4 SUSTAINABLE GROWTH IN ARGENTINA FAVORABLE INTERNATIONAL SCENARIO Argentina faces a unique opportunity given its healthy macroeconomic situation and sustainable growth coupled with a favorable international scenario.Four years steady growth at an average rate around 9%Substantial accumulation of reserves with reasonable goalsSteady growth of global economy and international tradeFavorable trade terms based on high price of “commodities” and natural resources.Twin Surpluses: fiscal and externalExtraordinary international liquidityGrowth of exports and imports with positive trade balanceSUSTAINABLE GROWTH IN ARGENTINAFAVORABLE INTERNATIONAL SCENARIOLow global interest rates“Tight” monetary policyGlobal splitting of value chainsCompetitive and stable exchange rateNew global consumption patterns (product differentiation)Record profitability in prime companiesIncreasing demand for alternative energy sources
5 Argentina grew at an average annual rate of around 9% over the past four years, ranking among the fastest growing economies worldwideAverage: 8.9%Average: 8.7%Average:5.4%Average:2.8%Average:1.7%Developing AsiaG7: Most developed economiesSource: ProsperAr based on IMF, WEO databases.Developing Asia: includes 23 countries such as China, India, Indonesia, Philippines, Vietnam, Bangladesh, Fiji and Pakistan, among others.
6 Fiscal and Current Account Surplus International Reserves Growth is based on solid macroeconomic foundations that strengthen the country’s economy and rule out the possibility of a crisis in the mid term.Fiscal and Current Account Surplus(in millions of pesos)International Reserves(in billions of dollars)Primary Fiscal BalanceCurrent Account BalanceSource: ProsperAr based on Ministry of Economy and Production.
7 Argentina’s income per capita measured in terms of purchasing power parity (ppp) is the highest in the region.* EstimatedSource: ProsperAr based on IMF World Economic Outlook.
8 In addition, Argentina has a solid base of competitive structural factors and capabilities to offer the world a differential value proposition.KnowledgeNatureCultureSkillsQualified Human ResourcesHigh level of education and trainingPrestigious UniversitiesHighly competent Research CentersHighly competitive health indicatorsAbundance of land and natural resourcesA wide variety of mineral and energy resourcesDiversity of regions, topography and climatePublic and private commitment to preserve nature and sustainable developmentDiverse cultural capital and outstanding productions in various fieldsImportant international figures and works of artRich Urban life with a wealth of cultural possibilitiesInternational destination chosen for its quality of life and tourismAbility to learn, undertake endeavors and innovationsStrong industrial traditionModern infrastructure and technological availabilityWorld-class agricultural and industrial commoditiesET with permanent and strategic outlookCompetitive SME center
9 MERCOSUR + partners in FTA’s (3) MERCOSUR + Venezuela (2) As a member of MERCOSUR, Argentina enjoys preferential access (0% of import duties) to a highly attractive market: 261 millions of consumers and joint GDP of U$S billions in 2006.MERCOSUR (1)GDP*: US$ BillionsPopulation: 234 Millions of inhabitantsMERCOSUR + partners in FTA’s (3)GDP*: US$ BillionsPopulation: 376 Millions of inhabitantsMERCOSUR + Venezuela (2)GDP*: US$ BillionsPopulation: 261 Millions of inhabitantsMERCOSUR is a common market conformed in the beginning (1991) by Argentina, Brazil, Paraguay y Uruguay.Venezuela was incorporated recently as a full member of the integration process in MERCOSUR, becoming the “Mercosur 5”Bolivia, Chile, Peru, Colombia y Ecuador are associated members.*Estimated 2006Source: ProsperAr based on IMF World Economic Outlook.
10 Intra and Extra Mercosur Exports shows a significant dynamism Intra and Extra Mercosur Exports shows a significant dynamism. The internal exports started recovering, surpassing in 2005 the maximum level of 1998.Internal and External Mercosur’s Exports increases ( %)Intra Mercosur ExportsExtra Mercosur Exports1990 – 2006521,6%173,3%1990 – 1998393,6%42,1%1998 – 200625,9%Source: ProsperAr based on INDEC
11 To accomplish the differential value proposition and continue with the steady growth trend at high rates, the flow of domestic and foreign investment is a key success factor
12 At current prices. Expressed as Percentages Investments over the past years reacted positively to the prevailing favorable conditions of the country and at the same time played a role in strengthening the economy.GDFI/GDP RatioAt current prices. Expressed as PercentagesSource: ProsperAr based on DNCN, INDEC.
13 Relación IBIF/PBI por país GDFI/GDP ratio by country High investment/GDP ratios position Argentina among the main economies of the regionRelación IBIF/PBI por país1º Semestre 2006, a precios corrientesGDFI/GDP ratio by country1st Quarter 2006, at current prices* Figure corresponds to total forSource: ProsperAr based on CEP.
14 Likewise, Foreign Direct Investment exhibits a dynamic performance over the past three years. 2006: Improvement in the composition of FDI In 2006 Argentina's FDI levels was similar to those of 2005 (-3,9%), highlighting: - The share of investment in the productive sector increased by US$ 276M (+6%) - The main components of FDI are the investment in production capacity expansion of foreign companies with operations in Argentina; and the entrance of new TN companies; -The M&A activity represents a very small share of total FDI - Historical record in reinvestment of earnings. Reinvestment in 2006 ( u$s 2238 M) was 4 times that of 2005 ( u$s 655 M). The investment of Argentina abroad increased 74% (from u$s 1151M to u$s 2008M).Source: ProsperAr based on INDEC
15 However Argentina faces big challenges in terms of investment ResultsChallengesThe highest Gross Domestic Fixed Investment (GDFI) as a percentage of the GDPPublic investment accompanying investment of the private sectorInvestments more directed to tradeable sectors of the economy.Recovery of Foreign Direct Investment after 2004To increase and sustain high investment/PBI ratios, aligned with the requirements of sustainable growth.To improve the quality of investmentsTo increase our participation in foreign and regional flows of Foreign Direct InvestmentTo promote further value chain integration international companies in ArgentinaTo support internationalization of local companies
16 This process occurs within a favorable political/institutional framework for investments. Full enforcement of civil and democratic rights.Argentina is a country where freedom prevails in every area, as confirmed by the Freedom in the World 2007 report.DemocracyWithin a framework of freedom and full enforcement of the rule of law, our country has moved consistently towards strengthening the democratic system following the institutional crisis in The new composition and structure of the Supreme Court of Justice of the Nation is a milestone in this sense that reinforces the independence of the Judiciary.Respect for Human RightsThere is full respect for human rights. The Courts have reviewed cases related to crimes of lese humanity committed in the past; convicted those involved; and reopened new investigations to avoid impunity.Strategically Safe CountryOld-time conflict hypotheses with neighboring countries have been defused following the regional economic integration. There are neither terrorist groups, drug trafficking, gangs or organized crime activities. There are no differences between religious or ethnic groups that could affect the security, or the institutional and economic activity 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 the UNCTAD report.Good quality of lifeArgentina ranks 10th on the quality of life index prepared by the specialized publication International Living.Preferred international tourism destinationArgentina ranks 5th as preferred international tourism destination, according to the FutureBrand report . Buenos Aires was rated the 7th best city to visit (Travel & Leisure 2006).
17 Public-private coordination and collaboration Under this scenario, the National Investment Development Agency (Prosperar) was created, representing an institutional innovation key to boost the private sector investments: foreign direct investment, domestic investment and internationalization of local companies.AutonomyStabilityPublic-private coordination and collaborationTransparencyEconomic-Financial AutarchyLegal statusInvolvement in the field of public and private lawAbility to send correspondents to the interior of the country and abroadBoard members hold a 4- year term of officeThe president’s rank is equivalent to that of a Secretary of State and the Directors rank to that of Undersecretary of StateGovernment Model:National Investment Council:Chief of CabinetMinister of Economy and ProductionMinister of Foreign Relations, International Trade and WorshipAdvisory Councils:Private and academic sectorInternationalYearly rendering of accountsInternal Audit Department in coordination with the National Audit Commission
18 The institutional design of the Agency aims to facilitate public-private coordination and collaborationBoard of Directors*President (1)Dr. Beatriz NofalMembers (2)Mr. Daniel FalcónMs. Luciana PaganiNational Council on Development Investments- Chief of CabinetMinister of Economy and ProductionMinister of Foreign Relations, International Trade and WorshipAdvisory Council: private sectorSuperior International Advisory CouncilInternal Audit DepartmentInvestment Strategy and Environment ManagerMr. Ricardo RozembergOperations and Investment Services ManagerMs. Marcela ReganzaniPublic Relations, Marketing and Communications ManagerMs. Mariana BlancoLegal DepartmentOffice of the Assistant Manager of Human Resources and Administration*A President’s rank is equivalent to that of a State Secretary and Members to that of Undersecretary
19 The main mission of the Agency is to contribute to the sustainable economic growth by attracting FDI and encouraging the growth of the domestic business ecosystem. There are four major areas of activity to accomplish this mission:Attract and generate investmentGeneral Investment MissionsInvestment and innovation proposals based on current opportunities in competitive entities and sectorsMissions and actions focused on investmentBoost investment environmentProgram to established closed relationships with investorsCreate a federal network to better serve the InvestorsOffer Services to Investors:Foreign Direct Investment/Local Companies/Enterprising DevelopmentPersonalized reply to investors inquiresLarge, Medium and Small businesses working together for a more prosperous ecosystemDevelop financial instruments to facilitate investment and innovationDisclose to the world the new favorable situation in Argentina - sustainable growth and investment opportunities.Create a country image aligned to its differential identity knowledge+nature+cultureCreating a differential image for Argentina
20 Basically, the agency aims to contribute so that investment in Argentina and prosperity become sinonymous.To Prosper, and that we all become more prosperous, is our ambition.To Prosper means to leverage in our achievements to propel a more competitive and innovative Argentina with a higher level of income per capita and social equity.In order to Prosper the public and private sectors must submit a differential value proposition to attract domestic and foreign investment, a key factor for growth.To Prosper, we will work for a vigorous investment environment, communicating Argentina’s value proposition to the world, and contributing towards an active integration to investment flows and international trade.In order to Prosper, our aim is to ensure Prosperity both to those companies that invest in our and to their employees.In order to prosper, the National Investment Development Agency of Argentina, ProsperAr, was created.
21 Your partner to invest and prosper in Argentina
23 Natural Resources Argentina has leveraged on the richness and diversity of its natural resources to develop highly competitive agribusiness activitiesCorn ProductivityYear Argentina = 100Wheat ProductivityYear Argentina = 100Soy ProductivityYear Argentina = 100Source: ProsperAr based on FAO
24 Natural Resources and Agro-industry …being a leading producer and/or exporter in various agroindustrial segments.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 N° 1 world producer and exporter of Sunflower Oil.The N° 1 world exporter and 3rd leading world producer of Soy Oil.The N° 1 world exporter and 3rd leading world producer of Honey.The N° 1 world exporter of Horse Meat.The N° 1 world exporter of Pears.The 2nd leading world exporter of Peanut Oil.The 3rd leading world producer of Beef.The 3rd leading world producer of Soy Beans.The 3rd leading world producer and the N° 1 exporter of Lemons.The 5th leading world producer of Wine.Source: ProsperAr based on FAO.
25 Industry A long industrial tradition has enabled us to reach an expansive and diverse manufacturing ecosystemA significant number of transnational companies have been present in the country for decades and progressively participated in the generation of value added activities.A group of prime national companies strongly internationalized and world-class.A segment of flexible, innovative and dynamic SMEsAs 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 and4.15 million tons of seamless and non-seamless pipes,550 thousand automobiles.
26 Socioeconomic Indicators Socioeconomic Indicators Argentina socioeconomic indicators are higher than the average for the regionSocioeconomic IndicatorsArgentinaBrazilChileMexicoRegion AverageHuman Development Index (HDI)0.8630.7920.8590.8210.795Life Expectancy at Birth (years)74.670.878.175.371.7Infant Mortality Rate (0/000)163282326Health Care Expenses (PPA in US$ per capita)1067597707582…Undernourished Population<2.54510Population with sustainable access to improved water source9690959791Deliveries performed by specialized staff (%)9910087Physicians/1000 inhabitants301115109198Illiteracy (% over 15 years old)2.811.44.3910.8Gross schooling rate89868175Researches in R&D (for every million inhabitants )720344444268306Source: UNDP Report on Human Development.
27 Adult Literacy Rate (+15 years) School Attendance Expectations Education Argentina is also characterized by its high educational and cultural level based on the high education standards, similar to developed countriesAdult Literacy Rate (+15 years)%School Attendance ExpectationsIn yearsSource: ProsperAr based on GED 2006, UNESCO.
28 Environment …within the context of a sustainable environment. Argentina ranks 9th among 146 countries in environmental sustainabilityEnvironmental Sustainability Index elaborated by environmental experts from Yale and Columbia.