Our comprehensive assessment of Argentina's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Argentina, as well as the latest industry developments that could impact Argentina's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Argentina before your competitors.

Country Risk

Argentina Country Risk

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The Argentine economy is reeling following the January 2014 currency devaluation. Economic growth has slowed markedly, prompting us to revise down our real GDP forecasts, as soaring inflation discourages investment and erodes purchasing power. Furthermore, the slowdown in economic activity has prompted a widening of the fiscal deficit, in line with our expectations, as government spending accelerates, and weak growth weighs on revenues. Moreover, we see further weakness for the Argentine peso, as the authorities allow for a gradual depreciation of the currency to address a widening spread between the black market and official exchange rates.

Politically, we are starting to see signs of strain. The perception of heightened street crime prompted incidents of vigilante justice in March and April, undermining the narrative that President Cristina Fernandez de Kirchner has presented, in which she, and her husband Nestor Kirchner before her,...

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Argentina Operational Risk Coverage (9)

Argentina Operational Risk

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BMI View: Argentina benefits from a well-diversified economy, extensive trade links and a well-regulated environment that all contribute towards its status as a near-developed economy. However, its levels of operational risk are increasing on the back of government intervention, industrial unrest and bureaucratic requirements for businesses. We have awarded Argentina an Operational Risk score of 52.3 out of 100, ranking it 10th in the region and 69th globally, but note that we expect risks to increase over the medium term.

Argentina has historically been an attractive destination for investors owing to its developed economy, with a broad agricultural and industrial base, relatively low rates of crime and a skilled workforce. Its transport links also provide adequate connections to major cities and...

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Argentina Crime & Security

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BMI View: Foreign workers and businesses in Argentina face a lower risk of crime and violence than in many Latin American countries, with the threat of terrorism and interstate conflict particularly low. These are the main factors behind Argentina's high regional ranking, in fifth place out of 28 Latin American countries, in the overall BMI Crime and Security Risk Index, with a score of 58.6 out of 100. Having said that, widespread rioting has occurred in recent years, causing considerable damage to business property. In addition, foreign workers will be at risk from petty street crime, while the public perceptions of criminal activity have reflected concerns about rising crime rates.

Argentina's main security risk is rising crime rates, which the public view as a major concern. Although the murder rate of 5.5 murders per 100,000 people is low...

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Argentina Labour Market

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BMI View: Argentina's labour market benefits from a well-trained and educated workforce, which is regulated by legislation compliant with international norms. Gender and racial equality are safeguarded by law and there is increasing female participation in the workforce. However, the country's strong unions are increasingly resorting to strike action to press their wage demands, raising labour costs. This results in Argentina having one of the best Labour Market Risks scores in the region. We give Argentina a score of 56.2 out of 100, which places it fourth in the region, behind the Bahamas and ahead of Uruguay.

The country's lowest risks stem from the Education category, for which its scores 64.3 out of 100. It ranks particularly well for secondary education, with 65.8 out...

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Argentina Logistics

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BMI View: Considerable logistics risks will serve to dampen investor sentiment towards Argentina over the medium term. The Argentinean economy is set for a period of more sluggish growth on the back of unsustainable economic policies, which will limit opportunities for investment. In addition, both the utilities and transport sectors suffer from a lack of investment. Consequently, poor quality infrastructure, combined with droughts, leads to electricity and water shortages, while the lack of development in alternative freight modes means that supply chains are overreliant on the road network, which is subject to disruption caused by fuel shortages. What's more, attempts to address economic imbalances have made the process of importing goods highly expensive and time consuming. However, Argentina continues to offer one of the largest markets in Latin America, with abundant natural resources and agricultural commodities,...

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Argentina Trade & Investment

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BMI View: Argentina has a diversified export base and strong trade links. However, these benefits to businesses are undermined by a deteriorating operating environment, characterised by increased government intervention in strategic sectors. We still see value for investors in Argentina, but would caution potential businesses of the volatility of government policy, particularly regarding potential investment disputes. Argentina scores 39.4 out of 100 for Trade and Investment in our Operational Risks Index. This places it 20th out of 28 countries regionally, ahead of the Dominican Republic. Given Argentina's historical status as a large and investment-friendly economy, this low score reflects the adverse effects of a more protectionist government policy over the last decade.

The main challenge to investors is Investment and Trade Openness, for...

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Argentina Industry Coverage (22)

Agribusiness

Argentina Agribusiness

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BMI View:   With a deteriorating economic environment , the Argentine grain sector will continued play centre stage over the medium term. With foreign reserves under pressure, grain exports (particularly soybean) will remain vital , but there is increasing evidence of hoarding, which could lead to clashes with the government over policy . Nonetheless, s oybean will remain the pre-eminent crop in Argentina over the long term, and we expect the poultry production to show the most promise within the livestock complex. We see potential for a mild rebound in beef production, as sector fundamentals remain challenging despite a significant decrease in grain prices. The country's dairy sector shows...

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Autos

Argentina Autos

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Vehicle sales in Argentina declined 33.8% y-o-y in the first six months of 2014, to 306,431 units. BMI has become increasingly bearish on the outlook for the Argentine autos sector in 2014 on the back of a devaluation of the peso in January, and the likelihood of further weakness in the unit going forward, and new taxes on autos imports. High inflation, slowing real wage growth, and increasing unemployment levels are likely to keep private consumption subdued in 2014, weighing on consumers' appetite for big ticket purchases. Moreover, high base effects from strong sales growth in 2013 will temper the y-o-y growth rate. We expect these dynamics to continue over the coming months, and believe this will weigh on the autos sector. Accordingly, we forecast a bearish 28.5% decline in total vehicle sales over the year.

We caution that, if inflation continues to escalate, Argentine consumers may start to purchase vehicles as a...

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Commercial Banking

Argentina Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Argentina Consumer Electronics

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BMI View: Economic challenges such as rapid inflation, the January 2014 devaluation of the peso and technical debt default in Q214 negatively impact our outlook for the Argentinean consumer electronics market in 2014. In particular, high inflation, slowing real wage growth, and increasing unemployment levels are likely to keep private consumption subdued throughout the year and we forecast the consumer electronics market to detract in US dollar terms . Despite this bleak short-term outlook, w e believe Argentina has very strong potential for growth over the medium term with strong mobile handset demand matched by increased availability of devices, helping the markets for smartphones, as well as flat screen TVs...

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Defence & Security

Argentina Defence & Security

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BMI View: Argentina is facing into a period of political transition. President Cristina Fernández de Kirchner was forced to hand over to her vice president in October due to ill-health, amid mid-term elections and having replaced the heads of all of the country's armed services. However, despite ongoing economic difficulties - such as the costly loss of an international court case over so-called 'vulture funds' - Argentina is proceeding with defence reform and modernisation.

In BMI's view the combination of elections and ill-health could spell the beginning of the end of Fernández's premiership, which could see her Peronist movement failing to win a third term in office. On the international stage, Fernández's leadership was characterised by an increasingly fractious relationship with the United Kingdom over the Falkland Islands/Islas...

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Food & Drink

Argentina Food & Drink

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We have reduced our regional ranking for Argentina's food and drink industry from its 2013 rank. We forecast that the high inflation rate seen through 2012 and 2013 will continue over the coming years, which will weaken consumer and business confidence, meaning any growth in the value of food and drink consumption will largely be due to inflationary pressures, rather than real value.

However, the Argentine economy has benefited from a depreciating currency (down 26% against the US dollar since January 2012) as exports have increased. In particular, increases in agricultural exports have been a key driving force behind the increase in GDP growth seen through 2013. Although this has proven beneficial to the economy, domestic food consumption has not grown much in real terms, as consumers and businesses have been hit by the increasing cost of imports.

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Freight Transport

Argentina Freight Transport

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BMI maintains its cautious outlook for the Argentine freight transport sector. We forecast real GDP to expand by a revised 1.7% in 2015, down from our previous forecast of 3.1%, implying only a modest improvement from 2014's forecasted growth of 0.4%. Argentina's economic recovery will be muted in the coming quarters as currency weakness and high inflation weigh on private consumption, which will have a negative knock-on effect on freight transport volumes. The main driver of the slowdown is the impact of the country's January 2014 currency devaluation, which sent inflation expectations soaring. As a result, consumer confidence has plunged.

We acknowledge that some risks remain to the upside, as an improving business environment and more moderate economic policies could lead to a surge in inbound investment for the country's oil and gas sector. Nevertheless, we caution that on top of its internal economic difficulties...

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Information Technology

Argentina Information Technology

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BMI View: Economic troubles have dominated the discussion of Argentina in 2014, with the devaluation of the peso, import restrictions, skyrocketing inflation, capital controls, shortage of credit and government debt default have seen the country enter a recession . The IT market will likely be hit by lower consumer confidence, higher import costs of components and problems of inflation affecting employee wages. However, potential investors do not seem to have been put off, as devaluation will help make IT exports abroad more competitive. The July 2014 IPO of Argentine tech company Globant demonstrates this and many investors still see the strong sector potential in Argentina. The scope for large increases in PC penetration, second...

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Infrastructure

Argentina Infrastructure

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BMI View:   We are maintaining our construction industry forecast for Argentina in 2014 at 1.5% real growth and we anticipate an average of 3.3% real growth in the industry over the next five years. Growth will be driven by energy and transport infrastructure projects - sectors which have struggled due to severe underinvestment in recent decades. We highlight risks to our forecast lie to the downside as the country continues to struggle with fundamental policy and regulatory constraints, which prevent the market from fulfilling its true potential.

Key Trends And Developments

  • Our  Country Risk team forecasts that Argentina's economy will slow in 2014, with real GDP growth falling to 0.4% from an estimated 3% in 2013, as currency devaluation pushes inflation higher, weighing on consumer and government spending....

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Insurance

Argentina Insurance

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BMI View: BMI's Argentina insurance report examines a range of key market indicators, including the potential for growth in both the life and non-life segments. Limited by a fragile domestic economy, we expect to see very little growth in life products, with high inflation limiting the provision of long-term savings products in particular. Prospects for growth are slightly more positive in the non-life segment, driven primarily by several key compulsory insurance lines. Any growth is dependent upon the renewed confidence of both market operators and customers in the Argentine economy.

The non-life segment is dominated by motor vehicle insurance (which is compulsory in Argentina and subject to prescribed minimum cover limits), a trend which we expect to continue throughout the five-year forecast period. While auto sales are declining (falling by some 33.8% in the first six months of 2014), the major insurers have...

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Medical Devices

Argentina Medical Devices

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Espicom Industry View: The Argentine medical device market ranks sixth in Latin America . Espicom forecas ts a low 2013-2018 CAGR of 4.8 % in U S dollar terms, affected by the projected depreciation of the local currency . Medical device imports are very high , although a relatively large domestic medical device sector is operational . The country has recovered from a severe economic crisis in 2002 but has not resolved its long-standing macroeconomic imbalances, which will affect the medical device...

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Mining

Argentina Mining

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BMI View: Though Argentina possesses significant natural resources and has a relatively underdeveloped mining sector, we expect modest industry growth of just 0.5% on average per annum through 2018 . A combination of weakening metals prices and a difficult operating environment will lead to low production growth in the country and likely lead to subdued mining exploration and development. We point out though that recent indicators suggest the central government is seeking to increase foreign investment into the country, providing potential upside to the mining sector in the coming quarters.

While Argentina has significant mineral reserves, we expect that the country's mining sector will remain small compared with other Latin American mining destinations...

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Oil & Gas

Argentina Oil & Gas

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BMI View: We have grown increasingly bullish on Argentina's upstream this quarter. Formal resolution to the Repsol-YPF dispute has removed a major barrier to international oil companies looking to enter the Argentine oil and gas sector. Increased investment and a growing exploration drive point to a marked improvement in investor sentiment, and we expect this trend to continue in the coming quarters.

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Headline Forecasts (Argentina 2012-2018)
  2012e 2013e 2014f 2015f

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Petrochemicals

Argentina Petrochemicals

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The Argentine petrochemicals industry will struggle to compete against imports from Brazil and the US as competitiveness declines amid feedstock shortages. While the situation could turn around if domestic gas resources are tapped, this scenario is not expected over the next five years, according to BMI's Argentina Petrochemicals Report.

Renationalisation of YPF has failed to stop the annual winter crisis of gas supply, which has caused feedstock shortages for the petrochemicals industry. Argentina has been a net gas importer since 2008 and has prioritised supplies to the residential power sector over the needs of the petrochemicals industry. Cutbacks in gas supplies have undermined performance and deterred investment and renationalisation has provided no new feedstock. Moreover, the fall in the value of the peso, which has raised the cost of imports, coupled with a price cap on consumer prices...

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Pharmaceuticals & Healthcare

Argentina Pharmaceuticals & Healthcare

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BMI View: The Argentine economy is still reeling from the January 2014 currency devaluation. Soaring inflation and stringent drug pricing controls will continue to discourage investment and erode the growth of the country's pharmaceutical market. More f oreign pharmaceutical companies will cease their local operations, if the hostile business environment is worsened .

Headline Expenditure Projections

Pharmaceuticals: ARS39.30bn (USD7.18 bn) in 2013 to ARS50.10bn (USD6.04bn) in 2014; +27.5% in local currency terms and -15.9% in US dollar terms. These figures have been revised downwards since Q314 due to a substantial deterioration in high frequency economic data.

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Power

Argentina Power

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BMI View:   Argentina's power generation grew by 5.3% in 2014 , as the Atucha II nuclear plant went online after years of delays - a crucial step in the government's ambitious nuclear expansion plan. Nevertheless, the country continues to suffer from poor power infrastructure and insufficient installed capacity, as highligh ted by an agreement to start import ing Bolivian power by the end of 2015.   The recen t sovereign default has further damaged   the...

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Real Estate

Argentina Real Estate

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BMI View:   Argentina's commercial real estate sector continues to be affected by the wider economic problems, notably high inflation, low GDP growth, restrictions on the purchase of US dollars and a business environment that does not favour international investment.After the January 2014 devaluation of the peso, inflation has increased, estimated at as much as 25%, leading to a drop in consumer, and investor, confidence. Should the government's new inflation index lose credibility, we would expect investor confidence in the country to be further dented, affecting the commercial real estate market by putting off potential market entrants, as well as potential expansions.

Meanwhile, we expect real GDP to grow by only 0.4% in 2014, significantly down from 3% in 2013, although we do see an improvement to 3.3% in 2015, meaning the economy is operating well below potential....

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Renewables

Argentina Renewables

Retail

Argentina Retail

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BMI View: We   expect household spending on the retail sector in Argentina to experience moderate growth over the forecast period to 2018. However, investor pessimism following the country's July 2014 technical default is dampening interest in the market and a significant proportion of the population is still below the poverty line. However, the number of households falling into the middle-income bracket of USD10,000-plus is set to rise steadily, and almost the entire population is situated in urban areas, maximising opportunities for retailers.

The latest Argentina retail report provides an extensive and comprehensive forecast of various retail indicators including household spending, and headline total spending across each retail subsector, household income and employment forecasts, demographic forecasts, and a detailed...

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Shipping

Argentina Shipping

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BMI View:   BMI   maintains its cautiously optimistic view o n the Argentine port sector. The country enjoys a good commodities mix, but it continues to struggle with external headwinds , as well as internal difficulties in the form of rising inflation and labour unrest. We continue to expect that Argentine rea l GDP will grow 0.4 % in 2014, a considerable slowdown from estimated 2013 's 4.9 % growth. The January currency devaluation and subsequent collapse in consumer sentiment underpin our view that real growth will slow in...

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Telecommunications

Argentina Telecommunications

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BMI View : The fragile Argentine economy will have a hugely negative impact on the telecoms sector in 2014, as high inflation and concerns about currency stability will affect the purchasing power of Argentine people as inflatio n is expected to move above 30%. The country's recent default on its restructured bonds will likely send borrowing costs higher across the economy, weighing on investment in general . This may impact the upcoming October 2014 auction of 3G and 3G spectrum, where operators may be reluctant to commit large capital expenditure outlays in such an uncertain environment. Nevertheless, there are several bright spots, including growing interest in pay-TV as operators increase the availability of multi-play options. Merging operations to offer converged services also...

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Water

Argentina Water

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BMI View:   The water sector in Argentina is characterised by the incoherent involvement of several national and regional ministries, underinvestment, underdevelopment and an outdated water infrastructure. While connectivity to water mains in urban areas is satisfactory, rural communities lag far behind in this respect.   Additionally, th e climatic variations resulting from the country's latitudinal expanse lead to regional challenges. Despite this, with a daily per capita water consumption of more than 600 litres, Argentina has one of the highest water consumption levels in the region.  

Energy developments will continue to occur hand in hand with water reservoir and dam constructions owing to the emphasis on hydropower generation in Argentina. In light...

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