Argentina
Argentina Economic Review
Written by: Mariano Dujovne – Trade Officer, Embassy of Israel, Buenos Aires, Argentina Updated: March 2009 Commercial Department - Embassy of Israel in Argentina [email protected] Tel: +54 11 4338 2519/20 Fax:+54 11 4338 2620
Part I: General 1)
General Information
Official Name: Argentine Republic Capital: Ciudad Autonoma de Buenos Aires Major Cities: Ciudad Autonoma de Buenos Aires, Cordoba, Mendoza and Rosario. Language: Spanish Currency: Peso ($) Population: 40,5 (estimated) Main Regions: Argentina is grouped into six geographical regions: Northwest, the fertile valleys concentrate most of the population of the area, and the economic activities. Of these, the cultivation of sugarcane, tobacco, and citrus are the most important, together with cattle and goat rising. Gran Chaco, the Chaco offers soil fertility and topography that are favorable for agricultural development, but in combination with aspects that are challenging for farming : A semi-arid climate with a 6-7 month dry season and the absence of sweet ground water in large parts. Mesopotamia, maté and tobacco is the most important product for the north of the region, although farmers have increasingly cultivated tea, tung trees (from which tung oil is derived), and citrus crops. Farther south, the truck-farming area supporting Buenos Aires, oranges, grapefruit, mandarins, and numerous vegetables are grown. Cuyo, viticulture is one of the main activities of the area. The wine production of the region represents almost 80% of national production, and the wines are highly considered in the world. Olives, potatoes, tomatoes and some fruits are also cultivated, and there is production of sweets and preserved foodstuffs. Quarrying and oil exploitation are other important industries. Pampas, is located in Central Argentina, a successful agricultural region with crops grown on the Pampas south and west of the Buenos Aires. In particular, the harvested area of soybeans is on pace to set a record, according to the Food and Agricultural Service. Much of the area is also used for grazing cattle and more recently to grow vineyards in the Buenos Aires wine region. These farming regions are particularly susceptible to flooding during heavy rainfall. Patagonia, principal economic activities have been mining, whaling, livestock (notably sheep throughout) agriculture (wheat and fruit production near the Andes towards the north), and oil. Energy production is also a crucial part of the local economy. Railways were planned to cover continental Argentine Patagonia to serve the oil, mining, agricultural and energy industries 2)
Geographic Information
Location: is located in the South and West Hemisphere. Its relative position in South America gives the country a diversity of land and culture Limits: To the North it is bounded by the Republics of Bolivia and Paraguay, to the south by the Republic of Chile and the Atlantic Ocean, to the east by the Federative Republic of Brazil, the Oriental Republic of Uruguay and the Atlantic Ocean and, to the West by the Republic of Chile. General Characteristics: The vast Argentine territory has a diversity of landscapes, where ice fields contrast with arid zones; mountains with valleys or plateaus; fluvial streams and lakes with large oceans, broad grassy plains with woods and forests.
Area: 3.761.274 sq km of which 2,791,810 sq km correspond to the American Continent and 969,464 sq km to the Antarctic Continent Climate: The main types of climate in Argentina are four: warm, moderate, arid and cold. The extension of the territory and the features of its relief determine the existence of varieties in each of the mentioned types. Average annual temperatures range from 24°C (75°F) to 11°C (51°F) in Buenos Aires (sea level) and Córdoba (420m/1270ft), and 24°C (75°F) to 8°C (46°F) in Mendoza (820 m/2484ft). 3)
Demographic Information
Argentines are a fusion of diverse national and ethnic groups, with descendants of Italian and Spanish immigrants predominant. Waves of immigrants from many European countries arrived in the late 19th and early 20th centuries. Syrian, Lebanese, and other Middle Eastern immigrants number about 500,000 to 600,000, mainly in urban areas. Argentina's population is overwhelmingly Catholic, but it also has the largest Jewish population in Latin America, estimated at between 280,000 and 300,000. In recent years, there has been a substantial influx of immigrants from neighboring countries, particularly Paraguay, Bolivia, and Peru. The indigenous population, estimated at 700,000, is concentrated in the provinces of the north, northwest, and south. The Argentine population has one of Latin America's lowest growth rates. Eighty percent of the population resides in cities or towns of more than 2,000, and over one-third lives in the greater Buenos Aires area. Population Distribution
Indicators Population Midyear (in thousands) Growth rate (%) Fertility Total rate (births per woman) Crude birth rate (per 1,000 population) Births (in thousands) Mortality Life expectancy at birth (years) Infant mortality rate (per 1,000 births) Under 5 mortality rate (per 1,000 births) Crude death rate (per 1,000 population) Deaths (in thousands) Migration Net migration rate (per 1,000 population) Net number of migrants (in thousands)
2008
2005
2015
2025
40,482 1.1
39,181 1.1
43,432 0.9
47,165 0.7
2.4 18 733
2.4 19 728
2.2 17 723
2.1 15 690
76 12 14 7 301
76 13 15 7 293
78 10 11 7 318
79 8 9 7 349
-
-3
-
-
- Represents or round to zero
Source: U.S.Census Bureau, International Data Base.
4)
Political Information
a. The Argentinean Government Argentina is composed of 23 provinces and one federal district (Ciudad Autonoma de Buenos Aires). It is governed by the 1853 constitution as revised in 1898 and 1994, and has a federal system of government. The President of Argentina is both head of state and head of government. Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of parliament. The Judiciary is independent of the executive and the legislature. The president and vice president are elected by popular vote for four-year terms and can be reelected once. The popularly elected bicameral national congress is composed of 72 senators (three from each province and the federal district), who serve six-year terms, and 257 deputies (based on proportional representation), who serve four-year terms. There is a nine-member supreme court. Each province has its own elected governor and legislature and its own judicial system. Authorities President: Ms. Cristina Fernandez Vice-President: Mr. Julio Cleto Cobos Chief of the Cabinet: Mr. Sergio Massa Minister of Foreign Affairs: Mr. Jorge Taiana Minister of the Interior: Mr. Florencio Randazo Minister of Defense: Ms. Nilda Garre Minister of the Economy: Mr. Carlos Fernadez Minister of Justice and Human Rights: Mr. Aníbal Fernández Minister of Labor, Employment and Social Security: Mr. Carlos Tomada Minister of Education: Mr. Juan Carlos Tedesco Minister of Science, Technology and Innovative Production: Mr. Lino Barañao Minister of Health: Ms. Graciela Ocaña Minister of Social Development: Ms. Alicia Kirchner Minister of Federal Planning and Public Utilities: Mr. Julio de Vido Minister of Production: Ms. Débora Giorgi b. The Economic Authorities
Ministry of Economy and Public Finances: Minister Carlos Fernandez Secretary of Economic Policies: Sec. Mr. Martin Pablo Abeles Sub-Secretary of Economic Coordination: Sub-Sec. Mr. Jorge Raul Robbio Sub-Secretary of Economic Programmer: Sub. Sec. Ms. Maria Fernanda Martijena
Secretary of Domestic Trade: Sec. Mr. Mario Guillermo Moreno Sub-Secretary of Defense for Consumer: Sub-Sec. Ms. Maria Lucila Colombo
Secretary of Finance: Sec. Mr. Hernan Gaspar Lorenzino Sub-Secretary of Financial Services: Sub-Sec. Mr. Juan Manuel Prada Sub-Secretary of Financing: Sub-Sec. Mr. Adrian Cosentino
Secretary of Treasury: Sec. Mr. Juan Carlos Pezoa Sub-Secretary of Budget: Sub-Sec. Mr. Raul Enrique Rigo Sub-Secretary of Provinces Relations: Sub-Sec. Ms. Nora Maria Fraccaroli Sub-Secretary of Public Incomes: Sub-Sec. Mr. Cristiana riel Modolo
Secretary of Legal and Administration: Sec. Ms. Ofelia Mabel Cedola
Part II: The Argentinean Economy 1)
General Data
GDP (%) GDP –in billions US dollars – (nominal) GDP –in billions US dollars – (PPP) GDP per capita - US dollars - (nominal) GDP per capita – US dollars - (PPP) Inflation (%) Unemployment (%) Imports (in millions US dollars) Exports (in millions US dollars) Trade Balance Currency Rates (per US dollars) External Debt (in millions US dollars) Foreign Direct Investments (in millions US dollars) Foreign Current Reserves (in millions US dollars)
2007
2008
8.7 260 524 6606 13307 8.5 9.4 44,707 55,780 11,073 3.17 123,000 6,400 44,325
7 324 571 8146 14376 7.5 7.8 57,413 70,589 13,176 3.47 128,000 7,300 47,056
2009 (estimated) 4 364 608 9067 15147 8 n/d 55,300 62,500 7,200 3.8 n/d n/d n/d
Source: INDEC – National Institute of Statistic and Census-
2)
Short overview of the current situation in the Argentinean Economy
Sunk in recession since 1998, Argentina found itself in a bankruptcy situation in 2001. Since 2003, the Argentine economy has started a process of recovery. The growth rate of its GDP had been over 8% since 2004, nether less the country has been struck by the financial crisis of 2008 and the future prospects of growth seem to be lowers. Likewise, domestic household consumptions, which dynamized the economic growth, are expected to be lower. The government of Cristina Fernandez de Kirchner will continue to distinguish itself from the policies of liberalization of the market carried out during the 1990s and prefer a more interventionist role for the State in the economy. It will also endeavor to keep inflation under control. The social consequences of the 2001 economic crisis are still significant and the Argentine economy suffers from structural fragility: the financial system is weak (especially for international investors), the social situation is delicate (unemployment and malnutrition persist, 25% of the population lives under the poverty threshold), and the country is facing an energy crisis. Nevertheless, Argentina has all the necessary assets to resist difficulties: its flourishing agriculture turned towards exports attracts foreign investors, its natural resources are considerable (copper, gas, petroleum) and its workforce is well qualified and competitive. a. Monetary Policy, Inflation & Budget The monetary policies are carried out by the Argentina’s central bank. It base on a five pillars: current account surplus; improved fiscal position; managed – floating exchange rate regime; anti-cyclical financial policy and robust monetary policy.
In 2003 – 2007 the Bank’s strategy focused on maintaining a week exchange rate, accumulating reserves and preventing a major rise in inflation. Since 2008, driven by the global crisis and by increasing doubts about macroeconomic stability, capital inflows have reversed and are now driving deflationary trends. According to the government’s 2009 budget bill, it foresees a primary budget surplus of 3.27 percent of gross domestic product; also estimates annual economic growth of 4 percent and inflation of 8 percent. The government will save money by cutting costly energy subsidies by an estimated $1 billion. Argentine electricity rates and fuel prices are among the lowest in Latin America thanks to hefty state subsidies and prices caps. Private economist have said energy, public transportation and farm subsidies could cost the government as much as $9.5 billion in 2008. b. Employment The unemployment rate averaged 7.8% in the fourth quarter of 2008, down from 9.4% a year earlier. Unemployment has dropped measurably in recent years after topping 20% in early 2003. The current economic expansion has created many jobs in sectors such as retail, construction, and some manufacturing activities. Labor conditions, however, will start to deteriorate in upcoming months as the economy cools off. c. Foreign Trade
EXPORT by REGION
Middle East 4%
MAGREB& Egypt 4%
Rest 10% MERCOSUR 23%
India 1%
Chile 7%
Japan 1% Korea 1% China 10% ASEAN 3%
E.U 19%
Source: INDEC – January –November ,2008 , in millions of u.s.d
NAFTA 10%
Rest of ALADI 7%
IMPORT by REGION Japan 2% India 1%
Others 11%
MERCOSUR 37%
Korea 1% China 12%
ASEAN 2%
Chile 2% E.U 16%
NAFTA 15%
Rest of ALADI 1%
Source: INDEC – January –November, 2008, in millions of u.s.d
d. Capital Flow According to the Institute of International Finance (IIF), net private capital flows to emerging markets are forecast to slow substantially to $165 billion in 2009. Net private capital flows into Latin America (Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela) are expected to be halved, with forecast volume of $43, billion. The collapse in commodity prices- after September 2008, has hit many emerging market borrowers hard. Many resource based companies had increased borrowing in order to finance ambitious production expansion schemes. The greatest strains have come in Ecuador, Argentina and Venezuela. So, Argentina, Ecuador and Venezuela have no access to international markets.
e. Main Sectors of Industry and Trade Argentine exports are mainly of the agricultural type, mostly processed goods. In all, exports of agricultural origin make up 54% of the total. Soybean products (the beans themselves, feed, oils, etc.) account for 24.1% of total exports. Cereals (mostly wheat and maize) make up for 8.3%. Beef, for which Argentina is well-known, made up 3.3%. Industrial manufactures, which twenty years ago were but 10% of exports, provided 31.1% of the total in 2007. Motor vehicles and parts constituted 9.6% of exports, chemicals and medicine, 5.3% and the siderurgical industry (mostly steel and aluminum), 5.1%. Fuels and energy provided 12.2% of total exports. Petrochemical industries provide 7.2% of exports (mainly refined fuels). Petroleum and natural gas each accounted for 2.3%. Argentina's principal mineral export is copper, 2.7%.
Main Export Sectors, 2008 Manufactures of Agricultural Origin 35% Fuel & Energy 11% Manufactures of Industrial Origin 31%
Primary Products 23%
Source: INDEC – December 2008-
Argentine imports have historically been dominated by the need for industrial and technological supplies, machinery and parts; together, these amounted to US$57 billion in 2008 (three-fourths of the total). Consumer goods (including motor vehicles) make up most of the rest.
Imports According to Final Use, 2008 Motor Vehicles 7% Consumer Goods 11%
Capital Goods 22%
Parts & Accesories for Capital Goods 17% Intermediate Goods 35% Fuels & Lubricants 8%
Source: INDEC – December 2008-
Argentina's merchandise imports and exports both reached historical highs in 2008. Imports grew 28% to US$57.4 billion and exports, 27%, to US$70.5 million. This resulted in a trade surplus of US$13.2 billion (the seventh straight year double-digit trade surpluses were recorded).
f. Exchange Rates The exchange rate has been stable and predictable and maintained between 3.1 and 3.3 pesos for a dollar in 2008 and there were no drastic fluctuations. The rate is expected to go between 3.5 and 4 pesos for a dollar in 2009. And now to tackle the impact of the global financial crisis, the government has announced billions of dollars of public works as well as packages to stimulate the market. Argentina’s Central Bank has managed monetary and currency policies in support of the economic expansion, maintaining an undervalued or “competitive” exchange rate and negative real interest rates. However, many observers argue that the policy has contributed to a rise in the level of inflation in recent years.
Part III: International Relations a. Current Agreements 1- Customs Union : Mercosur (Argentina, Brazil, Paraguay and Uruguay) 2- Free Trade Agreements: Mercosur-Bolivia; Mercosur Chile; Mercosur Comunidad Andina; Mercosur-Peru y Mercosur -Israel (to be ratified by Parliament of the signatories’ countries) 3- Automotive Sector: Mexico 4- Double Taxation: Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Russia, Spain, Sweden and United Kingdom 5- Promotion and Protection of Investments: Algeria, Armenia, Australia, Belgium – Luxembourg Union, Bolivia, Bulgaria, Canada, Chile, China, Costa Rica, Croatia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Germany, Greece, Holland, Hungary, India, Indonesia, Israel, Italy, Jamaica, Lithuania, Malaysia, Mexico, Morocco, New Zeeland, Panama, Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Senegal, South Africa, South Korea, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, United Kingdom, Venezuela and Vietnam. b. Future Agreements in the Making 1. Free Trade Agreement (under Mercosur’s umbrella) with: Cooperation Council of the Gulf (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates); South Korea; Egypt; Morocco; Mexico, Dominica Republic, Jordan, Turkey, Central American Integration System (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua y Panama); Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa and Swaziland) and Caribbean Community (Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago. 2. European Union (under Mercosur’s umbrella): the agreement includes/understands three areas: political dialogue, economic and commercial subjects and cooperation. Its scope was defined in the first round of negotiations (April 2000) and in the Summit of Madrid (May 2002) 3. Canada (under Mercosur’s umbrella): negotiation from access to the market of goods, services and investment between the parts.
Part IV: Trade with Israel Year
Imports $
Exports $
Trade Balance $
Total Trade $
% of Change
2006
165,876
80,882
(84,994)
249,758
(18.68)
2007
242,522
126,185
(116,337) 368,708
49.42
2008
247,959
124,628
(123,331) 372,587
1.05
Main Export Sector: 100% 90%
2.605.337
4.216.854
6.099.261
2.179.646
2.094.144
2.476.499
8.905.849
11.975.716
80% 70%
19.883.803
23.521.259 18.665.979
22.199.921 6.975.209
60%
6.267.953
8.197.562
50% 40% 28.200.996
63.628.318 52.726.288
30% 20%
1.448.318
10%
12.608.035
2.100.640
2.603.232
11.673.348
10.441.600
2007
2008
0% 2006
Other Minerals, Chemicals, Fertilizers & Paints Mechanical & Electric Machinery & Appliance Electronics & Components
Animal, Food & Agricultura Plastics & Rubber Communication Optics & Laboratory Equipment
Main Invest & Export Israeli Companies:
Main Import Sector:
100%
2078570
5230772
3870039
90% 80% 70% 60% 50%
132.511.848
224.581.501
234.321.977
40% 30% 20% 10% 0% 2006 Other
2007
Animal, Food & Agriculture
2008
Mineral, Chemicals, Fertilizers & Paints
Main Export Argentinean Companies:
Opportunities for Israeli Companies: Even if Argentina does not figure amongst Israel’s main trading partners, the Argentine market shows potential for Israeli firms to develop trade opportunities. a- There are solid prospects across a wide range of sectors with strong opportunities. The sectors are: telecommunication; solar energy, water technologies, homeland security products, agricultural inputs and know how and; dental and medical devices. b- Argentina – Israel Cooperation Program - The program supports joint commercially focused R&D projects between Israeli companies and Argentinean entities – more information http://www2.matimop.org.il/1/foreign/argentina-israel.asp Practical Tips to Successfully Approach Argentine Market: • • • • • • •
Appoint a representative or distributor Have Spanish speaker in the company Furnish materials in Spanish Have a long term outlook Personalize your approach Protect your trademarks Frequent visits and follow – up
Written by: Mariano Dujovne – Trade Officer, Embassy of Israel, Buenos Aires, Argentina Updated: March 2009 Commercial Department - Embassy of Israel in Argentina [email protected] Tel: +54 11 4338 2519/20 Fax:+54 11 4338 2620
Part I: General 1)
General Information
Official Name: Argentine Republic Capital: Ciudad Autonoma de Buenos Aires Major Cities: Ciudad Autonoma de Buenos Aires, Cordoba, Mendoza and Rosario. Language: Spanish Currency: Peso ($) Population: 40,5 (estimated) Main Regions: Argentina is grouped into six geographical regions: Northwest, the fertile valleys concentrate most of the population of the area, and the economic activities. Of these, the cultivation of sugarcane, tobacco, and citrus are the most important, together with cattle and goat rising. Gran Chaco, the Chaco offers soil fertility and topography that are favorable for agricultural development, but in combination with aspects that are challenging for farming : A semi-arid climate with a 6-7 month dry season and the absence of sweet ground water in large parts. Mesopotamia, maté and tobacco is the most important product for the north of the region, although farmers have increasingly cultivated tea, tung trees (from which tung oil is derived), and citrus crops. Farther south, the truck-farming area supporting Buenos Aires, oranges, grapefruit, mandarins, and numerous vegetables are grown. Cuyo, viticulture is one of the main activities of the area. The wine production of the region represents almost 80% of national production, and the wines are highly considered in the world. Olives, potatoes, tomatoes and some fruits are also cultivated, and there is production of sweets and preserved foodstuffs. Quarrying and oil exploitation are other important industries. Pampas, is located in Central Argentina, a successful agricultural region with crops grown on the Pampas south and west of the Buenos Aires. In particular, the harvested area of soybeans is on pace to set a record, according to the Food and Agricultural Service. Much of the area is also used for grazing cattle and more recently to grow vineyards in the Buenos Aires wine region. These farming regions are particularly susceptible to flooding during heavy rainfall. Patagonia, principal economic activities have been mining, whaling, livestock (notably sheep throughout) agriculture (wheat and fruit production near the Andes towards the north), and oil. Energy production is also a crucial part of the local economy. Railways were planned to cover continental Argentine Patagonia to serve the oil, mining, agricultural and energy industries 2)
Geographic Information
Location: is located in the South and West Hemisphere. Its relative position in South America gives the country a diversity of land and culture Limits: To the North it is bounded by the Republics of Bolivia and Paraguay, to the south by the Republic of Chile and the Atlantic Ocean, to the east by the Federative Republic of Brazil, the Oriental Republic of Uruguay and the Atlantic Ocean and, to the West by the Republic of Chile. General Characteristics: The vast Argentine territory has a diversity of landscapes, where ice fields contrast with arid zones; mountains with valleys or plateaus; fluvial streams and lakes with large oceans, broad grassy plains with woods and forests.
Area: 3.761.274 sq km of which 2,791,810 sq km correspond to the American Continent and 969,464 sq km to the Antarctic Continent Climate: The main types of climate in Argentina are four: warm, moderate, arid and cold. The extension of the territory and the features of its relief determine the existence of varieties in each of the mentioned types. Average annual temperatures range from 24°C (75°F) to 11°C (51°F) in Buenos Aires (sea level) and Córdoba (420m/1270ft), and 24°C (75°F) to 8°C (46°F) in Mendoza (820 m/2484ft). 3)
Demographic Information
Argentines are a fusion of diverse national and ethnic groups, with descendants of Italian and Spanish immigrants predominant. Waves of immigrants from many European countries arrived in the late 19th and early 20th centuries. Syrian, Lebanese, and other Middle Eastern immigrants number about 500,000 to 600,000, mainly in urban areas. Argentina's population is overwhelmingly Catholic, but it also has the largest Jewish population in Latin America, estimated at between 280,000 and 300,000. In recent years, there has been a substantial influx of immigrants from neighboring countries, particularly Paraguay, Bolivia, and Peru. The indigenous population, estimated at 700,000, is concentrated in the provinces of the north, northwest, and south. The Argentine population has one of Latin America's lowest growth rates. Eighty percent of the population resides in cities or towns of more than 2,000, and over one-third lives in the greater Buenos Aires area. Population Distribution
Indicators Population Midyear (in thousands) Growth rate (%) Fertility Total rate (births per woman) Crude birth rate (per 1,000 population) Births (in thousands) Mortality Life expectancy at birth (years) Infant mortality rate (per 1,000 births) Under 5 mortality rate (per 1,000 births) Crude death rate (per 1,000 population) Deaths (in thousands) Migration Net migration rate (per 1,000 population) Net number of migrants (in thousands)
2008
2005
2015
2025
40,482 1.1
39,181 1.1
43,432 0.9
47,165 0.7
2.4 18 733
2.4 19 728
2.2 17 723
2.1 15 690
76 12 14 7 301
76 13 15 7 293
78 10 11 7 318
79 8 9 7 349
-
-3
-
-
- Represents or round to zero
Source: U.S.Census Bureau, International Data Base.
4)
Political Information
a. The Argentinean Government Argentina is composed of 23 provinces and one federal district (Ciudad Autonoma de Buenos Aires). It is governed by the 1853 constitution as revised in 1898 and 1994, and has a federal system of government. The President of Argentina is both head of state and head of government. Executive power is exercised by the government. Legislative power is vested in both the government and the two chambers of parliament. The Judiciary is independent of the executive and the legislature. The president and vice president are elected by popular vote for four-year terms and can be reelected once. The popularly elected bicameral national congress is composed of 72 senators (three from each province and the federal district), who serve six-year terms, and 257 deputies (based on proportional representation), who serve four-year terms. There is a nine-member supreme court. Each province has its own elected governor and legislature and its own judicial system. Authorities President: Ms. Cristina Fernandez Vice-President: Mr. Julio Cleto Cobos Chief of the Cabinet: Mr. Sergio Massa Minister of Foreign Affairs: Mr. Jorge Taiana Minister of the Interior: Mr. Florencio Randazo Minister of Defense: Ms. Nilda Garre Minister of the Economy: Mr. Carlos Fernadez Minister of Justice and Human Rights: Mr. Aníbal Fernández Minister of Labor, Employment and Social Security: Mr. Carlos Tomada Minister of Education: Mr. Juan Carlos Tedesco Minister of Science, Technology and Innovative Production: Mr. Lino Barañao Minister of Health: Ms. Graciela Ocaña Minister of Social Development: Ms. Alicia Kirchner Minister of Federal Planning and Public Utilities: Mr. Julio de Vido Minister of Production: Ms. Débora Giorgi b. The Economic Authorities
Ministry of Economy and Public Finances: Minister Carlos Fernandez Secretary of Economic Policies: Sec. Mr. Martin Pablo Abeles Sub-Secretary of Economic Coordination: Sub-Sec. Mr. Jorge Raul Robbio Sub-Secretary of Economic Programmer: Sub. Sec. Ms. Maria Fernanda Martijena
Secretary of Domestic Trade: Sec. Mr. Mario Guillermo Moreno Sub-Secretary of Defense for Consumer: Sub-Sec. Ms. Maria Lucila Colombo
Secretary of Finance: Sec. Mr. Hernan Gaspar Lorenzino Sub-Secretary of Financial Services: Sub-Sec. Mr. Juan Manuel Prada Sub-Secretary of Financing: Sub-Sec. Mr. Adrian Cosentino
Secretary of Treasury: Sec. Mr. Juan Carlos Pezoa Sub-Secretary of Budget: Sub-Sec. Mr. Raul Enrique Rigo Sub-Secretary of Provinces Relations: Sub-Sec. Ms. Nora Maria Fraccaroli Sub-Secretary of Public Incomes: Sub-Sec. Mr. Cristiana riel Modolo
Secretary of Legal and Administration: Sec. Ms. Ofelia Mabel Cedola
Part II: The Argentinean Economy 1)
General Data
GDP (%) GDP –in billions US dollars – (nominal) GDP –in billions US dollars – (PPP) GDP per capita - US dollars - (nominal) GDP per capita – US dollars - (PPP) Inflation (%) Unemployment (%) Imports (in millions US dollars) Exports (in millions US dollars) Trade Balance Currency Rates (per US dollars) External Debt (in millions US dollars) Foreign Direct Investments (in millions US dollars) Foreign Current Reserves (in millions US dollars)
2007
2008
8.7 260 524 6606 13307 8.5 9.4 44,707 55,780 11,073 3.17 123,000 6,400 44,325
7 324 571 8146 14376 7.5 7.8 57,413 70,589 13,176 3.47 128,000 7,300 47,056
2009 (estimated) 4 364 608 9067 15147 8 n/d 55,300 62,500 7,200 3.8 n/d n/d n/d
Source: INDEC – National Institute of Statistic and Census-
2)
Short overview of the current situation in the Argentinean Economy
Sunk in recession since 1998, Argentina found itself in a bankruptcy situation in 2001. Since 2003, the Argentine economy has started a process of recovery. The growth rate of its GDP had been over 8% since 2004, nether less the country has been struck by the financial crisis of 2008 and the future prospects of growth seem to be lowers. Likewise, domestic household consumptions, which dynamized the economic growth, are expected to be lower. The government of Cristina Fernandez de Kirchner will continue to distinguish itself from the policies of liberalization of the market carried out during the 1990s and prefer a more interventionist role for the State in the economy. It will also endeavor to keep inflation under control. The social consequences of the 2001 economic crisis are still significant and the Argentine economy suffers from structural fragility: the financial system is weak (especially for international investors), the social situation is delicate (unemployment and malnutrition persist, 25% of the population lives under the poverty threshold), and the country is facing an energy crisis. Nevertheless, Argentina has all the necessary assets to resist difficulties: its flourishing agriculture turned towards exports attracts foreign investors, its natural resources are considerable (copper, gas, petroleum) and its workforce is well qualified and competitive. a. Monetary Policy, Inflation & Budget The monetary policies are carried out by the Argentina’s central bank. It base on a five pillars: current account surplus; improved fiscal position; managed – floating exchange rate regime; anti-cyclical financial policy and robust monetary policy.
In 2003 – 2007 the Bank’s strategy focused on maintaining a week exchange rate, accumulating reserves and preventing a major rise in inflation. Since 2008, driven by the global crisis and by increasing doubts about macroeconomic stability, capital inflows have reversed and are now driving deflationary trends. According to the government’s 2009 budget bill, it foresees a primary budget surplus of 3.27 percent of gross domestic product; also estimates annual economic growth of 4 percent and inflation of 8 percent. The government will save money by cutting costly energy subsidies by an estimated $1 billion. Argentine electricity rates and fuel prices are among the lowest in Latin America thanks to hefty state subsidies and prices caps. Private economist have said energy, public transportation and farm subsidies could cost the government as much as $9.5 billion in 2008. b. Employment The unemployment rate averaged 7.8% in the fourth quarter of 2008, down from 9.4% a year earlier. Unemployment has dropped measurably in recent years after topping 20% in early 2003. The current economic expansion has created many jobs in sectors such as retail, construction, and some manufacturing activities. Labor conditions, however, will start to deteriorate in upcoming months as the economy cools off. c. Foreign Trade
EXPORT by REGION
Middle East 4%
MAGREB& Egypt 4%
Rest 10% MERCOSUR 23%
India 1%
Chile 7%
Japan 1% Korea 1% China 10% ASEAN 3%
E.U 19%
Source: INDEC – January –November ,2008 , in millions of u.s.d
NAFTA 10%
Rest of ALADI 7%
IMPORT by REGION Japan 2% India 1%
Others 11%
MERCOSUR 37%
Korea 1% China 12%
ASEAN 2%
Chile 2% E.U 16%
NAFTA 15%
Rest of ALADI 1%
Source: INDEC – January –November, 2008, in millions of u.s.d
d. Capital Flow According to the Institute of International Finance (IIF), net private capital flows to emerging markets are forecast to slow substantially to $165 billion in 2009. Net private capital flows into Latin America (Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Peru and Venezuela) are expected to be halved, with forecast volume of $43, billion. The collapse in commodity prices- after September 2008, has hit many emerging market borrowers hard. Many resource based companies had increased borrowing in order to finance ambitious production expansion schemes. The greatest strains have come in Ecuador, Argentina and Venezuela. So, Argentina, Ecuador and Venezuela have no access to international markets.
e. Main Sectors of Industry and Trade Argentine exports are mainly of the agricultural type, mostly processed goods. In all, exports of agricultural origin make up 54% of the total. Soybean products (the beans themselves, feed, oils, etc.) account for 24.1% of total exports. Cereals (mostly wheat and maize) make up for 8.3%. Beef, for which Argentina is well-known, made up 3.3%. Industrial manufactures, which twenty years ago were but 10% of exports, provided 31.1% of the total in 2007. Motor vehicles and parts constituted 9.6% of exports, chemicals and medicine, 5.3% and the siderurgical industry (mostly steel and aluminum), 5.1%. Fuels and energy provided 12.2% of total exports. Petrochemical industries provide 7.2% of exports (mainly refined fuels). Petroleum and natural gas each accounted for 2.3%. Argentina's principal mineral export is copper, 2.7%.
Main Export Sectors, 2008 Manufactures of Agricultural Origin 35% Fuel & Energy 11% Manufactures of Industrial Origin 31%
Primary Products 23%
Source: INDEC – December 2008-
Argentine imports have historically been dominated by the need for industrial and technological supplies, machinery and parts; together, these amounted to US$57 billion in 2008 (three-fourths of the total). Consumer goods (including motor vehicles) make up most of the rest.
Imports According to Final Use, 2008 Motor Vehicles 7% Consumer Goods 11%
Capital Goods 22%
Parts & Accesories for Capital Goods 17% Intermediate Goods 35% Fuels & Lubricants 8%
Source: INDEC – December 2008-
Argentina's merchandise imports and exports both reached historical highs in 2008. Imports grew 28% to US$57.4 billion and exports, 27%, to US$70.5 million. This resulted in a trade surplus of US$13.2 billion (the seventh straight year double-digit trade surpluses were recorded).
f. Exchange Rates The exchange rate has been stable and predictable and maintained between 3.1 and 3.3 pesos for a dollar in 2008 and there were no drastic fluctuations. The rate is expected to go between 3.5 and 4 pesos for a dollar in 2009. And now to tackle the impact of the global financial crisis, the government has announced billions of dollars of public works as well as packages to stimulate the market. Argentina’s Central Bank has managed monetary and currency policies in support of the economic expansion, maintaining an undervalued or “competitive” exchange rate and negative real interest rates. However, many observers argue that the policy has contributed to a rise in the level of inflation in recent years.
Part III: International Relations a. Current Agreements 1- Customs Union : Mercosur (Argentina, Brazil, Paraguay and Uruguay) 2- Free Trade Agreements: Mercosur-Bolivia; Mercosur Chile; Mercosur Comunidad Andina; Mercosur-Peru y Mercosur -Israel (to be ratified by Parliament of the signatories’ countries) 3- Automotive Sector: Mexico 4- Double Taxation: Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Denmark, Finland, France, Germany, Italy, Mexico, Netherlands, Norway, Russia, Spain, Sweden and United Kingdom 5- Promotion and Protection of Investments: Algeria, Armenia, Australia, Belgium – Luxembourg Union, Bolivia, Bulgaria, Canada, Chile, China, Costa Rica, Croatia, Cuba, Czech Republic, Denmark, Dominican Republic, Ecuador, Egypt, El Salvador, Finland, France, Germany, Greece, Holland, Hungary, India, Indonesia, Israel, Italy, Jamaica, Lithuania, Malaysia, Mexico, Morocco, New Zeeland, Panama, Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Senegal, South Africa, South Korea, Sweden, Switzerland, Taiwan, Thailand, Tunisia, Turkey, Ukraine, United Kingdom, Venezuela and Vietnam. b. Future Agreements in the Making 1. Free Trade Agreement (under Mercosur’s umbrella) with: Cooperation Council of the Gulf (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates); South Korea; Egypt; Morocco; Mexico, Dominica Republic, Jordan, Turkey, Central American Integration System (Belize, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua y Panama); Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa and Swaziland) and Caribbean Community (Antigua and Barbuda, Bahamas, Barbados, Belize, Dominica, Grenada, Guyana, Haiti, Jamaica, Montserrat, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname and Trinidad and Tobago. 2. European Union (under Mercosur’s umbrella): the agreement includes/understands three areas: political dialogue, economic and commercial subjects and cooperation. Its scope was defined in the first round of negotiations (April 2000) and in the Summit of Madrid (May 2002) 3. Canada (under Mercosur’s umbrella): negotiation from access to the market of goods, services and investment between the parts.
Part IV: Trade with Israel Year
Imports $
Exports $
Trade Balance $
Total Trade $
% of Change
2006
165,876
80,882
(84,994)
249,758
(18.68)
2007
242,522
126,185
(116,337) 368,708
49.42
2008
247,959
124,628
(123,331) 372,587
1.05
Main Export Sector: 100% 90%
2.605.337
4.216.854
6.099.261
2.179.646
2.094.144
2.476.499
8.905.849
11.975.716
80% 70%
19.883.803
23.521.259 18.665.979
22.199.921 6.975.209
60%
6.267.953
8.197.562
50% 40% 28.200.996
63.628.318 52.726.288
30% 20%
1.448.318
10%
12.608.035
2.100.640
2.603.232
11.673.348
10.441.600
2007
2008
0% 2006
Other Minerals, Chemicals, Fertilizers & Paints Mechanical & Electric Machinery & Appliance Electronics & Components
Animal, Food & Agricultura Plastics & Rubber Communication Optics & Laboratory Equipment
Main Invest & Export Israeli Companies:
Main Import Sector:
100%
2078570
5230772
3870039
90% 80% 70% 60% 50%
132.511.848
224.581.501
234.321.977
40% 30% 20% 10% 0% 2006 Other
2007
Animal, Food & Agriculture
2008
Mineral, Chemicals, Fertilizers & Paints
Main Export Argentinean Companies:
Opportunities for Israeli Companies: Even if Argentina does not figure amongst Israel’s main trading partners, the Argentine market shows potential for Israeli firms to develop trade opportunities. a- There are solid prospects across a wide range of sectors with strong opportunities. The sectors are: telecommunication; solar energy, water technologies, homeland security products, agricultural inputs and know how and; dental and medical devices. b- Argentina – Israel Cooperation Program - The program supports joint commercially focused R&D projects between Israeli companies and Argentinean entities – more information http://www2.matimop.org.il/1/foreign/argentina-israel.asp Practical Tips to Successfully Approach Argentine Market: • • • • • • •
Appoint a representative or distributor Have Spanish speaker in the company Furnish materials in Spanish Have a long term outlook Personalize your approach Protect your trademarks Frequent visits and follow – up
