
INVESTMENTS
CAREFULLY EVALUATED BY INVESTORS
 In 2013 Argentina received 12 242 million USD net,
representing 2% of the country’s GDP
 In 2013, USA was the leading country to invest in
Argentina, responsbile for 21% of total FDI
 Oil & gas sector received the highest share of FDI in
2013, 2 755 million USD mainly due to the US owned oil
companies investing in the exploration in Vaca Muerta
NET FOREIGN DIRECT INVESTMENT IN ARGENTINA
Million USD
14 000
12 000
10 000
8 000
6 000
 Potential to diversify much more, however significant
investments, know-how, and restructuring are needed to
develop different sectors
 Mining, oil and shale gas have high development
potential and is expected to attract large
investments
 Infrastructure sector in urgent need of investments
to improve availability and capacity
4 000
2 000
0
Total FDI
2010
10400
2011
10655
2012
12784
2013
12242
Argentina is since 2014, approaching the BRIC countries
for investments in energy and infrastructure
MAJOR DEVELOPMENT POTENTIAL ACROSS ARGENTINA'S ECONOMIC SECTORS
SOURCE: INDEC, CEI
BUSINESS SWEDEN
NOTE: NO PUBLIC OFFICIAL STATISTICS SINCE 2013
10 FEBRUARY 2016
8
PLENTY OF NATURAL WEALTH IN THE VAST TERRITORY
North Region
ARGENTINE ECONOMY IN NEED OF INVESTMENTS
 Regional differences in economic resources which is
noted in investment levels across the regions
 Wine
 Meat
Cordoba
 Agriculture
 Mining
 Forestry
 Manufacturing
Rosario
Buenos Aires
Central Region
 Agriculture
 Wine
 Meat
Andes and South
Region
 Mining
 Oil & Gas
 Tourism
 Hydraulic Energy
 Wool
 Fruits
 Fishing
SOURCE:CITY OF BUENOS AIRES, INDEC,
BUSINESS SWEDEN
 Finance
 Telecom
 Construction
 Manufacturing
 Many opportunities in oil, gas and mining, due to
bountiful findings, however, need for foreign capital to
enable exploration
 Buenos Aries is responsible for around 25% of
Argentina’s GDP
5% 4% Business,
Finance,
6%
Services,
6%
Real Estate
18%
Health,
8%
Education
17%
Retail,
8%
Hotel, Manufacturi
Restaurant ng 15%
13%
Agriculture, Fishing
Transport, Communications
Mining
Public Administration
Construction
Electricity, Gas, Water
10 FEBRUARY 2016
9
7% OF SWEDISH GOODS EXPORTS TO LATIN AMERICA
GOES TO ARGENTINA – 1.6 BILLION SEK
SWEDISH GOODS EXPORT TO LATIN AMERICA
100% = 24.3 billion SEK
SWEDISH GOODS EXPORT TO ARGENTINA
Million SEK
2 000
1 800
1 600
Other 21%
1 400
Brazil 38%
Peru 6%
1 200
1 000
Argentina
7%
800
600
Chile 11%
400
Mexico
19%
200
0
2008 2009 2010 2011 2012 2013 2014
RECENT YEARS’ IMPORT RESTRICTIONS ARE REFLECTED IN DECREASING SWEDISH EXPORTS TO ARGENTINA
SOURCE: STATISTISKA CENTRALBYRÅN, 2014
BUSINESS SWEDEN
10 FEBRUARY 2016
10
SWEDISH EXPORT TO ARGENTINA IS HEAVILY
DOMINATED BY MACHINERY & TRANSPORT EQUIPMENT
Rest of Swedish exports
2014
2013
2012
2011
2010
2009
2008
2007
7 773
2006
Other
16 453
2005
Beverages and tobacco
74 667
SWEDISH EXPORTS OF GOODS TO ARGENTINA
Billion SEK
2,5
2,0
1,5
1,0
0,5
0,0
2004
Miscellaneous
manufactured articles
176 670
2003
Manufactured goods
classif. by material
241 296
 Most volatile product group of Swedish exports to
Argentina, from 73% of total exports in the year 2000
to 36% in the crisis year of 2002
2002
Chemicals and related
products
1 034 905
 Reflected in the large number of Swedish companies
in Argentina within this group
2001
Machinery and
transport equipment
 Two thirds of Swedish exports are related to machinery
or transport equipment
2000
SWEDISH EXPORTS OF GOODS TO ARGENTINA 2014
100% = 1.6 billion SEK
Machinery and transport equipment
SOURCE: STATISTICS SWEDEN, 2014
BUSINESS SWEDEN
10 FEBRUARY, 2016
11
POSSIBLY THE MOST EQUAL COUNTRY IN SOUTH AM.
HOWEVER, PURCHASING POWER IS DECREASING FOR THE MIDDLE CLASS
ANNUAL INCOME SPREAD IN ARGENTINA
Number of people in thousands
6 000
5 000
4 000
3 000
2 000
1 000
0
2009
 Argentina has the most equal salary distribution in Latin
America according to ECLAC
 8% of population lives in poverty, mainly concentrated to
the Northern regions and outskirts of Buenos Aires
2013
2017
 Minimum gross salary is 4 716 pesos (510 USD)
 Argentina has experienced an increase in the formalization
of employment in 2014 33% of employments were informal
ONLY 6% OF CHILE'S POPULATION EARN MORE THAN 1 MILLION PESOS PER MONTH (1 460 USD)
SOURCE: EUROMONITOR, ECLAC,, ILO, MINISTRY OF LABOUR
BUSINESS SWEDEN
10 FEBRUARY, 2016
12
ARGENTINA’S LEVEL OF INDUSTRIALIZATION IS
PROVIDING MANY OPPORTUNITIES FOR COMPANIES
31 million hectares of
Telecommunications
network needs
modernization. Software
for agribusinesses,
healthcare, security
programs, and valueadded services.
Vast mineral reserves
having a large part of the
Andes. Gold, silver and
cooper are among the
most important minerals.
Large potential within the
mining sector.
Need for a further
development within
railway and transportation
of goods, now all transit
goes via Buenos Aires.
ICT
Mining
Transport
Forestry
Pulp & paper
Oil & Gas
Healthcare
Agriculture
Energy
In 2015, the government
has announced a new
investments in the public
healthcare sector. Private
sector is modern and up
to date with European
standards.
Argentina is part of top 5
of the world’s biggest
agricultural nations. 35
mn ha:s cultivated with
grains, oilseeds, industrial
crops, vegetables and
fruit. #1 world exporter of
soy oil, pears and
lemons.
Currently Argentina is
dependent on energy
imports, contrary to 2001
when it exported 46% of
its energy generated.
Infrastructure and energy
facilities need to be
improved to meet
demand.
The region around Vaca
Muerta, towards the
Chilean boarder, has
many unexplored
possibilities related to oil
and gas.
native forests and great
growth potential due to
available lands. Capacity
of 850 000 tonnes of
cellulose and 1.3 million
tonnes of paper and
cardboard annually.
SOURCE. BUSINESS SWEDEN
BUSINESS SWEDEN
10 FEBRUARY, 2016
13
ARGENTINE BUSINESS CULTURE IS DISTINGUISHED TO
BE QUITE EUROPEAN
Business
atmospher
e is more
formal
compared
to Sweden
Take time to
get to know
the industry,
not only
customers
…having
the right
connections
is key
Appearance
is important
and dress
code formal
Physical
presence is
beneficial as
Argentineans
often only do
business after
having met in
person
Spanish is
the
language
of
business
Be active and
flexible in
negotiations,
and respect a
give-and-take
mentality
Agreements
should
always be
confirmed in
writing
Make sure
to protect
your
intellectual
property
European
products are
considered
high-end.
Sweden has a
positive
image
MAKE SURE TO COUNT WITH LONG TIME MARGINS FOR CONTACTS WITH AUTHORITIES AND IMPORTS
BUSINESS SWEDEN
10 FEBRUARY, 2016
14
TAKE-AWAYS FOR SWEDISH COMPANIES REGARDING
THE ARGENTINE MARKET…
 A complex market that should be approached with plenty of information, make sure to have plenty of knowledge and
understanding of the market
 Always consider Argentina and its statistics with a long term perspective
 An economy that seems to work in cycles, offering plenty of opportunities if you take advantage of the prosperous
periods
 Argentina is a protagonist country with decreasing imports levels over the past few years due to stricter regulations
 Key to have local presence, it is more advantageous if you have local production in contacts with Authorities
 Long distances within the country and long distance to Sweden
 Business might take longer than expected, can be a quite slow and extended process
 Relatively low level of English speakers in business relations, beneficial if company representative speaks Spanish
Argentina’s main challenge
Prove that the economy is stable enough to be
trusted with foreign investment to be able to boost
development in infrastructure and energy
SOURCE: BUSINESS SWEDEN
BUSINESS SWEDEN
10 FEBRUARY 2016
15
“A COMMON MISTAKE IS TO
 COMPARE ARGENTINA TO REGIONAL
NEIGHBORS SUCH AS VENEZUELA
… BUT DESPITE ITS ECONOMIC
FLUCTUATIONS, ARGENTINA IS AN
IMPORTANT AND LUCRATIVE
MARKET TO BE PRESENT IN”
BUSINESS SWEDEN
10 FEBRUARY, 2016
16
CONTACT US
Business Sweden – The Swedish Trade & Invest Council
Rosario Norte 615, Las Condes, Santiago
+56 2 2925 1900
[email protected]
www.business-sweden.se/chile