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Argentina’s Investment Development Agency
Investment and innovation:key drivers of Argentina’s sustainable economic development
Beatriz Nofal (Ph.D), President
Argentina’s Investment Development Agency
Tokyo, May 2008
Argentina’s Investment Development Agency 2
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 3
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 44
Argentina is facing an extraordinary opportunity to reach the next station on the path towards economic development
FactorsFactorsProductivityProductivity
Innovation Innovation
GDP per capita US$ PPP
GDP per capita US$ PPP
< 2,0002,000 –3,000
3,000 – 9,000 9,000 –17,000
> 17,000
ARGENTINA
Argentina’s Investment Development Agency 4
Argentina’s Investment Development Agency
Argentina Spain
13.307
30.120
GDP per cápita U$S PPPYear 2007*
*Estimated
Source: ProsperAr based on FMI World Economic Outlook Database, April 2007
By stabilizing the economic growth at moderately high rates, we can reach the development and equity levels of recently developed countries in one generation
Argentina Spain
0,33
0,49
Income DistributionGini Coefficient
Source: ProsperAr based on INDEC and OECD Stat.
5Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 66
STRUCTURALLYCOMPETITIVE FACTORS OF PRODUCTION
KNOWLEDGE
NATURE
CULTURE
Argentina offers an extraordinary investment opportunity given the combination of high and sustainable economic growth, favorable terms of trade and a competitive base of production factors.
ARGENTINA’S SUSTAINABLE
ECONOMIC GROWTH
Five years of steady growth at an average
rate of 8.8%
Twin Surpluses: fiscal and external
Flexible and Competitive exchange rate
Prudent monetary policy
Record profitability
FAVORABLE INTERNATIONAL
SCENARIO
Favorable terms of trade and high prices of agricultural “commodities” and raw materials.
Global Integration of Value Chains and off shoring
New global consumption patterns (product differentiation)
Accumulation of foreign exchange reserves and
reduction of public debt
Increasing demand for renewable energy sources
Marked reduction of unemployment and poverty
levels
Rich culture
Modern Industries
Entrepreneurial and innovative capacities
Skilled Human Resources
Abundant Natural Resources
Argentina’s Investment Development Agency 77
GDP annual growth rates (%)
4
9
6
44,4
1.1
8.8
10
1.82.9
5.7
10.1
2.32.9
5.7
9.2
10.4
2.6
3.7
8.5
11.1
2.1
5.9
8.7
11.5
China Argentina Chile Brazil G7: MostDevelopedEconomies
2003 2004 2005 2006 2007
Average: 10.6%
Average: 8.8%
Average : 5.1%
Average : 3.6%
Average : 2.3%
Source: ProsperAr based on IMF WEO database, 2007.
Over the past five years, Argentina ranked among the fastest growing economies worldwide. In 2007, the annual GDP growth rate was 8.7% and the average annual growth rate during the last five years has been 8.8%. For 2008, the estimated growth rate is in the order of 8%
Argentina’s Investment Development Agency 88
25,722,7
-15
-10
-5
0
5
10
15
20
25
30
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
*
Primary Fiscal Balance
Current Account Balance
Growth is based on solid macroeconomic fundamentals that strengthen the country’s economy, making it more resilient vis-à-vis external shocks, and ruling out the possibility of a crisis in the mid-term. Macroeconomic sustainability results in higher predictability, a key factor for investment.
Fiscal and Current Account Surplus(in billions of pesos)
International Reserves(in billions of dollars)
Source: ProsperAr based on Ministry of Economy and Production.
50.446.9
32.028.1
19.6
14.110.5
19.4
26.527.826.524.3
19.317.617.9
0
5
10
15
20
25
30
35
40
45
50
55
Dic
-94
Dic
-95
Dic
-96
Dic
-97
Dic
-98
Dic
-99
Dic
-00
Dic
-01
Dic
-02
Dic
-03
Dic
-04
Dic
-05
Dic
-06
Dic
-07
Mar
.-08
During the first quarter of 2008, tax revenues increased at a faster rate than public expenditure and international reserves continued growing steadily.
Argentina’s Investment Development Agency 99
Investment has grown steadily, at higher rate than GDP, leading to robust employment growth.
*EstimatedSource: ProsperAr based on INDEC and Ministry of Economy and Production
0
20
40
60
80
100
120
140
1601
98
3
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
30%
35%
40%
45%
50%
55%
Employment rate (right axis) GDP constant prices (Index 1997=100)IBIF constant prices (Index 1997=100)
GDP, Investment and EmploymentIn % and Index numbers 1997=100
Argentina’s Investment Development Agency 1010
Likewise, there has been important productivity gains in the industrial sector, as the surge in production outpaces the rise in employment.
50
60
70
80
90
100
110
120
130
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*
Industrial Production Index, volume (IPI) Employed Workers Index (EWI)Productivity Index (IPI/EWI)
+ Productivity
+ Production
+ Employment
+ Productivity
+ Production
- Employment
= Productivity
- Production
- Employment
Industrial Production, Employment and Productivity
Argentina’s Investment Development Agency 1111
One of the cornerstones of the current macroeconomic program is the maintenance of a flexible and competitive exchange rate.
0,0
0,2
0,4
0,6
0,8
1,0
1,2
1,4
Jan
-01
Ma
r-M
ay-
Jul-
01
Se
p-
No
v-Ja
n-0
2M
ar-
Ma
y-Ju
l-0
2S
ep
-N
ov-
Jan
-03
Ma
r-M
ay-
Jul-
03
Se
p-
No
v-Ja
n-0
4M
ar-
Ma
y-Ju
l-0
4S
ep
-N
ov-
Jan
-05
Ma
r-M
ay-
Jul-
05
Se
p-
No
v-Ja
n-0
6M
ar-
Ma
y-Ju
l-0
6S
ep
-N
ov-
Jan
-07
Ma
r-M
ay-
Jul-
07
Se
p-
No
v-
USA RER
EURO RER
Brazil RER
Nominal ER (US dollar)
Nominal and Real Exchange Rate (RER)EURO - USA – Brazil. Inverted Scale
Source: ProsperAr based on INDEC
Argentina’s Investment Development Agency 1212
11,154
55,933
44,780
-10000
0
10000
20000
30000
40000
50000
60000
700001
99
3
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Trade Balance Exports Imports
Argentinean International TradeMillions of dollars
Source: ProsperAr based on INDEC
Argentina’s exports and imports are at record-high levels. The country has experienced a sizable and persistent trade surplus over the past eight years.
Argentina’s Investment Development Agency 13
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 1414
Productive Capacities
• Rich culture and outstanding cultural productions in various fields
• Distinguished international figures and works of art
• Rich Urban life with a wealth of cultural possibilities
• International destination chosen for its quality of life and tourism
• High entrepreneurial and innovative skills (ranked 10th in the GEM 2007)
• Strong industrial tradition
• Modern infrastructure and technological availability
• World-class producers of agricultural and industrial commodities
• Competitive private sector
• Preferential Access to Mercosur market at 0% tariff
• Qualified Human Resources
• High level of education and training
• Prestigious Universities
• Excellent Research Centers
• Outstanding health indicators
• Abundance of land and natural resources
• A wide variety of mineral and energy resources
• Diversity of regions, topography and climate
• High commitment with environmental protection and sustainable development
Argentina’s economic growth is supported by an attractive and competitive resource endowment base which combines a pool of talented people, abundant natural resources, a wealth of culture and significant entrepreneurial and business skills...
NatureKnowledge Culture
Cesar Milstein – Nobel PrizeFederico Leloir– Nobel Prize
Argentina’s Investment Development Agency 1515
Argentina’s high educational standards are similar to some developed countries.
Source: ProsperAr based on GED 2006, UNESCO.
Adult Literacy Rate (+15 years)%
School Attendance ExpectationsIn years
88,6
89,7
90,4
90,9
91
92,8
93
95,7
97,1
97,2
98,4
Brazil
Am. Lat. y Caribe
Indonesia
China
Mexico
Colombia
Venezuela
Chile
Israel
Argentina
Italy
11,2
11,5
11,5
11,7
12,5
13,1
13,4
14,6
15,6
15,7
16,4
China
Indonesia
Colombia
Venezuela
México
Am. Lat. y Caribe
Chile
Brazil
Israel
Italy
Argentina
Argentina’s Investment Development Agency 16
Socioeconomic IndicatorsArgentin
aBrazil Chile
Mexico
Region Averag
e
2007/2008 Ranking 38 70 40 52
Human Development Index (HDI)
0,869 0,800 0,867 0,829 0,803
Life Expectancy at Birth (years) 74,8 71,7 78,3 75,6 72,8
Infant Mortality Rate (0/000) 15 31 8 22 26
Health Care Expenses (PPA in US$ per capita)
1274 1520 720 655 …
Undernourished Population 3 7 4 5 10
Population with sustainable access to improved water source
96 90 95 97 91
Deliveries performed by specialized staff (%)
99 97 100 83 87
Physicians/1000 inhabitants 301 115 109 198 …
Literacy (% over 15 years old) 97,2 88,6 95,7 91,6 89,9
Gross schooling rate 89 86 81 75 81
Researches in R&D (for every million inhabitants 1990-2003)
720 344 444 268 306
Argentina socioeconomic indicators are the highest in Latin America and are among the top 40 in the world, out of 177 countries.
Fuente: UNDP Report of Human Development 2007.
Argentina’s Investment Development Agency 1717
Likewise, Argentina shows significant innovative and creative abilities.
9,8
4,3
6,3 6,2
1,4
Arg
en
tin
a
Bra
zil
Ch
ile
Me
xic
o
Co
lom
bia
3,5
1,72,2
2,4
0,6
Arg
enti
na
Bra
zil
Ch
ile
Mex
ico
Co
lom
bia
Source: Prosperar based on US Patent and Trademark Office
Patents per million of inhabitants registered at the US Patent and Trademark Office
29,6
9,7
14,8
22,6
4,9
Arg
enti
na
Bra
zil
Ch
ile
Mex
ico
Co
lom
bia
Patents 1963-2005 Patents 1998-2005 Patents 2003-2005
Argentina’s Investment Development Agency 18
Argentina has been honored with five Nobel Prizes: three of them related to Science –received by Houssay, Leloir and Milstein- who graduated from Public Universities
BERNARDO A. HOUSSAY
He was awarded the Nobel Prize in Physiology and Medicine in 1947 for his discovery of the part played by the hormone of the anterior pituitary lobe in the metabolism of sugar.
LUIS FEDERICO LELOIR
He was awarded the Nobel Prize in Chemistry in 1970 for his work in biochemistry. He discovered sugar nucleotides and their function in the biosynthesis of carbohydrates.
CÉSAR MILSTEIN
He was awarded the Nobel Price in Physiology and Medicine in 1984 for developing the hybridoma technique for the production of monoclonal antibodies.
Argentina’s Investment Development Agency 19
Likewise, the country has fully exploited its wealth of natural resources becoming a leading producer and/or exporter in various agroindustrial segments.
Source: ProsperAr based on FAO.
The Argentine territory has almost 250,000 km2 of farmland.
This large quantity of fertile land together with a competitive industry places Argentina as the world’s:
• N° 1 producer and exporter of Sunflower Oil.
• N° 1 exporter and 3rd leading producer of Soy Oil.
• N° 1 exporter and 3rd leading producer of Honey.
• N° 1 exporter of Horse Meat.
• N° 1 exporter of Pears.
• 2nd leading exporter of Peanut Oil.
• 3rd leading producer of Beef.
• 3rd leading producer of Soy Beans.
• 3rd leading producer and the N° 1 exporter of Lemons.
• 5th leading producer of Wine.
Argentina’s Investment Development Agency 20
A long industrial tradition has enabled us to reach an extensive and diverse manufacturing development.
A significant number of
transnational corporations have
been present in the country for
decades.
A group of prime national
companies world-class.
A segment of flexible, innovative
and dynamic small and medium
sized enterprises (SMEs)
As an example, the annual production capacity of local industry includes:
• 7 million tons of vegetable oils and over 20 million in by-products,
• Over15 million hectoliters of wine,
• 400 thousand tons of tanned leather,
• 1.2 million tons of paper,
• 200 thousand tons of PVC and over 1.5 million tons of derivatives such as propylene and polyethylene.
• 275 thousand tons of raw aluminum,
• 5 million tons of steel
• 4.15 million tons of seamless and non-seamless pipes,
• 550 thousand automobiles.
Argentina’s Investment Development Agency 2121
As a member of MERCOSUR, Argentina enjoys preferential access (no import tariffs) to a highly attractive market: 265 millions of consumers and joint GDP of U$S 1.800 billions in 2007.
MERCOSUR +
partners in FTA’s (3)
GDP*: US$ 2,300 Billions
Population: 381 Millions
Atlantic
Ocean
Pacific
Ocean
MERCOSUR
MERCOSUR (1)
GDP*: US$ 1,575 Billions
Population: 238 Millions
MERCOSUR + Venezuela (2)
GDP*: US$ 1,800 Billions
Population: 265 Millions
(1) MERCOSUR is a common market formed in 1991 by Argentina, Brazil, Paraguay y Uruguay.(2) Venezuela is under negotiations process to become a full member of MERCOSUR.(3) Bolivia, Chile, Peru, Colombia y Ecuador are associated members.*Estimated 2007Source: ProsperAr based on IMF World Economic Outlook, October 2007.
Argentina’s Investment Development Agency 2222
Extra Mercosur Exports Billions u$s
56 5871,277,4
93,4
118,2
142,4
190,6
6658504443
4142,3
6061
164,3
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Fuente: ProsperAr en base al INDEC
Intra Mercosur Exports
Extra Mercosur Exports
1990 – 2007
713.4% 350.6%
1990 – 1998
393.5% 42.7%
1998 – 2007
64.8% 215.9%
Increase in Intra and Extra Mercosur’s Exports ( %)
Intra MERCOSUR Exports. In billions u$s
4,1 5,17,2
1012
14,417
15,217,7
15,2
10,212,8
17,3
21,1
33,5
20,420,1
25,6
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Intra and extra-Mercosur trade has grown significantly over the last six years. Intra-regional exports peaked in 2007
Argentina’s Investment Development Agency 2323
Mercosur intra-regional imports grew from U$S 20 billion in 1998 to U$S 33 billion in 2007. Two-third of that growth (64%) was explained by the increase in Argentina’s intra-regional imports, while Brazil only accounted for 17% of it.
However, Brazil’s import demand grew from U$S 57.6 billion in 1998 to U$S 135.5 billion in 2007, but 96.5% of that growth was explained by extra-regional imports
Argentina is the main growth engine of Mercosur’s intra-regional trade
Fuente: Prosperar en base a INDEC y CEI
Millones de dólares IntrazonaArgentina 9.415 12.282 30,5% 2.868 2,6%Brasil 8.877 17.353 95,5% 8.476 7,8%Paraguay 531 1.963 269,7% 1.432 1,3%Uruguay 1.523 1.939 27,3% 416 0,4%Sub-Total 20.346 33.538 64,8% 13.192 12,1%ExtrazonaArgentina 17.026 43.371 154,7% 26.344 24,1%Brasil 41.618 143.296 244,3% 101.678 93,1%Paraguay 483 1.411 191,9% 928 0,8%Uruguay 1.227 2.557 108,5% 1.331 1,2%Sub-Total 60.355 190.635 215,9% 130.280 119,3%Total 80.700 189.898 135,3% 109.198 100%
Expo1998 2007 1998 - 2007
EvoluciónEvolución u$s mill
Contrib a la Var. Millones de dólares
Intrazona
Argentina 7.930 16.037 102,2% 8.107 20,2%Brasil 9.428 11.630 23,4% 2.202 5,5%Paraguay 1.383 2.632 90,3% 1.249 3,1%Uruguay 1.649 2.716 64,7% 1.067 2,7%Sub-Total 20.390 33.015 61,9% 12.625 31,4%ExtrazonaArgentina 23.473 28.668 22,1% 5.194 12,9%Brasil 48.265 108.990 125,8% 60.725 151,0%Paraguay 1.087 3.866 255,7% 2.779 6,9%Uruguay 2.158 2.872 33,1% 714 1,8%Sub-Total 74.983 144.396 92,6% 69.413 172,6%Total 95.373 135.583 42,2% 40.210 100%
Impo 1998 20071998 - 2007
Evolución Evolución u$s mill
Contrib a la Var.
Argentina’s Investment Development Agency 2424
The combination of these resources and capacities results in a supply of competitive goods and services that are very attractive and complementary to world demand trends.
Natural Products, High Quality Raw
Materials and Bioenergies
Increasing global demand of:
Soy and Grains
Fruits
Fishing
Mining
Biofuels
Premium Food, Organics and with
traceability
Increasing global demand of:
Premium Wines
Premium Beef
Olive oil and other vegetables oils
Organic products
Technological and Differentiated
Industries
Precision Machinery
Shipbuilding industry
Biotechnology
Software
Fashion design
High value added Professional
Services
Business Professional Services
Health Services
High Education Services
Cultural Products and Services
International demand of cultural goods
Entertainment and works of art with national identity
Tourism and Leisure in unique
places
Increasing flows of International tourism
European and American citizens with a second alternative housing, outside of its own country
Argentina’s Investment Development Agency 25
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 26
Argentina offers a favorable political/institutional framework for investment.
Full enforcement of civil and democratic rights.Argentina is a country where freedom prevails in every area, as confirmed by the 2007 Freedom in the World report.
DemocracyWithin a framework of freedom and full enforcement of the rule of law, our country has moved consistently towards strengthening the democratic system.
Strategically Safe CountryThere are neither terrorist groups, drug trafficking gangs or organized crime activities registered nor differences between religious or ethnic groups that could affect the institutional and economic life or the security of the country.
Country of choice among multinational companiesArgentina ranks 18th out of 25 countries of choice among the largest 100 multinational corporations, according to a UNCTAD report.
Good quality of lifeArgentina ranks among the 10 best countries according to the 2007 quality-of-life index prepared by the specialized publication International Living.
Preferred international tourism destinationBuenos Aires was rated the 2nd best city to visit (Travel & Leisure 2007).
Argentina’s Investment Development Agency 27
Foreign direct investments in Argentina are widely protected by domestic law and by bilateral investment protection treaties, and receive equal treatment to local investors (National Treatment)
The Argentine Constitution gives foreigners an equal treatment and recognizes they have the same rights than native citizens.
The Foreign Investments Act (enacted in 1976) defines the legal framework for foreign investments and gives equal treatment to local investors.
Foreign investors may:
• Transfer liquid and realized gains from their investments abroad, as well as repatriate their investments.
• Use any of the legal organizational forms provided by national laws.
• Use domestic credit with the same rights and under the same conditions than local companies owned by nationals.
International negotiations
Regional Level: The Southern Cone Common Market (MERCOSUR) made up by Argentina, Brazil, Paraguay, Uruguay and Venezuela, in addition to Bolivia and Chile as Associate States.
Bilateral Level: Argentina has subscribed fifty-eight (58) Bilateral Agreements for Mutual Promotion and Protection of Investments (APPRI).
Multilateral Level: Argentina has been a member of the World Trade Organization (WTO) since 1995 and has participated as observer in the Investment Committee of the Organization for Economic Cooperation and Development (OECD) since 1996. Additionally, it is a member of the Multilateral Investment Guarantee Agency (MIGA).
Argentina’s Investment Development Agency 28
Argentina offers an attractive set of fiscal investment incentives that may be used by both local and foreign investors.
I. Horizontal Incentives: to any region or economic activity; to reduce the fiscal burden during the initial investment period• Promotion of Investment Law (N° 26.360): Early reimbursement of VAT and/or accelerated
amortization for capital goods and infrastructure.
• 0% import tariff for capital goods.
• 0% import tariff for all goods that are part of large investment projects.
II. Sectorial Incentives: aimed at promoting specific economic sectors.- Software - Mining - Tourism - Biofuel
- Biotechnology - Forestry - Automotive
III. Regional Incentives: Provincial promotion schemes and support for infrastructure for investments• Exemptions on provincial taxes
• Support for infrastructure investments
• Facilities to purchase and lease public goods.
• Public services at competitive costs
Argentina’s Investment Development Agency 29
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 3030
To continue growing at high rates, investment and innovation are key success factors
Argentina’s Investment Development Agency 3131
21.5%
19.2%
15.1%
12.0%
14.2%
16.2%
19.4%18.1%
24.3%
19.9%
23.5%
18.0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
19.8%
17.7%
14.3%
11.3%
15.8%
17.9%
20.6%
18.9%
22,7%
21.1% 21.7%
19.1%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Investment has recovered and grown steadily since 2002, reaching a record high-level as a percent of GDP. In 2007 gross fixed capital grew at a 14.4% annual rate, and represented 22.7% of the country’s GDP, the highest rate in the last 30 years.
Source: ProsperAr based on DNCN, INDEC.
Gross Fixed Capital InvestmentAt current prices. Percent of GDP
Gross Fixed Capital Investment/GDP RatioAt prices of 1993. Percent of GDP
Argentina’s Investment Development Agency 3232
Argentina’s investment/GDP ratio (at current prices) is the highest in Latin America.
*2006Source: ProsperAr based on different Nationals Statistics Institutes of the region.
Gross Fixed Capital Investment/GDP ratio by country in Latin AmericaYear 2007, at current prices
16.4%17.5%
19,3%20.6%
21.7%24.3%
0%
5%
10%
15%
20%
25%
Argentina México Chile Perú* Brasil Uruguay*
Argentina’s Investment Development Agency 3333
2087 1858
34994496
6369
8268
6859
8899
5372
2141
4431
2793
5609
10418
23988**
50375265
4125
165221492166
72919160
6949
3635
5720
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007*
Net FDI Total FDI
1992-2000 average without privatizations
U$S 5300 M
Foreign Direct Investment has recovered and is currently above the average of the 1990s, excluding privatizations. However, Argentina faces the challenge to recover its average historical share of FDI flows into South America.
** 1999 was the year of aquisition of YPF, the public oil company, by Repsol from SpainSource: ProsperAr based on INDEC
18,6%
13,8%
18,0%
34,4%**
8,5%10,7%11,1%
12,1%
7,0%
7,5%
5,6%
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
*
Total FDI and net FDI (without privatizations)-millions of US dollars-
Argentina’s share of South American FDI inflows, (includes privatizations)
* Preliminary estimatesSource: ProsperAr based on INDEC and UNCTAD
Argentina’s Investment Development Agency 34
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 3535
Notwithstanding the positive results, Argentina faces important challenges in terms of investment
To increase and sustain high investment/GDP ratios, consistent with the requirements of a sustainable growth and price stability.
To improve the quality of investment.
To increase our participation in world and regional flows of Foreign Direct Investment
To promote further global value chain integration of international companies with their suppliers and clients
To support the growth and internationalization of local companies
To meet the increasing demand for energy and infrastructure that results from strong economic growth
Challenges
Significant increase in Investment as a percentage of the GDP
Investments mainly oriented to tradable sectors of the economy.
Recovery of Foreign Direct Investment after 2004
Public investment accompanying investment of the private sector
Investment growth coupled with employment growth
Results
Argentina’s Investment Development Agency 3636
• Greater productive diversification, with a growing participation of value-added and differentiated goods, propelled by a strong domestic demand.
• Higher value of exports and exports/GDP
• Higher participation of differentiated and value-added products and services in total exports.
High-Value Added Agribusiness Products
Biotechnology
Differentiated manufacturing
Software and IT Services
Tourism
Education, Health
15 Traditional Export Groups
82%
15 Traditional Export Groups
82%
High Value Added
Exports18%
High Value Added
Exports18%
15 Traditional Export Groups
70%
15 Traditional Export Groups
70%
High Value Added
Exports30%
High Value Added
Exports30%
2006US$ 54,000 M
2016US$ 100-120,000 M
Exports of Goods and Services
Source: FORTEZA, J. (2007)
For sustainable economic growth and development it is necessary to consolidate macroeconomic stability and to build microeconomic and institutional capacities which will allow us to produce and sell innovative and high value-added products and services in the domestic and international markets.
Argentina’s Investment Development Agency 3737
Natural Products
Natural Products
Food Products
Food Products
Raw Materials
Raw Materials
Biotechnology and Natural
Sciences
Biotechnology and Natural
Sciences
Design-Intensive
Manufacturing
Design-Intensive
Manufacturing
Hi-tech and Value-Added
Professional Services
Hi-tech and Value-Added
Professional Services
Business Processes
Outsourcing (BPO)
Business Processes
Outsourcing (BPO)
Real-estate and Tourism
Development
Real-estate and Tourism
Development
Culture
Culture
In this sense, Argentina has several success stories in a wide range of sectors and activities with high growth-potential, usually found in economies that are knowledge-and innovation- oriented.
Argentina’s Investment Development Agency 3838
To reach the next stage in the path towards sustainable development requires …
STRATEGIC VISION
BUILDING SOLIDCONSENSUS
INNOVATION, EDUCATION, Science &
Technology
NEW INVESTMENTS
A BRIDGE BETWEEN THE GOVERNMENT AND THE PRIVATE SECTORS
…within an institutional change-driven environment.
Argentina’s Investment Development Agency 39
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 4040
Given the extraordinary opportunity Argentina faces in the world economy the country's Investment Development Agency, ProsperAr, was created to:
…contribute to the optimization of Argentina’s investment and innovation environment.
…support the development and internationalization of local companies
…encourage national and foreign investment
Argentina’s Investment Development Agency 40
Argentina’s Investment Development Agency 41
Our vision is that that fostering Argentina’s entrepreneurship and innovation skills will increase investment and improve its quality.
INVESTMENT
ENTREPRENEURSHIPINNOVATION
41Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 4242
Argentina’s Investment Development Agency constitutes an institutional innovation in terms of its mission and organizational design.
Governance Model:
National Investment Council:- Minister Chief of Cabinet- Minister of Economy and Production- Minister of Foreign Affairs
Advisory Councils:- Private and academic sector- International
Public-private coordination and
collaboration
Economic-Financial Autarchy
Legal status
Ability to perform in the public and private law fields
Ability to send correspondents abroad
Autonomy
Board members hold a 4-year term of office
The president’s rank is equivalent to that of a Secretary of State and the Directors rank to that of Undersecretary of State
Stability
Yearly rendering of accounts
Internal Audit Department in coordination with the National Audit Commission
Transparency
Yearly rendering of accounts
Internal Audit Department in coordination with the National Audit Commission
Transparency
Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 4343
We have launched ten programs within five major areas of activity to optimize the investment and innovation environment.
Pro
gra
ms
a) Communicating the country’s sustainable economic growth and investment opportunities;
b) Creating a differential country image aligned to its identity: knowledge+ nature+ culture
1
Creating a diferential image for Argentina
Creating a diferential image for Argentina
Pro
jec
ts Federal Network for Investments
Investment Database
2 Personalized investor services
Services to investorsServices to investors
Active Investor Dialogue
Financial instruments to facilitate investment and productive innovation
10
4
5 Enhancement of Investment and Innovation Environment
Boost Investment Environment
Boost Investment Environment
6 Identification of investment and innovation opportunities and matching them with potential investors
Investment- focused Missions
Atract and Generate Investment
Atract and Generate Investment
Promoting the internationalization of local firms
“Pioneers Program”: enhancing the growth of innovative firms
7
8
9
Development and internationalization of local firms
Development and internationalization of local firms
Fostering the integration of local suppliers to Global Value Chains
3
Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 4444
ProsperAr has in its governance model concrete public-private collaboration working schemes.
National Council on Development Investments
- Chief of Cabinet
- Minister of Economy and Production
- Minister of Foreign Relations, International Trade and Worship
Internal Audit Department
Superior International Advisory Council
Advisory Council: private sector
Board of Directors*
President (1)
Dr. Beatriz Nofal
Members (2)
Mr. Daniel Falcón
Ms. Luciana Pagani
Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 4545
Differential Strategy and Positioning
Concrete Initiatives and
Projects
High-Impact Tools
With public-private coordination and a collaborative environment, we want to maximize the impact of our work regarding:
• Differential strategy and positioning of Argentina in productive activities with high-growth potential.
• Initiatives for optimizing the innovation and investment environment.
• Investment projects to take advantages of opportunities or to close competitive gaps.
• Refinement of the Agency’s programs to:
•Stimulate domestic and foreign direct investments.
•Support the growth and internationalization of domestic companies.
•Improve access to financing and capital.
45Argentina’s Investment Development Agency
Argentina’s Investment Development Agency 4646
In conclusion, at ProsperAr we work within a public-private
collaborative framework with the goal of making
investment and innovation the engines of sustainable
development.
To achieve this goal, it is necessary to continue
consolidating sustainable macroeconomic growth and to
build social consensus aimed at enhancing a natural
resource based export economy with the application of
new investment, knowledge and innovation to produce
also world-class competitive high value added products
and services.
Argentina’s Investment Development Agency 47
• Investment Opportunity– Macroeconomic Sustainability– Competitive Production Factors– Incentives and Investment Environment
• Investment Performance
• Future Challenges
• ProsperAr
• Argentina - Japan bilateral relations
Table of Contents
Argentina’s Investment Development Agency 48
Sector 1990-2001 2002-2007Automotive 158,2 436,8Rubber products 4,6 105,7Research & Development (R&D) 0,0 13,2Auto parts 21,5 12,2Beverages 14,0 5,0Electronic devices & domestic appliances 8,0 4,2Metallic minerals 49,0 3,9Retail 0,0 2,6Shipping 0,0 0,9Hotels & restaurants 17,7 0,0Diary products 16,8 0,0Machinery & Equipment 106,7 0,0Fishing 19,1 0,0Petrochemical 83,0 0,0Telecommunications 35,1 0,0Transport terminals 5,0 0,0Total 538,7 584,4
Investment announcements made by Japanese companies in Argentina In millions of dollars
Source: ProsperAr based on CEP* The investments mentioned above correspond to companies’ announcements taken from the media. Investments in greenfield, expansion of existing plants and mergers & acquisitions have been considered.
Japanese direct investment has contributed significantly to the building of productive capacities in our country, with strong participation in the automotive industry.
Argentina’s Investment Development Agency 49
Some major Japanese companies present in Argentina
Company Sector Toyota Automotive Brigestone/Firestone Rubber products Honda Motors Motorcycles & Automotive NEC Software Araco Auto parts Nissan Automotive (retail) Newsan Electronic & domestic appliances Japan Oil, Gas and Metals Metallic minerals La Superiora Beverages Sony Electronic & domestic appliances Marubeni Various industries Kataoka Beverages Denso Manufacturing Auto parts Yamaha Motorcycles NKY Shipping Canon Electronics (retail) Yakult Diary products Mitsubishi Various industries
World-class leading Japanese companies have been actively present in our country for several decades
Source: ProsperAr based on CEP
Argentina’s Investment Development Agency 50
-592,0
687,2
1279,3
-1.000
-500
0
500
1.000
1.500
2.000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Balance Exports Imports
Argentina-Japan Trade. 1996/2007millions of US$
Source: ProsperAr based on INDEC
Renewed dynamism has been observed in bilateral trade flows over the last three years…
Argentina’s Investment Development Agency 51
1,2%0,9%
0,8%1,0%
1,3%1,4%1,4%
2,5%2,3%
1,4%
2,9%
4,6%
4,2%4,0% 3,8%
3,5%
2,7%2,8%2,7%2,9%
0%
1%
2%
3%
4%
5%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Exports Imports
Japan's share in Argentina's Exports and Imports
Source: ProsperAr based on CEP and INDEC
... with a recovery of Japan's share in total Argentine trade, although this share remains relatively low showing a significant growth potential.
Argentina’s Investment Development Agency 52
Source: ProsperAr based on CEP and JETRO
0,12%
0,21%
0,26%
0,37%
0,19%
0,08% 0,08%
0,11%0,13%
0,10%
0,13%
0,10%0,08%
0,06%0,08%
0,11%0,10%0,10%
0,17%
0,23%
0,0%
0,1%
0,2%
0,3%
0,4%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Exports Imports
Argentina's share in Japan's Exports and Imports
Likewise, Argentina's share of Japanese trade also shows signals of recovery, but it continues at low levels.
Argentina’s Investment Development Agency 53
Exports to Japan Imports from Japan
Primary Products: 58.2%
MOA (farming & livestock manufactures): 21.7%
MOI: (industrial manufactures): 17.3%
Fuel & Energy: 2.9%
Capital Goods Parts & Accessories: 37.2%
Capital Goods: 28.4%
Intermediate Goods: 16.7%
Consumer Goods: 9.2%
Passenger vehicles: 8.3%
Source: ProsperAr based on INDEC
Argentina - Japan trade breakdown Year 2007
Bilateral trade has a clear specialization pattern. Exports from Argentina are mainly primary products (58%) while imports from Japan are concentrated on capital goods and their parts (65% of total imports).
Argentina’s Investment Development Agency 54
0
200
400
600
800
1.000
1.200
1.400
1.600
1.800
2.000
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
0
20
40
60
80
100
120
140
160
180
200
220Announced Investment (axis on the right)
Exports (axis on the left)
Imports (axis on the left)
Trade flows with Japan and investments* made by Japanese companies in Argentina. Millions of USD
Investment and trade flows between Japan and Argentina are clearly complementary.
Source: ProsperAr based on CEP* The investments mentioned above correspond to companies’ announcements taken from the media. Investments in greenfield, expansion of existing plants and mergers & acquisitions have been considered.
Argentina’s Investment Development Agency 55
To conclude...
• An important recovery of trade and investment flows has
been observed between Japan and Argentina over the past
few years
• The challenge is to continue increasing the intensity of
bilateral trade flows and to improve Argentina’s export
composition towards higher value added products and
services.
• Japanese direct investments in Argentina, and maybe
Argentinean investments in Japan -although to a lesser
extent- can contribute to meet that challenge.
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Argentina’s Investment Development Agency
Muchas GraciasThank you
To learn more about how to invest in Argentina, contact ProsperAr:
Florida 375, 8th Floor Suite B (C1005AAG) Buenos Aires
Argentina
Tel: (+5411) 4328-9510
email: info@prosperar.gov.ar
www.prosperar.gov.ar