Republic of Argentina
Major Business Sectors
The Swiss Embassy in Buenos Aires wants to thank Estudio Willa – Abogados y Consultores Tributarios - www.estudiowilla.com – for the help in creating this document.
In Argentina it is estimated that the agricultural segment represents the 8,5% of the Gross Domestic Product (“GDP”), while the industry and services segments accounted for the 31,6% and 59,8% of the GDP, respectively.[1]
As shown in Figure 1, this distribution is fully in line with major countries in Latin America, such us Brazil and Mexico.
Agriculture
Although the agricultural segment has a smaller part of the GDP (accounts for the 8,5% of the GDP), plays a very important role in the Argentina’s economy. Most exports are concentrated in the primary products.
Profit in this sector has highly increased as a consequence of record prices in commodities during the last years mainly due to some permanent and temporary factors:
· The strong food demand from emerging economies, in particular from countries in Asia.
· The increase in demand for corn and rapeseeds oil actually used for biofuel production.
· The decrease in supply as per the drought in the conditions in major wheat-producing countries (e.g., Australia and Ukraine) and restrictive trade policies in major exporters of key commodities.
Given the fact that the demand is expected to continue increasing, exports to emerging countries will continue to be a key driver of the agricultural production in the country. However, a key risk to this is the country's significantly inflation, which could force the government to make restrictions to the exports in order to control internal food prices, as has been done in the sector in the past.
Industry
The Industry segment in Argentina (which accounts for the 31,6% of the GDP) is mainly influenced by the Real Estate and the Automotive industries.
Real Estate
During 2010, the construction activity has made significant improvements due to private and public investments. As per the ISAC -index developed by the National Institute of Statistics and Censuses (“INDEC”) to measure the sector activity- positive growth took place in the entire year (compared to the previous year same period). Figure 2.
Automotive
The automotive industry in Argentina continues having a good performance during 2010, increasing its production from 512,924 units in 2009 to 724,023 units in 2010. One of the main drivers of this increase was the exports to Brazil that accounted for the 85% of total exports.
This industry is highly competitive with a segmented market. As per the Argentina Carmaker Association (“ADEFA”), in 2010 the main carmaker was General Motors Argentina, with 18,7% of the market share, followed by PSA Peugeot-Citroen, Ford Argentina and Fiat Auto Argentina which accounted for the 17,5%, 13,3% and 13,3% of the market, respectively (Figure 3).
The immediate concern for vehicle production in the near future lies in the uncertainty surrounding the 2011 presidential elections, which makes it difficult for carmakers to ascertain the direction of future government policies.
This will affect the production as the existing suppliers are already operating at near full capacity, meaning that the size of the segment is just not big enough to catch up with the growth in production. Therefore, if the existing suppliers could not meet the production increase for new vehicle, they will further lose competitiveness as carmakers will be forced to rely on imported parts.
Services
Finally, the services segment in Argentina (which accounts for the 59,8% of the GDP) is mainly influenced by Telecommunications and Public services.
Telecommunications
The strongest competition is in the mobile market, with three main operators: Claro, Movistar and Telecom Personal; reporting quite similar market shares.
The government has also announced a national project to expand broadband internet service and free digital TV services across the country. The program, called “Argentina Conectada” aims to provide 75% of the population with internet access by mid-2011. The necessary infrastructure is deployed by Arsat, a state owned company.
Public Services
With regards to public services, the last years have been characterized by huge government subsidiaries that have helped to keep prices at low levels. It is estimated that total subsidiaries in 2010 increased by more than 40%, compared to 2009.
The national government monitoring policies could bring to negative impact on attracting investments in the sector in the time that the country need them as structural deficiencies are increasing. The lack in investments must be solved in the near future, if not, could affect the country´s production.
Date: 9th, February 2011
Author: Swiss Embassy Buenos Aires
www.eda.admin.ch
Alejandro Lentz
Avenida Santa Fe 846 -12° piso-
1059 Buenos Aires
Tel: 00 54 11 4311 6491
Fax: 00 54 11 4313 2998
With special collaboration of Estudio Willa – Abogados y Consultores Tributarios - www.estudiowilla.com –.
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[1] Source: 2010 CIA World Factbook.