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Argentina

Argentina. Emerging Market?. U.S. Dept. of Commerce Def. Markets with fast growth for U.S. products, newly opened, new opportunities, market economies, previously unfamiliar to U.S. Original List: Mexico, Brazil, Argentina South Africa, Poland, Turkey

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Argentina

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  1. Argentina Emerging Market?

  2. U.S. Dept. of Commerce Def. • Markets with fast growth for U.S. products, newly opened, new opportunities, market economies, previously unfamiliar to U.S. • Original List: • Mexico, Brazil, Argentina • South Africa, Poland, Turkey • Indonesia, Thailand, Malaysia, Sing, Vietnam • China (including Hong Kong), Taiwan

  3. What constitutes “emerging” • Growth in GDP two to three times that of developed countries • 1995, BEM’s 10% of world GDP. Expected signif growth in next 20 years. • Free market institutions

  4. “Emerging Market” from other countries’ view • An economy that is in the process of creating a market economy • Consumer-oriented • Property ownership is fairly clear • Contract law is enforced • Government regulations that support competition • Reliance on the market to determine prices

  5. Other terms to know • Underdeveloped countries (1950-60s) • Less developed countries, LDCs (1970s) • Developing countries (1980s) • Lower income (versus middle and upper income), varying standards • Transitional economies

  6. Typical attributes of emerging markets • Low per capita income (typically less than $10,000) • Inadequate infrastructure development • Roads • Energy • Telecommunications • Lack of capital availability • Stock markets, banks, venture capitalists, etc. • Significant regulations • High interest rates

  7. Why must countries “emerge?”What are they emerging from? • Historical Reasons: Colonialism • Geographical Reasons: Isolation • Political Reasons: Planned economies, socialism • Trade Policies: Import substitution • Other reasons: political instability, wars, bad luck

  8. Does Argentina Qualify? On What Basis?

  9. US as an “emerged” market(CIA Factbook 2006) • 298 million people • $12 trillion GDP (ppp ’05) • GDP per capita $41,600, 3.2% growth • Gini 45

  10. Select Emerging Markets by GDP per Capita

  11. Select Emerging Markets by Growth in GDP

  12. Select Emerging Markets by Size(in billions, 2006)

  13. by Inequality

  14. Institutional “voids”  importance of brands • Product markets lack information • Communication infrastructure • Power shortages • Postal services • Illiteracy • Corroboration of sellers’ claims lacking • Little consumer redress

  15. Imperfect capital markets  business groups • Investors hesitate • Financial reporting inadequate • Managers/directors held less accountable • Business groups can advertise good returns and use internal capital

  16. Imperfect labor markets  internal training • Business groups centralize training • Transfers from business to business

  17. Uncertain regulation  necessity to lobby, protect rep • Transitional economies have large government influence • Discretion of government officials • Court system underdeveloped • Contracts not well enforced

  18. Institutional adaptations • Business groups • Brands that signal quality • Family relationships • Centralized experience and connections • “Educating” regulators • Internal training • Transfers instead of lay-offs

  19. Building Institutional Infrastructure • Political “will” needed -- possibly authoritarian • Remove politics from banks • Require more information, transparency • Train reliable market analysts • Let business groups restructure on own

  20. Argentina Brazil Chile Colombia Mexico Peru Czech Republic Hungary Poland Russia Egypt Morocco South Africa Israel Jordan China India Indonesia Malaysia Pakistan Emerging Markets

  21. Philippines Sri Lanka Taiwan Thailand Emerging Markets

  22. Summary • Emerging markets differ from others due to “institutional void.” • Business groups with known brands can fill the void. • But not all problems are economic. Some are political. Government plays key role.

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