The Argentine economy has significant long-term growth potential due to its natural resource wealth and highly educated labour force. The country has a high urban population, and strong primary school enrolment rates ensure basic skills are widespread. Argentina's vast deposits of natural gas make the country a potential investment destination for many of our clients, despite a notable degree of government intervention in the private sector.
Our coverage, using our unique Total Analysis model, ensures that our clients make sound, risk-assessed decisions in Argentina. We keep clients informed of the latest market moves and political developments, supported by our interactive data and forecasting. We provide in-depth analysis of 22 of Argentina’s most important industries, as part of our 'top-down' and 'bottom-up' perspective. Our aim is to make sure you are always ahead of the game in Argentina.
Argentina Country Risk
A substantial uptick in investment is likely following a devaluation and liberalisation of Argentina's external accounts. Nonetheless, this will likely not begin until the latter half of 2016, leading to a contraction in real GDP as private consumption declines in response to falling real purchasing power. Thereafter, Argentina will enter a period of robust growth as foreign investment flows into the country.
The government of President Mauricio Macri will move to reduce the country's budget deficit in the coming years by reducing government subsidies on electricity. This will temper inflationary pressures as the government can move away from printing new pesos to finance its substantial deficit. Nonetheless, subsidy reduction will be gradual in order to limit the shock to consumers' disposable incomes.
Argentina Operational Risk Coverage (9)
Argentina Operational Risk
Argentina Operational Risk
BMI View: Argentina's operating environment will receive a boost from the election of a more reformist president in the October 2015 election. This will allow foreign investors greater opportunities to take advantage of the country's developed economy, with a broad agricultural and industrial base, relatively low rates of crime, adequate transport connections to major cities and ports, and skilled workforce. However, the absence of long-term planning in government policymaking has resulted in a currently unappealing operating environment with numerous barriers to doing businesses. These include underinvestment in logistics infrastructure, poorly implemented education reforms, and interventionist economic policies which pose obstacles to international trade and foreign investment. Consequently, Argentina is placed in the middle of the pack regionally inBMI's Operational Risk Index, in 25th position...
Argentina Crime & Security
Argentina Crime & Security
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 59.1 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...
Argentina Labour Market
Argentina Labour Market
BMI View: Argentina boasts a large and well educated labour force which offers a range of recruitment options for investors. High urbanisation rates ensure that labour is readily available in concentrated geographic areas, and a well established healthcare system ensures that workers are healthy and demographic trends are strong. These factors are behind Argentina's high regional ranking of fourth overall in our Labour Market Risk Index, with a score of 59.0 out of 100. Nevertheless, investors in Argentina face notable costs and difficulties with regard to the labour force, largely due to exorbitant costs associated with employing workers, driven by high minimum wages, generous fringe benefits...
BMI View: Considerable logistics risks will serve to dampen investor sentiment towards Argentina over the medium term. A primary concern is that both the utilities and transport sectors suffer from a lack of funding. 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 overly reliant on the road network, which is subject to disruption caused by fuel shortages. Furthermore, 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...
Argentina Trade & Investment
Argentina Trade & Investment
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 the possibility of investment disputes. Argentina scores 38.1 out of 100 for Trade and Investment in our Operational Risks Index. This places it 24th out of 28 countries regionally, between Ecuador and Bolivia. Given Argentina's historical status as a large and investment-friendly economy, this low score reflects...
Argentina Industry Coverage (24)
BMI View: We believe that, with export quotas for corn and wheat having been removed by the new government, soybeans will lose acreage to both crops and yields will decrease as farmers swap soybeans for wheat in early plantings. What is more, soybean hoarding will decrease due to a lower export tax and the peso devaluation. As such, we hold a bearish view on soybean production in Argentina through to the end of our forecast period in 2018/19. Meanwhile, we expect moderate output growth for corn over our forecast period to 2018/19, as we expect corn prices to increase from current levels, which will incentivise production. Over the same period we are also predicting wheat production to trend higher, although this will be largely due to base effects.
BMI view: As a result of Argentina's decision to float the peso in December and its subsequent depreciation against major currencies, sales volumes will continue declining in 2016. The weak peso will raise prices of imported vehicles and components but reinvigorated demand in the commercial vehicle segment will help keep total vehicle sales volumes from dropping significantly.
|Passenger Car and Light Commercial Vehicle Sales|
Argentina Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Argentina Consumer Electronics
BMI View: We hold the view that 2016 will witness the Argentine consumer electronics market decline significantly in US dollar terms due to the sharp devaluation of the peso. We had changed our forecasts in the Q415 report to reflect on the positive growth in 2015 but we expect the market to again be disrupted by significant peso depreciation against the US dollar in 2016, which will have the most severe impact on the PC and AV segments, extending the run of handset spending outperformance. We believe the outlook for Argentina is stronger over the medium term, particularly from 2017-2019. Areas of growth we identify include smartphones, tablets, hybrid notebooks and smart TVs. However, we highlight there is considerable downside risk with Argentina vulnerable to external shocks should the global economic...
Defence & Security
Argentina Defence & Security
BMI View: Argentina's domestic defence sector remains small in a global context but from a regional perspective, the country represents the second largest producer of military equipment in Latin America. Local defence companies are capable of manufacturing a range of equipment in the land and air segments though their ability to develop high-tech, advanced platforms and systems, as well as naval vessels remains limited at present. As such, in relation to this kind of platform and systems, the country continues to rely on foreign suppliers to meet the...
Food & Drink
Argentina Food & Drink
BMI View: Despite expected currency devaluation in 2016, Argentina's real GDP and private consumption growth rates are forecast to accelerate to 2.5% and 1.5% respectively. These figures indicate only a marginal economic improvement after several difficult years and are well-reflected in our outlook for the food and drink industry, which is forecast to expand by 14.5% in 2016 local currency terms, but face a 9.9% contraction in USD terms.
Headline Industry Data
Total food consumption (local currency) growth year-on-year (y-o-y) in 2015: +9.9%; compound annual growth rate (CAGR) 2014-2019: +9.3%
Total food consumption (USD) growth (y-o-y) in 2015: -1.3%; CAGR 2014-2019: -0.7%
Per capita food...
Argentina Freight Transport
BMI View: Argentina's freight sector will witness a turnaround in 2016 following negative growth in 2015 on the back of currency constraints and a dim economic picture. The likelihood of currency devaluation in 2016 and the installation of a business friendly president will make exports more competitive and increase the country's attractiveness as an investment destination.
Economic growth will accelerate in 2016 as fixed capital formation returns to growth on the back of investor optimism towards a new government. This will come even as the government enacts a devaluation of the peso. In addition, improving employment conditions will boost consumer purchasing power and lead to an uptick in household spending despite the inflationary effects of devaluation after a new government takes office in order to boost the competitiveness of...
Argentina Freight Transport
BMI View: As Argentina enters recession in 2016, we maintain a mixed outlook for the economy and its freight sector. While currency devaluation will boost the competitiveness of the country's exports, increased costs of foreign goods will dim demand for imports. We expect dynamics across the freight modes will improve in the medium term as the economy recovers. Furthermore, elevated spending will prevent growth prospects from turning negative. We are still maintaining positive outlooks for all freight modes in 2016, albeit with subdued growth rates. Our forecasts envision stronger upticks from 2017 onwards when the economic landscape is more...
Argentina Information Technology
BMI View: The devaluation of the peso in December 2015 was the latest macroeconomic event to impact the Argentine IT market, with retail hardware spending rising in anticipation of expected price rises, and we believe it will result in a contraction in spending in 2016. The normalisation of economic conditions is however expected to result in stronger IT market performance from 2017 as purchasing power growth returns, and our core scenario is for a CAGR of 14.0% over 2016-2020. It could however be a brake on the software and services export industry that has been a noteworthy success in Argentina in recent years.
Latest Updates And Industry Developments
Computer Hardware Sales: From ARS21.7bn in 2016 to ARS34.5bn in 2020, corresponding to a compound annual growth rate (CAGR) of 12.3% in local currency terms....
BMI View: In the medium-long term, Argentina's infrastructure sector should enjoy increased private investment amid an improving business environment in light of new president Mauricio Macri's pro-business stance. Meanwhile, Chinese and Russian backing of major projects, particularly in the energy and rail sectors, continues, but may face greater domestic and international competition as the market begins to open. However, the short term will be characterised by transition, after years of market, policy and operational volatility.
Latest Updates And Structural Trends...
BMI View: As a result of Argentina's decision to float the peso in December and its subsequent depreciation against major currencies, insurance premiums will continue declining in US dollar terms in 2016. BMI anticipates an acceleration in real GDP growth from late 2016, although inflation will remain elevated and will weigh on growth in demand for insurance. However, greater access to US dollars and a more favourable business environment will prompt an uptick in investment which will, from 2017, lead to a boost in demand. In the coming years, the peso will appreciate gradually as foreign money flows into the economy accelerate, which should support growth in premiums in US dollar terms. The non-life segment will grow faster than life premiums due to high demand for motor insurance lines and other personal covers....
Argentina Medical Devices
BMI View: The Argentine market will record a low US dollar 2014-2019 CAGR, reflecting a slow depreciation of the official exchange rate through 2015 and a projected devaluation of the peso in 2016. Market drivers include a large population with a sizeable elderly group, the increasing incidence of chronic diseases, a well developed healthcare system, a large amount of international loan funding for healthcare, a backlog of healthcare investment needs, and medical device import reliance.
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BMI View: Despite Argentina's significant natural resources, we forecast the country's underdeveloped mining sector will see little growth in the years ahead. Indeed, we forecast average annual growth of just 0.5% to 2020. Ultimately, both subdued metals prices and a difficult operating environment will keep mining exploration and development activity subdued. Nevertheless, various copper and gold mines remain in development.
We expect Argentina's mining sector will remain relatively small and underdeveloped compared to other Latin American mining destinations, such as Chile and Peru, and that the industry will face headwinds in the years ahead. Economic and political headwinds are prominent, including elevated inflation, capital controls, and local content requirements. These and other challenges have made the operating...
Oil & Gas
Argentina Oil & Gas
BMI View: Highly prospective acreage, a strengthening competitive landscape and supportive pricing dynamics will help insulate the Argentine shale sector from aggressive clawbacks in industry spending. A shift toward a more centrist government under the newly inaugurated Macri administration will open up significant investment opportunities in Argentina, particularly within the oil and gas sector. As such, the core Neuquen shale province will experience increased development over the course of the next decade, although more peripheral shale formations...
The steady decline in hydrocarbons production in Argentina led to a shortage of feedstock in recent years with a lack of both ethane and methane. As the Vaca Muerta shale reserves become more available, there is potential for rejuvenating the petrochemicals sector. This should resolve domestic shortages.
Petrochemicals growth in Argentina will not happen immediately and new infrastructure will be crucial. Only in the next two to three years will Argentina be at a point where it can even start thinking about new petrochemicals projects. The new administration of Mauricio Macri is set to shake up the business environment, making it more attractive to investors with the potential for lower feedstock costs as well as market liberalisation.
The Argentine government is hoping a new generation of fields in the southern region of Tierra del Fuego will help to offset falling gas output from the mature basins in the west and...
Pharmaceuticals & Healthcare
Argentina Pharmaceuticals & Healthcare
BMI View: In the near term, the substandard regulatory and market access environment will continue to tarnish Argentina's appeal to drugmakers. However, in the long term, Argentina stands among the most promising pharmaceutical markets in Latin America in terms of growth. In fact, rising demand and improvements in the business environment are expected to translate in significant commercial and investment opportunities for drugmakers in the country over a multi-year horizon.
Headline Expenditure Projections
Pharmaceuticals: ARS64.02bn (USD6.91bn) in 2015 to ARS79.31bn (USD5.18bn) in 2016; +...
BMI View : The outlook for Argentina's power sector is improving steadily due to the reforms introduced by the Macri government. The country will continue to suffer from tight power supply and a weak electricity infrastructure over the coming months, but we expect the market to offer growing opportunities over the coming years as the government will prioritise plans to attract investment into new conventional and renewables power capacity.
Argentina Real Estate
BMI View: In all three cities and in all three real estate investment segments, we are seeing similar trends. Little investment activity combined with sustained demand and falling vacancy rates. The established nature of the real estate market in Argentina presents opportunities in the long-term, but at the current time, there is a characteristic of stagnation in most locations. With the election of the new government and a revision of regulations put in place under the last government, demand from tenants is likely to increase in all three areas.
Despite recent uncertainties, economic indicators point to a recovery in Argentina from next year. Real GDP growth, estimated to be 0.7% in 2015, is set to rise to 2.5% in 2016 and average at 2.9% per annum thereafter. Business confidence has been falling and capital investment has turned negative in 2015 as investment decisions have been put on hold...
BMI View : An unstable economic environment and poor access to project financing have left Argentina's renewables sector notably underdeveloped relative to the country's extensive natural resources and its regional peers. However, we believe that the business-friendly economic reforms pushed by the newly elected Argentina's president Mauricio Macri will facilitate the sector's expansion over the medium term. Despite these improvements, we do not see non-hydro renewables playing a significant role in the country's power mix during...
BMI View: The election of Marcelo Macri as the new president of Argentina will have a number of positive impacts for the country's economy. We anticipate a number of reforms to improve business environment and increase Argentina's appeal for foreign retailers. While the country's households will suffer from high inflation and weak income growth in the medium term, Argentina's retail sector will accelerate after 2019.
The Argentine economy has experienced significant turbulence over the past five years. Economic growth, which peaked at 9.5% in 2010, fell to 0.5% in 2014 and is expected to only achieve 0.7% in 2015. Consequently, the retail sector faces considerable challenges going forward owing to high inflation and a business environment that remains unwelcoming to foreign firms. Many are therefore awaiting positive changes following the election of Marcelo...
BMI View: Our outlook for the Argentinian port sector is continuing to look better than it has been for some time. In 2016, we forecast growth, albeit modestly, both in tonnage and throughput volumes at several of the country's maritime facilities. Weaker private consumption will continue to reduce imports in the next year, while a weaker exchange rate will slightly improve the competitiveness of exports, which will have a positive outcome for port volumes. Government intervention, industrial unrest and bureaucratic requirements will continue to disrupt the industry, while easing inflationary pressure supporting growth in household incomes, declining real imports and a boost in soy export volumes will strengthen net export numbers. However, we sill forecast a moderate expansion due to structural issues still affecting the...
BMI View: Latest developments from the new telecoms regulator indicate an increasingly investor friendly environment, although further reforms are still needed. We, however, still maintain the view that as the mobile market saturates, and 3G/4G access grows, operators will seek inorganic growth by shifting subscriber on to advanced mobile services. Convergence remains a key element in avoiding the decline in voice subscriptions and spurring further growing in broadband access.
Latest Updates & Industry Developments
Mobile subscriptions increased by 1,000mn in Q415, but this offset subscriber losses earlier in the year.
Fixed broadband connections reached 6.712mn at the end of September 2015, as convergence was introduced in the country.
In the wake of...
BMI View: Argentina's tourism market, though offering significant growth potential, does face some short-term challenges. Arrivals will receive a boost in 2016 from an influx in regional travel due to the Olympic Games being hosted in Brazil, which will likely see a rise in travel to destinations such as the Iguazu Falls; however, the growing threat from the Zika virus could deter large numbers of visitors from various key source markets, particularly those in Europe. The country is keen to grow the tourism industry, and the government is investing in a...
BMI View: This quarter we have expanded our forecasts to include new projections for water extraction by source, and treated wastewater. These additions have provided extra data to be incorporated into our existing forecasts, resulting in their revisions also. Overall, we expect investment to continue to trickle into the sector over the short term, constraining expansion and modernisation projects, with the majority of funds centred on hydropower and water storage.
Public expenditures tick up in the coming quarters, and infrastructure is commonly one of the main beneficiaries of this pre-election expenditure. Along with transport projects, construction industry growth will be driven by a number of infrastructure projects in the power and oil and gas sectors. Given Argentina's precarious external account...