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ARGENTINA. See: www.biasca.com ; www.vrg-ar.com. ARGENTINA Advantages of Investing Today. Secretariat of Industry, Commerce, and SMEs Ministry of Economy and Production. The Argentine Economy. Argentina at a Glance .

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Argentina l.jpg
ARGENTINA

See: www.biasca.com ; www.vrg-ar.com


Argentina advantages of investing today l.jpg

ARGENTINAAdvantages of Investing Today

Secretariat of Industry, Commerce, and SMEs

Ministry of Economy and Production




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In terms of purchasing power, Argentina boasts the highest per capita income among major Latin American economies.


The argentine economy is highly diversified l.jpg
The Argentine economy is highly diversified … per capita income among major Latin American economies.

GDP by Economic Sector, 2004

Services, 54%

Goods, 46%

Wholesale, Retail, and Repairs; 21%

Manufacturing Industry; 52%

Real Estate, Rental, and Other Business Activities, 21%

Transport, Warehousing, and Communications; 17%

Fisheries; 1%

Hotels and Restaurants; 4%

Electricity, Gas, and Water Supply; 4%

Other Services; 7%

Education, Social, and Health Services; 12%

Agriculture, Fishing, Hunting, and Silviculture; 22%

Construction;

9%

Mining and Quarrying; 12%

Financial Intermediation: 8%

Public Administration, Defense, and Extraterritorial Activities; 10%

Source: ADI based on National Accounts


With an ample supply of skilled labor l.jpg
with an ample supply of skilled labor … per capita income among major Latin American economies.

The relative high school attendance expectancy is reflected on the literacy rate and the primary, secundary and tertiary education enrollment rates. Attendance expectancy at educational establishments in Argentina is the highest in Latin America and compares with developed countries (i.e members of the Organisation for Economic Co-operation and Development).


High availability of natural resources l.jpg
… high availability of natural resources … per capita income among major Latin American economies.

  • Argentina has just under 250,000 km²of 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 world’s leading 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)


And considerable energy resource reserves l.jpg
… and considerable energy resource reserves. per capita income among major Latin American economies.

CONFIRMED RESERVES as at 12/31/2003

Confirmed

Probable

Basin

Gas

Gas

3

3

Oil (Mm

)

Oil (Mm

)

3

3

(MM m

)

(MM m

)

North West

19,308

124,511

8,355

52,599

Cuyana

28,879

516

7,300

220

Neuquen

161,934

311,172

54,602

99,277

San Jorge Gulf

195,887

38,048

46,871

23,431

Southern

19,206

138,248

21,059

113,479

TOTAL

425,213

612,495

138,187

289,006

Source: ADI based on Energy Secretariat data.


Domestic industry is modern and competitive l.jpg

Argentine industrial structure is broad and diversified. per capita income among major Latin American economies.

Highly competitive industrial sectors boast world class enterprises.

The sectoral and regional active policies along with the general economic policy favors the development of the sector.

Companies including Exxon, Ford, Coca-Cola, Fiat, Bayer, Renault, Siemens, Nestlé, Firestone, BASF, Pirelli and Abbot have been operating in Argentina for over 50 years.

Annual capability of production at domestic industrial sector includes:

7 million tons of oilseed oils and more than 20 million tons of related products.

15 million hectoliters of wine.

2 million tons of sugar.

400,000 tons of tanned leather.

1.2 million tons of paper.

200,000 tons of PVC and more than 1.5 million tons of derivates like polyetyhlene and propiline.

275,000 tons of aluminium.

5 million tons of steel.

4.15 million tons of seamless and seam pipes.

550,000 automobiles.

Domestic industry is modern and competitive …


With a highly developed infrastructure l.jpg
… with a highly developed infrastructure. per capita income among major Latin American economies.

  • A 38,744 km national road network

  • This extends to 500,000 kms if the provincial and municipal networks are included

  • A 35,753 km railway network

  • 38 maritime ports and 25 river ports

  • 52 airports, 21 of which are international

  • Over 25 airlines operate flights from Argentina to 40 international destinations in five continents

TELECOMMUNICATIONS

Latin Am. &

per 1000 inhabitants

Argentina

Brazil

Mexico

the Caribbean

Telephone Lines

220.2

182.1

124.7

145.9

Cellular Phones

168.8

136.6

142.4

70.5

PCs

91.1

62.9

68.7

59.3

Source: World Bank (2002)

  • Installed electrical energy generating capacity totals 21,300 MW.


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Social conditions are above the average of Latin America. per capita income among major Latin American economies.


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As a MERCOSUR Member State, Argentina enjoys preferential access to a market totalling 274 million consumers.

MERCOSUR

GDP: US$ 722 billion

Population: 223 million people

  • The MERCOSUR (Southern Cone Common Market) is a common market comprising Argentina, Brazil, Paraguay and Uruguay.

  • Bolivia, Chile and Peru are MERCOSUR Associate States, recently it was approved the incorporation of Colombia, Ecuador and Venezuela with the same status.

  • At the same time, Mercosur’s calendar of external negotiations includes agreements and negotiations with different blocs and countries like Mexico, India and EU.

MERCOSUR + ASSOCIATES

GDP: US$ 975 billion

Population: 355 million people

Source: ADI based

on IMF data (2005)


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Since the creation of MERCOSUR, there has been strong growth in trade between Argentina and the other Member States ...

  • Argentine exports to the bloc increased by 236% between 1991 and 2004 (34% more than sales to the rest of the world). Imports from MERCOSUR practically quintupled over the same period.

In 2004, 4,800 companies registered exports to the value of US$ 6,650 million to MERCOSUR.


Resulting in a higher value added export profile l.jpg
… resulting in a higher value added export profile. in trade between Argentina and the other Member States ...

  • 37% of total industrial manufacture exports go to MERCOSUR.

  • The export value per-ton to MERCOSUR is 35% higher than to other markets.

US$/ ton (2004)

MERCOSUR

477

Other Markets

354

PP:Primary Products

AM:Agricultural Manufactures

IM:Industrial Manufactures

F&E:Fuel and Energy

Source: ADI based on INDEC


Argentina ranks as an integrated economy l.jpg
Argentina ranks as an integrated economy... in trade between Argentina and the other Member States ...

  • Since the late 80s and as a result of a significant reduction in tariff and non-tariff barriers, foreign trade has been particularly dynamic, a phenomenon that does not exclude trade with the region.


And with its doors open to the world l.jpg
… and with its doors open to the world. in trade between Argentina and the other Member States ...

FOREIGN DIRECT INVESTMENT FLOWS (FDI)

  • Diferent factors influenced in order to make Argentina attractive to numerous foreign direct investment projects in various sectors of the economy.

  • The good performance of last year allows to glimpse the beginning of a new growing cycle, in which Argentina will be among the major FDI host countries.

Foreign Direct Investment

By Economic Sector (1992-2002)

Oil

Manufacturing

20%

Industry

34%

Electricity, Gas,

and Water

Mining

14%

1%

Banks

Trade

10%

4%

Transport and

Others

Communications

8%

9%

Source: ADI based on Ministry of Economy data


Argentina in the new economic context l.jpg

Argentina in the in trade between Argentina and the other Member States ...new economic context


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The economy staged a gradual recovery following the crisis that began in mid-1998 and ended with the abandonment of the Convertibility Regime in January 2002.


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The manufacturing industry led the recovery, reaching the 1998 level in March 2004, only 1.2% below the historical record (June 1998).


There was renewed growth in the construction industry surpassing 2000 and 2001 levels l.jpg
There was renewed growth in the construction industry, surpassing 2000 and 2001 levels.

Source: ADI based on Ministry of Economy data


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There has been a gradual recovery in investment as from 4Q 2002. Renewed growth in investment represented a significant contribution to GDP.


Following devaluation consistent monetary and fiscal policy led to price stability l.jpg
Following devaluation, consistent monetary and fiscal policy led to price stability.

  • 2002 inflation marked a break with the price stability of the previous decade and was the result of abandoning the Convertibility Regime, introduced in April 1991, establishing exchange rate parity at $ 1= US$ 1.

  • Nevertheless, following the adjustment involving a minimal pass-through of devaluation to prices, a single-digit inflation rate was once again achieved in 2003.

Source: ADI based on Ministry of Economy data


The recovery in economic activity led to a significant increase in jobs l.jpg
The recovery in economic activity led to a significant increase in jobs.

1. Employment Rate: Employed/ Total Population

2. Unemployment Rate: Unemployed/ Economically Active Population

  • Almost 2 million new jobs were created between 2Q 2002 and 3Q 2004 in the private sector.

  • The albeit still high unemployment levels began to drop following the recovery in economic activity, it is falling as the economy recovers, and a further decline can be expected.


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Export performance is highly favourable and the upward trend is expected to continue.

There has been a gradual expansion in exports as from 2003. Last year reached a new historical record.

Imports have recovered strongly following the drop in 2002. Since then has registered an increase of 163%.

A robust trade surplus was maintained in 2004 despite the recovery of economic activity and a slight appreciation of the peso in real terms.

Source: ADI based on Ministry of Economy data.


The current account balance has turned positive following ten years of deficits l.jpg
The Current Account Balance has turned positive following ten years of deficits.

  • The 2004 balance is slightly down on 2003 due to a 60% rise in imports and the net expenditure of earnings and dividends following the economic recovery.


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The trade surplus and the reduction in the financial account deficit have significantly boosted Central Bank reserves.


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Fiscal accounts have improved substantially since May 2002, as a result of stabilized public spending and higher tax revenues.

Source: ADI based on Ministry of Economy data


A favorable monetary trend was established throughout the last years l.jpg
A favorable monetary trend was established throughout the last years.

  • The expansion of the broad monetary base and the issue of Central Bank Bills (LEBACs) exemplified the continuity of a prudent and flexible monetary policy that accompanied economic growth at no cost in terms of inflation.

Source: ADI based on Ministry of Economy data


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The drain on deposits was halted as from 2Q 2002 , with a positive trend from that point onwards, together with banks recovering liquidity.

Source: ADI based on Ministry of Economy data


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Why invest in Argentina? positive trend from that point onwards, together with banks recovering liquidity.


Why invest in argentina32 l.jpg
Why invest in Argentina? positive trend from that point onwards, together with banks recovering liquidity.

  • Highly qualified population

  • Availability of natural resources

  • Modern diversified industry

  • Competitive costs and services

  • Developed infrastructure

  • Investment incentives

  • A legal framework that does not discriminate against foreign investments


A country with a highly skilled workforce l.jpg
A country with a highly skilled workforce positive trend from that point onwards, together with banks recovering liquidity.

A comparison of the main education indicators reveals Argentina’s high ranking at both regional and international level. Attendance expectancy at educational establishments is the highest in Latin America and similar to the one observed for developed countries such as Spain, Italy, and the United States.

Illiteracy in the City of Buenos Aires, with a population similar to Uruguay, is 0.5% and 1.3% in the metropolitan region, with a population similar to that of Chile.

Source: ADI based on UNESCO data, 2004.


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Education is compulsory and free for the 5-14 year age group, thus ensuring high school enrolment rates, not only at primary but also at secundary and tertiary education level.

Net education enrollment rate: Number of students enrolled in the correct age group level as a percentage of the total population eligible for this age group level.

Gross education enrollment rate: Total number of students enrolled in the level as a percentage of the total population eligible for this age group level.

Source: ADI based on UNESCO data, 2004.


The argentine education system is also well developed at the higher education level l.jpg
The Argentine education system is also well developed at the higher education level.

University Students

(per 100,000 inhabitants)

  • Argentina boasts a broad network of public and private universities attended by over one million students.

  • The university student/ total population ratio is the highest in Latin America and compares with the ratio for several developed countries.

3,582

Spain

Argentina

3,123

Italy

3,022

Uruguay

2,400

Chile

2,100

Colombia

1,540

1,490

Mexico

1,068

Brazil

Source: ADI based on UNESCO data


Slide36 l.jpg
The strength of the education system is exemplified by the number of scientists and engineers working in research and development.

Scientists and Engineers working in R&D

(per 1,000,000 inhabitants)

1,921

1,128

713

533

370

323

225

219

101

Spain

Italy

Costa Rica

Chile

Brazil

Mexico

Uruguay

Colombia

Argentina

Source: ADI based on UNESCO data


Availability of natural resources l.jpg
Availability of Natural Resources number of scientists and engineers working in research and development.

  • Argentina is characterized by the abundance and quality of its natural resources that provide competitive advantages in developing activities linked to these resources.

  • Argentina is the eighth largest country in the world in terms of surface area and its relevance is even greater if factors relating to the potential its surface area offers are considered (i.e. the proportion of surface area suitable for agriculture, mining resources, etc.).


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Agriculture: Argentina has some of the most suitable agricultural land worldwide

The relevance of Argentina’s agricultural surface area is not only due to its size but also to the excellent agroecological conditions, resulting in high yields.

Source: ADI based on FAO data

  • Land under temporary crops, temporary meadows for mowing or pasture, land under market and kitchen gardens and land

  • cultivated with permanent crops (fruit trees, nut trees, vines, etc.).


Slide39 l.jpg

In Latin America, only Brazil has a greater surface area suitable for agricultural use. However, if domestic market pressure on production is considered, Argentina has a higher availability in relative terms.

Brazil and Argentina represents 9% of the world´s agricultural surface area. Furthermore, Latin America has about 23% of the world's potential arable land.

* Land under temporary and permanent crops, temporary meadows for mowing or pasture, gardens and land used permanently for herbaceous forage crops, either cultivated or growing wild.


Slide40 l.jpg

  • In comparison with the major grain-producing countries, Argentine yields are highly competitive at international level.

  • Similar conclusions are obtained when comparing yields for other crops such as apples, pears, lemons, beans, and garlic in which Argentina also has a considerable global market share.

Soybean Productivity

(Argentina =100)

Argentina

Brazil

USA

Australia

China

Russia

India

0

50

100

Wheat Productivity

Corn Productivity

(Argentina =100)

(Argentina =100)

China

USA.

USA

Argentina

India

Australia

Argentina

China

Brazil

Brazil

Australia

Russia

Russia

India

0

50

100

150

200

0

30

60

90

120

150

Source: ADI based on FAO data


Slide41 l.jpg

Agricultural production increased 103% in the period 19 Argentine yields are highly competitive at international level. 90-2004. Principal crops include soybean, wheat, sunflower, and corn. Cultivated surface area increased approximately 40% over the same period, representing significant progress in terms of yields.

Source: ADI based on SAGPyA data.


Slide42 l.jpg
Silviculture: The availability of extensive areas promotes the development of other activities including silviculture.

  • The main factors determining competitive advantages in this activity (soil types, climate, costs, human resources, etc.) are present in vast regions of Argentina.

  • Of the 20 million hectares suitable for forestry, only 5% are currently used for this purpose. Land suitable for forestry does not compete with other agricultural activities.

  • The diversity of climates and soil types makes it possible to cultivate a wide variety of species.

  • In addition to tree growth rates, the relatively low land value compared to countries such as Brazil and Chile yields high rates of return and exceptional payback periods.

  • High growth rates: 41 m3 / hectare/ year (Chile 35 m3) for eucalyptus and up to 32 m3 / hectare / year for pine (three times the growth rate in Canada and twice that of the United States).


High growth rates for conifers and eucalyptus l.jpg
High growth rates for conifers and eucalyptus the development of other activities including silviculture

Conifers

Eucalyptus

Source:Simpson Timber Co., Aracruz Cellulose, Jaako Powry Investments. CIEF.


Slide44 l.jpg

Fishery Resources: The length of its Atlantic coastline the development of other activities including silviculture(4,725 km) and the variety of species found in the fishing zone make Argentina one of the best fishing areas worldwide.

Maritime fishing have recovered strongly in the last years. There are also considerable captures of molluscs and crustaceans like prawns and squids, besides fish.

Source: ADI based on SAGPyA data


Mining in argentina l.jpg
Mining in Argentina the development of other activities including silviculture

  • 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.

  • The positive impact of the new legal framework on the sector can be observed in recent investments and exports that rose from practically zero to over US$ 1 billion per year.


The mining investment law provides the following incentives l.jpg
The Mining Investment Law provides the following incentives:

  • According to the Law, companies may file for a 30 year long fiscal stability period.

  • Double deduction of prospecting, exploration, and technical/ economic feasibility study expenses, for income tax purposes.

  • Financing and reimbursement regime for VAT on capital goods and investments in physical infrastructure projects.

  • Accelerated depreciation of capital investments.

  • Exemption from import duties on capital goods and equipment, spare parts, and accessories.

  • Exemption from assets tax.

  • Provincial royalties are limited to 3% of the pit-head value of mineral extracted.

  • An income tax deduction of up to 5% of extraction operating costs and a tax deduction for environmental conservation allowances.


Notable growth in mineral exports l.jpg
Notable growth in mineral exports incentives:

The transformation and integration of the Argentine mining industry into international markets is reflected in the tripling of exports over the last seven years. The upward trend is expected to continue due to Argentina’s geological potential, the availavility of potential areas that remains unexplored and high rates of return.

Source: ADI based on INDEC data


Investment growth in the sector l.jpg
Investment growth in the sector incentives:

  • The positive impact of the new legal framework on the sector can be observed in recent investments that rose from practically zero to over US$ 1 billion in 2002.

  • Investment has remained robust despite the economic crisis.

  • Leading global mining companies including Barrick - Homestake, BHP - Billiton, FMC Lithium, Anglogold, Weathon River Minerals, Xstrata, Rio Tinto and Minera Aguilar have already decided to invest in Argentina.

Source: ADI based on CEP data


Argentina ranks high internationally in terms of available mining resources l.jpg

The principal mining areas currently in production include incentives: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

Argentina ranks high internationally in terms of available mining resources.

Source: ADI based on Mining Journal


Increased oil and gas production l.jpg
Increased oil and gas production incentives:

  • Argentina has a very gas-intensive economy, natural gas accounted for half of total primary energy supply. Gas production has increased constantly since the early 90s, doubling early 90s levels in 2004. Argentina is the second largest producer in the Region.

  • Although oil production has fallen in recent years, levels are still 50% above the levels recorded 13 years ago. At the same time, should be pointed out that Argentina is still one of the major producers in the region.

Source: ADI based on Energy Secretariat data


Oil and gas l.jpg
Oil and Gas incentives:

  • The oil reserves/ production ratio increased despite a 13% rise in production during the period under review.

  • Although the gas ratio decreased between 1994 and 2002, it should be pointed out that production rose by 65.2% during this period.

Gas: Reserves/ Production ratio

Oil: Reserves/ Production ratio

(years)

(years)

10.6

19.8

19.3

10.2

17.8

9.2

9.1

8.9

14.8

14.5

1994

1996

1998

2000

2002

1994

1996

1998

2000

2002

Source: ADI based on Energy Secretariat data


A sustainable environment l.jpg
A Sustainable Environment incentives:

  • Argentina ranks 9 among 146 countries in the University of Colombia environmental sustainability rankings.

  • The availability of vast areas with optimal environmental conditions is clearly a significant factor in attracting investment. Nowadays, Argentina is highly considered noyt only because the abundance and quality of its natural resources but also because of its lowest vulnerability to environmental stress, the functioning of ecosystems and global stewardship.

The ESI is elaborated by a team of environmental experts at Yale and Columbia Universities.


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Modern diversified industry incentives:

  • Argentina boasts a relatively modern and diversified industrial structure. There has been substantial investment in machinery and equipment in recent years and a nucleus of state of the art companies has emerged.

  • In addition, Argentina’s industrial profile is characterized by:

    • Pronounced alignment with Argentine factor endowment

    • High labor productivity indices

    • High capital intensity

    • Export-oriented production

    • Increases of scale

    • Transnational enterprises

Source: ADI based on CEP data

The recovery is currently being boosted by new investment, with flows aimed at industry and other tradable goods sectors playing a dominant role.


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Relatively higher prices for domestic products favor the production of tradable goods, resulting in a higher industrial sector share in GDP.

  • The industrial sector is one of the pillars of the current economic recovery and growth in production is the result of higher exports as well as import substitution.

  • The improvement in the structural sustainability of the economy, allows to settle down competitiveness policies that will consolidate the strategies of quality, technological development and productivity.

Sector Share in GDP at current prices


A modern diversified industrial sector integrated into the global market l.jpg
A modern diversified industrial sector integrated into the global market

Economic opening has transformed the industrial sector, resulting in:

  • A greater emphasis on exporting:Manufactured goods exports have increased their share

    of industrial GDP.

  • Increased international integration:Intermediate goods imports have increased their

    share of industrial GDP.

Intermediate Goods Imports/

Industrial GDP

Exports / Industrial GDP

70%

26%

26,2%

60%

28,7%

50%

22%

40%

10,1%

18%

30%

35,8%

IM

20%

IM

14%

13,6%

10%

AM

11,8%

0%

10%

´ 94

´ 96

´ 98

´ 00

´ 02

´ 04

´ 94

´ 96

´ 98

´ 00

´ 02

´ 04

Source: ADI based on INDEC and National Accounts data


The industrial sector displays continuous improvement in human resource productivity l.jpg
The industrial sector displays continuous improvement in human resource productivity.

  • Argentina has recorded significant progress in human resource productivity with a

    26% increase in labor producivity between 1995 and 2000.

The relative labor productivity gap with the United States is the lowest in Latin America. According to ECLAC statistics, average Argentine industrial sector labor productivity is 67% of US levels, with Brazil at 37%, and no other Latin American country higher than 40%.

Source: ADI based on INDEC data


A modern diversified and growing industrial sector l.jpg
A modern, diversified, and growing industrial sector human resource productivity.

  • Industrial production has developed favorably in recent months. The recovery in domestic demand, the integration of Argentine world classproducers of industrial inputs and primary commodities into external markets is intensifying, accompanied by a new process of import substitution in specific branches.

The industrial activity is currently at its highest level for the last five years.

The cumulative increase from January 2002 to December 2004 is 38,5%.

Source: ADI based on INDEC data


There has been growth in all industrial sectors in recent months l.jpg
There has been growth in all industrial sectors in recent months.

Industrial sector evolution

  • Of the industrialsectors currently displaying increased growth, special attention should be drawn to the metalworking and automotive industry, editing and printing products and other foodstuff and drinks sub-sectors.

  • Industrial growth over the past two years has been generalized, irrespective of the various branches’ specific orientation (domestic market, import substitution, or exports).

2004 average vs. 2003 average, % variation

Automotive

Editing and printing

No metallic minerals

Other metalmechanics

Paper and cardboard

Chemicals

Rubber and plastics

General Level

Textiles

Beverage and food

Petroleum refining

Basic metals

10%

20%

30%

40%

50%

60%

Source: CEP based on INDEC data


Slide59 l.jpg

Argentina months.is among the most competitive economies in the international market in terms of costs for producing a wide range of products and services.

  • Some of the basic costs investors must take into consideration if they wish to set up their business in Argentina are listed below.

Source: ADI based on Ministry of Economy and Production data


Skilled labor costs for buenos aires are competitive vis vis other cities worldwide l.jpg
Skilled labor costs for Buenos Aires are competitive vis months.-à-vis other cities worldwide.

  • Comparing City of Buenos Aires local labor costs with costs in other major urban centers reveals that Argentine costs are highly competitive.

Source: ADI based on UBS, Prices and Earnings 2003.


Buenos aires also offers clear advantages over the rest of the world in terms of cost of living l.jpg
Buenos months. Aires also offers clear advantages over the rest of the world in terms of cost of living.

A basket of 39 products with due consideration of the preferences of Western European consumers was taken as a reference.

A basket of 19 services including telephone, post office, hairdressing, cinema, restaurant dining, dry cleaning, etc. was taken as a reference.

Source: ADI based on UBS, Prices and Earnings 2003.


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Competitive costs for agricultural land combine with excellent agroecological conditions that ensure high yields in the widest variety of crops.

Source: ADI


Availability of office space at low rates l.jpg
Availability of office space at low rates excellent agroecological conditions that ensure high yields in the widest variety of crops.

* The rent quoted is the typical “achievable” rent for a 1,000 sq. m. unit in a top quality (Class A) buildings in a primer location. Class A: Buildings generally used for rental purposes. Located in easy access areas. Modern layouts with good natural light and view. Well finished and maintained. Tenants are generally multinational companies and/ or tenants with a high economic capacity.

Source: ADI based on CBRE, Global Market Rents 2004.


Low cost electric power for industry l.jpg
Low-cost electric power for industry excellent agroecological conditions that ensure high yields in the widest variety of crops.


Low cost gas for industry l.jpg
Low-cost gas for industry excellent agroecological conditions that ensure high yields in the widest variety of crops.


Competitive telecommunications costs l.jpg
Competitive telecommunications costs excellent agroecological conditions that ensure high yields in the widest variety of crops.


Developed infrastructure l.jpg
Developed infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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.


Commercial aviation infrastructure l.jpg
Commercial Aviation infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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).


Port infrastructure l.jpg
Port infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Argentina has 38 maritime ports along the Atlantic coastline and 25 river ports. Most of foreign trade transactions passed out through these ports.

  • Recognised international maritime cargo operators operate out of Argentina.

  • 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.


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Port Infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Argentina’s main port has achieved considerable progress in recent years in terms of operability. Buenos Aires was born and grew with a close relationship to its role as a port, which would become, in time, a point of commercial and communication ways concentration.


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Paraguay - Paraná Waterway excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • The Paraguay-Paraná Waterway is the main river transport lane along the Paraguay-Paraná water system and measures 3,302 km in length.

  • The importance of this project lies in the lower river navigation costs (the approximate freight cost is US$ 0.010 per ton/ km) and the lower environmental impact.

  • Hidrovía S.A. is responsible for dredging to a draft depth of 32 feet, seamarking, and maintaining the main access channel to the River Plate and the River Paraná for the 779 km stretch to the port of Santa Fe.

  • The waterway is navigated by tug-propelled barge convoys, each barge with a loading capacity of 1,500 tons. Currently, the maximum convoy is generally 20 barges (30,000 tons) measuring approximately 300 meters between perpendiculars with a 48 meter beam.


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Road Infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • The National Road Network spans 38,632 km,

    81% of which are paved (see map).

  • A further 180,000 km of roads are under

    provincial and 280,000 km under municipal

    jurisdiction.


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Railway Infrastructure excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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 though the railway system and consequently decreed the reopening of branch lines such as the Central Trans-Andean Railway via tender and the rehabilitation and transformation of the Belgrano Cargas freight line.


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Telecommunications excellent agroecological conditions that ensure high yields in the widest variety of crops.

Argentina began developing telecommunications 123 ago, only 4 years following the launch of the Bell Telephone Company.

Over the last 10 years, investments totalling more than 20 billion dollars have increased the number of telephone lines in service by 74%, total digitalization of the network has been achieved, and the mobile telephone service has grown from less than half a million to 12 million phones in service.

PER 100

Latin Am.

Argentina

Brazil

Mexico

INHABITANTS

& Carib.

Telephone lines

22.0

18.2

12.5

14.8

Cellular phones

16.9

13.7

14.2

12.2

PCs

9.1

6.3

6.9

5.9

Internet users

8.8

4.6

3.7

5.0

Source: World Bank (2001)


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Telecommunications excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Various indicators give an overview of improvements in the telecommunications sector in recent years.

CATHEGORY

1990

2004

Fixed lines installed (thousands)

3,097

9,894

Cellular phones (thousands)

15

12,480

Digitalization of network

13%

100%

Lines in service per 100 inhabitants

11.9

55.6

Public telephones (thousands)

22.5

150.7

Lines in service per employee

76.1

956.9

Investment in the sector 1991-2000

US$ 21,150 Millones

Source: National Communications Commission


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Telecommunications excellent agroecological conditions that ensure high yields in the widest variety of crops.


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Telecommunications excellent agroecological conditions that ensure high yields in the widest variety of crops.


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Investment Incentives excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Argentina has a number of regimes designed to promote investments by both domestic and foreign investors alike:

    • General incentives: Instruments and measures aimed at promoting investment in any region or economic activity.

    • Sectoral incentives: Promotion regimes aimed at a particular economic sector.

    • Regional incentives: Provincial investment promotion regimes and investment support infrastructure.


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General Incentives excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Export promotion incentives including drawback, temporary admission, turnkey plant exports, and customs-at-factory regimes.

  • Instruments and regulations aimed at reducing initial investment costs: investment Value Added Tax (VAT) financing; reduced VAT tax rate on capital, informatic and telecommunications goods; zero import tariff on capital goods; zero tariff on all goods destined for use in major investment projects.

  • Measures that boost competitiveness by reducing operating costs, such as deregulation of the electricity and long distance telecommunication markets, air freight transport, etc.


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General Incentives: New tax measures to promote investments excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Since September 2004, the Executive Branch has implemented new mechanisms designed to promote investment. The new promotion regime consists in the accelerated reimbursement of VAT related to the investments and in an accelerated depreciation regime under the income tax

    • Accelerated depreciation for machinery, equipment, and infrastructure works destined for investment projects. Capital goods purchases may be depreciated in the balance sheets for the three years subsequent to purchase and infrastructure project depreciation will be reduced by 50% vis-à-vis the usual depreciation period.

    • Refund of VAT paid on the purchase of goods destined for use in investment projects. All VAT not offset will be refunded in cash three months after purchase.

    • The regime will remain in effect for 36 months. Until now 36 projects were included in the regime covering a total investment of 1,800 billion us dollars.


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Sectoral Incentives excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Certain sectors including mining, forestry, tourism, and the automotive industry have specific investment promotion regimes.

  • Some of these regimes include the following incentives inter alia:

    • Fiscal stability for 30 years (forestry, mining)

    • Special depreciation regime for income tax purposes (forestry, mining)

    • Tax exemptions (forestry, mining, tourism, automotive industry)

    • Compensated trade regime (automotive industry)

  • On March 2004 the Argentine Government sent to Congress a bill containing a series of measures aiming to promote investments in different sectors like Biotechnology.


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Regional Incentives excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • Various provinces in Argentina have investment promotion regimes that generally include the following incentives:

    • Exemption from provincial taxes such as turnover tax, stamp duty, real estate tax, etc.

    • Reduced public utility rates

    • Support for infrastructure and equipment projects

    • Facilities for the purchase, rental, or lease without charge of public property

  • Most provinces have business support infrastructure such as industrial parks and free trade zones.


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Legal Framework excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • The legal framework currently in force was designed to attract foreing investment trough the open up of its economy and the removal of barriers to foreign investor acess to specific economic sectors.

  • The main aspects of the current legal framework with regard to FDI are based on:

    • National treatment for foreign investors

    • No prior approval or registration requirement for investments

    • Access to all economic sectors

    • Access to domestic incentive programs

    • Unimpeded transfer of profits and repatriation of capital


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Attractive Sectors for Investment excellent agroecological conditions that ensure high yields in the widest variety of crops.


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Attractive sectors for investment excellent agroecological conditions that ensure high yields in the widest variety of crops.

The following include some of the most attractive sectors for investment: Mining Forest industry Leather and leather products Petrochemical industry Agricultural machinery Vegetable oils Grape growing and wine making Cultural industries Software Outsourcing Tourism


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Mining excellent agroecological conditions that ensure high yields in the widest variety of crops.

Rates of return after taxes

(gold mine)

  • Strong increase in production

  • Exports tripled in the last 7 years (US$ 996 millon in 2003)

  • Strong foreign investment in the last 6 years (US$ 3 billion)

  • Favorable legal framework

  • Geological potential: rich in mining resources (ranked sixth worldwide)

  • 75% territory with potential still unexplored

  • Mining Integration Treaty with Chile

  • High profitability in copper and gold mines

  • Availability of production resources: infrastructure, skilled labor and a growing supply of local suppliers

S. Africa

Chile

Argentina

Australia

USA

Peru

Bolivia

Canada

Mexico

China

0

5

10

15

20

Rates of return after taxes

(copper mine)

Chile

Argentina

S. Africa

USA

Australia

Peru

China

Bolivia

Mexico

Source: Colorado School of Mines

Canada

0

5

10

15

20


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Forest Industry excellent agroecological conditions that ensure high yields in the widest variety of crops.

PAPER INDUSTRY

  • Unmet domestic demand

  • Growing per capita consumption

    WOOD INDUSTRY

  • New project potential

  • Cost of wood lower than in Nordic countries

  • High expansion potential due to relatively low consumption

  • The Forestry Law provides an attractive legal framework for investments

  • Fiscal and economic incentives for the development of the sector

  • High growth rates and lower harvesting maturities

  • 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

  • Extensive use of recycled fibers with definite growth potential

Source: ADI based on CEP data.


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Leather and leather products excellent agroecological conditions that ensure high yields in the widest variety of crops.

Production has increased notably in recent years.

The largest firms produce up to 5,000/6,000 pelts per day (in Italy average-sized companies produce approximately 200/300 pelts per day).

The industry is moving forward in terms of upstream integration, basically by producing upholstery covers for the automotive industry (US$ 200 million in exports).

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.

80% of total production is exported and 50% of these exports go to the USA, China, and Brazil.

Source: ADI based on CEP data.


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Petrochemical Industry excellent agroecological conditions that ensure high yields in the widest variety of crops.

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 (oil derivatives and natural gas compounds).

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.The industry has the potential to become a production platform to supply MERCOSUR markets.Human resource productivity in the manufacture of chemical products for agricultural use has practically tripled in 10 years.


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Agricultural Machinery excellent agroecological conditions that ensure high yields in the widest variety of crops.

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).

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.

Argentine seeder production statistics

3,278

1990

2,562

1991

1992

2,080

3,100

1993

3,600

1994

3,400

1995

5,880

1996

4,740

1997

4,640

1998

4,178

1999

3,894

2000

3,420

2001

5,100

2002

5,350

2003


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Vegetable Oils excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • SOYBEANS:

    • Average production unit capacity: 5,000 tons Principal global producers: USA (1,500 tons), Brazil (2,500 tons)

    • Crush cost US$ 4/ ton (USA –US$ 10-, Brazil -US$ 14-)

  • A high incidence of leading-edge technology in use in the industrial sector.

  • Capacity to produce bio-fuels from 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

  • GPV: US$ 4.2 billion.

  • Low cost of arable land.

  • High geographic concentration of primary and industrial production.

  • Availability of futures markets for agricultural producers.

  • Growing global demand for vegetable oils and vegetable oil by-products.

Source: ADI based on INDEC data


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Grape Growing and Wine Making excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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

  • Available technology similar to that used by the major producing countries

  • Capacity to export high-value wines amid growing foreign demand

  • Capacity to produce organic products

  • Ongoing improvement in the quality of grape and wine products

  • Argentina is the world’s fifth largestproducer of wine

  • High domestic consumption (world’s sixth largest consumer of wine)

  • Argentine wine exports have risen by more than 400% in the last ten years

  • High quality wines account for over 80% of exports in this sector

Source: ADI based on INDEC data


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Cultural Industries excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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.

  • A large number of training centers are available for professionals in the various specialist fields covered by these industries.

  • 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.

  • Argentine cinema is always represented and performs well at international film festivals, and 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, and a good tourist infrastructure and transport system makes it easy for television, cinema, and advertising production teams to stay in and move around the country.


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Software excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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

  • 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


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Outsourcing excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • 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.

“Proficiency in English” examination

"

  • Potential to provide the US market with call center services. A growing number of Argentines are training and qualifying in English. Qualifications obtained abroad by Argentine students are among the highest.

(% of successful candidates)

70

60

50

global average:

46%

40

No data

available: less

than 40

candidates

30

20

10

0

Chile

Brazil

Uruguay

Argentina

Italy

Spain

Source: University of Cambridge, EFL


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Tourism excellent agroecological conditions that ensure high yields in the widest variety of crops.

  • The number of foreign tourists visiting Argentina rose by 27% in 2003compared to a 15% increase in 2002.

  • Foreign tourism displays a high degree of diversity in terms of countries of origin and average spending, accompanied by longer average stays.

  • 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.).

Hotel supply:

Number of establishments

7,800

7,500

7,200

6,900

6,600

6,300

1998

1999

2000

2001

2002

Tourist countries of origin

2003

Others

Brazil

13%

17%

Chile

Uruguay

17%

26%

USA &

Europe

Canada

17%

10%

Source: INDEC


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Perspectives and Challenges excellent agroecological conditions that ensure high yields in the widest variety of crops.


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Market expectations consensus: improved Argentine economic performance

Market Expectations Survey

GDP

Industrial Activity

2004

9.0%

2004

8.9%

(Interannual variation)

2005

6.5%

(Interannual variation)

2005

7.5%

Nominal Exchange Rate

Investment

End 2004

2.97

2004

34.1%

($/US$)

End 2005

3.00

(Interannual variation)

2005

17.3%

Consumer Prices

Trade Balance

Dec 04

6.9%

2004

11.2

(Interannual variation)

Dec 05

8.3%

(US$ billion)

2005

10.1

Average Salary

Current Account Balance

2004

10.5%

2004

3.1

(Interannual variation)

2005

10.3%

(US$ billion)

2005

2.1

Unemployment Rate

International Reserves

2004

13.5%

2004

19.8

(% of Workforce)

2005

11.1%

(US$ billion)

2005

22.1

Source: BCRA

This survey is conducted by the Central Bank of Argentina to obtain a systematic follow-up of the principal short- and medium-term macroeconomic projections made by Argentine and foreign analysts and academics on Argentine economic performance.


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Argentina was among the leading countries in Latin America in 2003 / 2004 in terms of growth.

  • Argentina recorded the highest growth in Latin America in 2003 and, exceeding all expectations, the economy grew 9.0% last year. This trend is expected to continue in the years to come.

Source: ADI based on World Economic Outlook (IMF)and BCRA.


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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


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While on the international front, the main objective is to intensify Argentina’s quantitative and qualitative international integration by ...

  • Deepening regional integration schemes and moving forward in the foreign trade negotiations agenda (WTO, FTAA, MERCOSUR, etc.)

  • Ensuring the ordered and sustainable restructuring of public and private debt with a view to achieving a solution in accordance with Argentina’s payment capacity.


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Secretariat of Industry, Commerce, and SMEs intensify Argentina’s quantitative and qualitative international integration by ...

Ministry of Economy and Production

Av. Julio A. Roca 651 – 5th Floor, Office 22

(C1067AAB) Buenos Aires

Republic of Argentina

Tel. (+54 11) 4349-3442 / 3313 / 3315

Fax (+54 11) 4349-3453

E-mail: [email protected]

http://www.inversiones.gov.ar


Argentina103 l.jpg
ARGENTINA intensify Argentina’s quantitative and qualitative international integration by ...

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