investment and innovationkey drivers of argentina’s economic

Argentina’s Investment Development Agency

Investment and innovation:key drivers of Argentina’s sustainable economic development

Beatriz Nofal (Ph.D), President


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





• ProsperAr


Table of Contents


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 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


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


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%


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.


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


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


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

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2S

ep

-N

ov-

Jan

-03

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ay-

Jul-

03

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4M

ar-

Ma

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4S

ep

-N

ov-

Jan

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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


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


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.





• ProsperAr


Table of Contents


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 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


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.


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 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.


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.


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.


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)



MERCOSUR + Venezuela (2)



(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.


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


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.


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





• ProsperAr


Table of Contents


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).


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 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





• ProsperAr


Table of Contents


To continue growing at high rates, investment and innovation are key success factors


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/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*


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





• ProsperAr


Table of Contents


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


• 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%


82%

High Value Added

Exports18%

High Value Added

Exports18%


70%


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.


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.


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.





• ProsperAr


Table of Contents


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



Our vision is that that fostering Argentina’s entrepreneurship and innovation skills will increase investment and improve its quality.

INVESTMENT

ENTREPRENEURSHIPINNOVATION



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



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



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



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.



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.





• ProsperAr


Table of Contents


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.


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


-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$


Renewed dynamism has been observed in bilateral trade flows over the last three years…


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.


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.


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%


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).


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.


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.


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: [email protected]

www.prosperar.gov.ar

investment and innovationkey drivers of argentina’s economic

Economy & Finance

production employment

productivity production

production gdp

average rate

estimated growth rate

average annual growth

annual gdp growth rate

robust employment growth