Slide1: ARGENTINA BUSINESS OPPORTUNITIES COLORADO JUNE 2006


Argentina: Argentina


Location: Location Southern South America Eighth largest country in the world in terms of surface area Seventh largest country in the world in terms of surface area suitable for agriculture Second largest country in Latin America Neighboring countries Paraguay Chile Bolivia Brazil Uruguay


Government: Government Federal Republic Democratic political system President Néstor Kirchner (since May 2003) Political Subdivisions with 24 autonomous States with political, administrative and economic powers 23 provinces and the City of Buenos Aires


Basic Data: Basic Data Population: 38.5 million (2005) Area: 2.8 million km2 Major Cities: Buenos Aires (capital), La Plata, Cordoba, Mendoza, Rosario Language: Spanish Religion: Roman Catholic 92%, 8% others Literacy rate: 96.3% Life expectancy: 76 years


Slide6: Free market Limited role of the state in the economy Exchange rate US$ 1 = 3.00 pesos Inflation May 2006: 0.5 % Unemployment 2005: 11 % GDP: US$ 146.4 billion (2005) GDP real growth rate: 9.2% (2005) GDP per capita: US$ 4.685 (2005) External debt: US$ 129.583 Billion (2006) Economy


Slide7: Highly qualified population Modern telecommunication infrastructure International competitive costs Flexible labor laws Important urban centers Government initiatives to promote investments Minimal time difference between USA & Argentina Increasing presence of foreign firms Availability and quality of natural resources Why Argentina?


Modern Telecommunication Infrastructure: Modern Telecommunication Infrastructure The main cities of Argentina offer connectivity nods where some of the most important international carriers are interconnected having access to multiple telecommunication networks and reaching a worldwide communicational coverage through optical-fiber networks all over the Atlantic and Pacific. Argentina has state of the art technology built by international communication companies such as Telefónica from Spain, STET from Italy, France Telecom, AT&T and Telmex. These companies provide a wide range of services including traditional and mobile voice/data, internet, and submarine cabling. Furthermore, many advantages recline on the presence of software development.


International Competitive Costs: International Competitive Costs As a result of the local currency depreciation and the adoption of a more realistic exchange rate, Argentina has become in one of the most competitive economies in the international market. Argentina counts with important costs advantages for what is needed in BPO operations: Workforce Telecommunications Electricity Office spaces


Increasing Presence of Foreign Firms: Increasing Presence of Foreign Firms Several American companies conduct business in Argentina. Some of them have been operating locally for a long time (more than 90 years). The presence of US firms is significant in different economic sectors like financial services, energy, petrochemicals, food processing, and motor vehicle manufacturing. Examples of Fortune 500 companies with facilities in Argentina includes:


Friendly Legal Framework For Foreign Investment: Friendly Legal Framework For Foreign Investment The main aspects of the current legal framework with regard to FDI are based on: National treatment for foreign investors. No prior approval process for investments. No prohibition to acquire a locally owned call center company or having partial equity position. Access to domestic incentive programs. Unimpeded transfer of profits and repatriation of capital. Argentina maintains bilateral agreements for the promotion and protection of investment with USA.


Slide12: After the 2001 – 2002 crisis and exceeding all expectations, Argentina achieved an average annual growth rate from 2003 to 2005 close to 8,3%. Argentine economy grew faster than the international average and the most attractive developing markets. As a consequence of the economy recovery new investment opportunities appear in different economic sectors. Source ADI based on IMF data.


Slide13: achieve sustainable growth through Pillars


Slide14: The recovery of the Argentine economy started in the second quarter of 2002, and there have been 14 consecutive quarters of growth since 2002.


Slide15: Argentina not only leads the GDP growth in Latin America, besides it was the second economy that grew the most in the world during the last three years


Slide16: One of the good points of the new growth process is the recovery of flows of Foreign Direct Investment (FDI).


Slide17: After depreciation of the local currency, a competitive exchange rate was achieved.


Slide18: A robust trade surplus was maintained since 2002 despite the recovery on imports. Exports reached 40 Billion Dollars in 2005 achieving a new record.


Slide19: A robust Fiscal Surplus is a necessary condition to reach the sustainable growth of economy.


Slide20: Consolidate fiscal solvency (tax reform, improvement of tax compliance, new scheme of distribution of federal taxes) Achieve long term price stability Recovery of long term credit International negotiations to expand trade opportunities (MERCOSUR, other American initiatives, European Union, WTO, bilaterals). Promote and consolidate social inclusion


Highest per capita income among major Latin American economies.: Highest per capita income among major Latin American economies.


Availability of Natural Resources: Availability of Natural Resources Argentina has just under 250,000 km² of 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 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)


Developed infrastructure: Argentina boasts considerable development in terms of road, rail, port, aeronautical, and telecommunications infrastructure. In addition, modern regulatory frameworks ensure a high level of competition. Appropriate infrastructure provides a platform to boost production sector competitiveness and ensure territorial and social integration. The development of new infrastructure projects was listed as among the major priorities for the national government. The implementation of theses projects will be carried out by the State or by local or foreigners private operators. Developed infrastructure


Commercial Aviation infrastructure: The National Airports System comprises 52 airports, 35 of which are managed by the private sector in conjunction with recognized international operators. Argentina has 21 airports equipped for international traffic (see map). Commercial Aviation infrastructure


Port infrastructure: Argentina has 38 maritime ports along the Atlantic coastline and 25 river ports. Most of foreign trade transactions passed out through these ports. The Port of Buenos Aires is the main container port in Latin America and the Caribbean. Argentina’s principal maritime and river ports are featured on the map. Port infrastructure


Road Infrastructure: The National Road Network spans 38,632 km, 81% are paved 180,000 km of roads are under provincial jurisdiction and 280,000 km under municipal jurisdiction. Road Infrastructure


Railway Infrastructure: The Argentine railway network is one of the most extensive worldwide, covering a distance of 35,753 km. The federal government has decided to promote regional integration through the railway system and consequently decreed the reopening of branch lines such as the Central Trans-Andean Railway via public tender and the rehabilitation and transformation of the Belgrano Cargas freight line. Railway Infrastructure


 Mining Forest industry Leather and leather products Petrochemical industry Agricultural machinery Vegetable oils Grape growing and wine  making Cultural industries Software Outsourcing Tourism Oil & Gas: Best Prospects for Business Opportunities  Mining  Forest industry  Leather and leather products  Petrochemical industry  Agricultural machinery  Vegetable oils  Grape growing and wine making  Cultural industries  Software  Outsourcing  Tourism  Oil & Gas


Mining: Mining Exploration and development Projected investment Agreements with Chile and Bolivia Equipment and services Government incentives Favorable legislation Exports to 40 countries


Argentina ranks high internationally in terms of available mining resources.: Argentina ranks high internationally in terms of available mining resources. 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 Source: ADI based on Mining Journal Mining


Mining : Mining 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 that generated exports that rose from practically zero to over US$ 1 billion per year.


Slide32: Mining Strong increase in production Favorable legal framework Geological potential: rich in mining resources (ranked sixth worldwide) 75% territory with potential still unexplored Availability of production resources: infrastructure, skilled labor and a growing supply of local suppliers Rates of return after taxes (copper mine) 0 5 10 15 20 Canada Mexico Bolivia China Peru Australia USA S. Africa Argentina Chile Source: Colorado School of Mines Rates of return after taxes (gold mine) 0 5 10 15 20 China Mexico Canada Bolivia Peru USA Australia Argentina Chile S. Africa


Slide33: Forest Industry The Forestry Law provides an attractive legal framework for investments Fiscal and economic incentives High growth rates Abundant supply of suitable low-cost land and extensive tracts available 20 million hectares of suitable virgin land, only 5% of which is currently being cultivated High potential for industrial development PULP INDUSTRY Abundant supply of forest raw material PAPER INDUSTRY Unmet domestic demand Growing per capita consumption WOOD INDUSTRY New project potential High expansion potential Source: ADI based on CEP data.


Slide34: The sector produces tanned leather, semi-finished and finished leather, and upholstery covers with an annual turnover of US$ 1 billion. Argentina is the world’s fourth largest producer and exporter of leather goods and claims 9% of the global leather market. Production has increased notably in recent years. The industry is moving forward in terms of upstream integration, basically by producing upholstery covers for the automotive industry (US$ 200 million in exports). Leather and leather products Source: ADI based on CEP data.


Slide35: The petrochemical industry has been operating for more than fifty years in Argentina and petrochemical plants process and add value to raw materials in the form of locally extracted hydrocarbons. 43 plants with installed capacity on an international scale produce primary, intermediate, and final products, and in the five-year period 1996-2000, the petrochemical industry invested approximately US$ 3 billion and doubled its installed capacity to 6.2 million tons per annum. Demanding domestic market: one of the most notable examples is the increase in apparent consumption in the agricultural sector. Petrochemical Industry


This sector has been industrially active for over 100 years and has the capacity to adapt to changes in agricultural practices (e.g. the adaptation of seeders to the direct seeding system).: Agricultural Machinery This sector has been industrially active for over 100 years and has the capacity to adapt to changes in agricultural practices (e.g. the adaptation of seeders to the direct seeding system). Argentine seeder production statistics 3,278 2,562 2,080 3,100 3,600 3,400 5,880 4,740 4,640 4,178 3,894 3,420 5,100 5,350 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003  An ever-expanding and important domestic market: Agricultural production is displaying marked growth, while current profitability allows producers to procure suitable equipment.  The industry is able to support domestic purchasers in the post-sales phase.  National equipment can be adapted perfectly to Argentine soil characteristics.  Applied knowledge export potential.


Slide37: Vegetable Oils Argentina’s prominence in the global market: 12% of global soybean production 30% of vegetable oil exports and 10% of seed exports 22% of global sunflower production Leading exporter of sunflower oil Growing global demand for vegetable oils and vegetable oil by-products. SOYBEANS: Average production unit capacity: 5,000 tons Principal global producers: USA (1,500 tons), Brazil (2,500 tons) Capacity to produce bio-fuels from vegetable oils. Source: ADI based on INDEC data


Slide38: Grape Growing and Wine Making Argentina is the world’s fifth largest producer of wine High domestic consumption (world’s sixth largest consumer of wine) High availability of raw materials: eighth largest global producer of fresh grapes High competitiveness of Argentine wine producers: excellent price/quality ratio Low cost of land in the context of a global reduction in planted area Capacity to produce organic products High quality wines account for over 80% of exports in this sector Source: ADI based on INDEC data


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.: 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. Source: ADI based on SAGPyA data Maritime fishing have recovered strongly in the last years. There are also considerable captures of molluscs and crustaceans like prawns and squids, besides fish.


Slide40: Cultural Industries The book industry was one of the first to develop in Latin America, while there is also a long history of film production. Cultural industry professionals and technicians are high-quality, and human resources working in these industries display a high degree of flexibility in adapting to work-related developments and adverse scenarios. Argentina boasts talented writers, musicians, actors, authors, scriptwriters, directors, and advertisers of world renown. High-level equipment in graphic design, film studios, television and music production ensures high-quality productions. Argentina was among the top five creative leaders worldwide in advertising in the 90s. Argentina has a wide variety of landscapes and locations suitable for filmmaking, with good infrastructure and transport systems.


Slide41: Software Human Capital: highly trained, specialized in technology and IT solutions at competitive costs, with socioeconomic and cultural characteristics similar to those in the most highly developed countries 3,500 computer and IT graduates/ year 20,000 AMBA professionals Potentially significant domestic markets for specific applications: Agribusiness, industrial automation, educational and entertainment software (edutainment) Exportable software development capability


Slide42: Software Low production costs: the cost structure for this sector is highly competitive internationally Argentina: A highly competitive base for producing and exporting software and IT services to Latin America and the Spanish-speaking world Legal framework: Software Development Bill: Fiscal stability Extrazone import duty exemption for hardware imports Income tax reduction in the amount of a percentage to be invested in R&D VAT credit


Slide43: Outsourcing " ) Source: University of Cambridge, EFL Argentina is in a position to become one of the main beneficiaries of this growing corporate trend. Various multinational companies (Ernst & Young, Delloite, KPMG, HP, IBM, Teleperfomance, Siemens, SAP, Motorola, Accenture) have selected Argentina as their base for operations ranging from basic services (such as telemarketing or call-centers) to software development, engineering, financial analysis, design, and R&D. The main reasons for Argentina’s attractiveness are the level of qualification of the population, the critical mass of professionals and university students, labor cost levels, and telecommunications infrastructure availability.


Slide44: Tourism There has been strong investment in hotel infrastructure in recent years, although there are still a considerable number of locations available for developing tourist services. Skilled labor is low-cost and tourist tariffs are attractive. The diversity of Argentine landscapes makes it possible to tailor products to international demand (ecotourism, rural tourism, cultural tourism, sport tourism, etc.). Tourist countries of origin 2003 Brazil 17% Chile 17% Europe 17% Uruguay 26% Others 13% USA & Canada 10% Source: INDEC


Tourism: Tourism Opportunities Hotel construction & upgrading Convention centers Equipment & supplies for the hotel industry Mountain & ski resorts Tourism infrastructure / development


Slide51: Argentina: National Energy Balance Primary domestic demand 1986-2004 Source: Secretaría de Energía - IAPG


Oil & Gas : Oil & Gas Exploration and production Equipment and services Refineries and petrochemicals Environmental services


Slide53: 24 Sedimentary Basins On Shore Basins: 1.457.550 km2 (79 %) Off Shore Basins ( up to 200 mts. ): 387.450 km2 ( 21%) Total Basins: 1.845.000 Km2 Oil & Gas


Slide54: Million of m3 Thousands of Million m3 Source: Secretaría de Energía - IAPG Oil Natural Gas 1989 - 2005


Slide55: Argentina: Oil 1992 - 2005 Production Millions of m3 Nº of wells Production per well and number of active wells Source: Secretaría de Energía - IAPG


Slide56: Argentina: Natural Gas 1992 – 2005 Thousands of MM of m3 Rel. Res./ Prod. Year s Mil Millones de m3 Proven Reserves Production / Reserves Annual Production Source: Secretaría de Energía - IAPG


On the domestic front, Argentina aims to intensify the current economic growth process: On the domestic front, Argentina aims to intensify the current economic growth process To achieve this goal, Argentina must ensure continuity in the processes already underway: Lowering unemployment Boosting investment flows Strengthening the financial system Fiscal consolidation Restructuring the social security system Stabilizing prices


Slide59: Key material and data for this presentation was provided by the Argentinean Government Our recognition and appreciation to: Argentina's Investment Promotion Agency Tel. (+54 11) 4349-3442 / 3313 / 3315. Fax (+54 11) 4349-3453 Email: adi@mecon.gov.ar http: www.inversiones.gov.ar Email: acivet@mecon.gov.ar ; matmol@mecon.gov.ar


COLORADOOffice of Economic Development & International Trade: COLORADO Office of Economic Development & International Trade Dr. Jorge Vallmitjana Honorary Trade Representative State of Colorado Vallmitjana & Company Consulting Services Santa Fe 4860 - 13º A (1425) Capital Federal Argentina Tel / Fax: (5411) 4776 3990 Cell. (Local): 15 4088-5125 Cell. (From Overseas) (54911) 4088-5125 E-mail: vall@vallmitjana.com Website: www.vallmitjana.com June 2006