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.

Country Risk

Argentina Country Risk

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Core Views

  • Tepid private consumption and a weaker net exports position will weigh on Argentine real GDP growth in 2015. A negotiated settlement allowing for the resumption of coupon payments on sovereign bonds in early 2015 will improve investor sentiment somewhat, but a substantial uptick in investment is unlikely while the current administration remains in power.

  • Pre-election spending and rising interest payments will see Argentina's primary and nominal budget deficits widen in 2015. The Argentine government will tap its foreign reserves in order to finance the budget shortfall, exacerbating the country's weak external account position.

  • The Argentine government will allow the peso to depreciate over the coming months, as a drop in foreign currency reserves keeps downwards pressure on the exchange rate. We expect a more substantial...

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Argentina Operational Risk Coverage (9)

Argentina Operational Risk

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BMI View: Argentina benefits from a 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 11th in the region and 73rd 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...

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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 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...

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Argentina Labour Market

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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...

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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. 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 over-reliant 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, as well...

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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 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...

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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 continue to 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, soybean 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...

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Autos

Argentina Autos

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Vehicle sales in Argentina declined 36.3% in 2014, to 613,848 units. BMI remains bearish on the outlook for the Argentine autos sector in 2015. We believe ongoing currency controls, rampant inflation, falling fixed investment and the expiry of the government's subsidised car purchasing scheme will all weigh on vehicle sales and production over the year.

We project that high inflation, slowing real wage growth, low fixed investment and increasing unemployment levels are likely to keep private consumption subdued in 2015, weighing on consumers' appetite for big ticket items and businesses' demand for fleet vehicles. On Top of this, the end of the government's Pro.Cre.Auto car loan scheme will further dampen demand as cheap access to car loans dries up amid rising interest rates in the country. Accordingly, we forecast a 6.3% decline in 2015 with only tepid 0.3% growth to follow in 2016....

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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: Consumer electronics spending was hit hard by the economic challenges in 2014, with total spending estimated to have contracted by 15.7%. Peso devaluation, high inflation and technical debt default in Q214 negatively impacted Argentine consumer purchasing power in global markets, as well as eroding confidence levels and restricting access to credit - all of which contributed to the contraction. Despite this bleak performance we believe the outlook for Argentina is stronger over the medium term, particularly...

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Defence & Security

Argentina Defence & Security

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BMI View: President Cristina Fernández de Kirchner has had an eventful year. With repeated visits to the hospital it has affected her mid-term elections results. Although her party remains in control of both houses, there is a distinct lack of power she now holds over proposing new legislature as well as amending the current two term limit on presidential elects. Due to failing health and her lack of influence within the Argentine government BMI expects her not to run for president again at the end of 2015. This will greatly affect any further procurements as well as military/defensive spending.

The Argentine President, Cristina Fernández de Kirchner, has remained vocal in several areas and although losing a high court ruling in regards to 'vulture funds' has continued to cause strained relations for her country. None more...

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Food & Drink

Argentina Food & Drink

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Argentina's struggling economy, plagued by high inflation and ongoing currency devaluation, will continue to have a negative impact on the country's food and drink sector. After considerable sales decline (in USD terms) in 2014, the industry is expected to enter the path of slow recovery throughout the rest of our forecast period to 2018. Nonetheless, the improvement will be negligible in 2015 with the risks lying firmly to the downside.

Headline Industry Data

  • Total food consumption (local currency) growth year-on-year (y-o-y) in 2014: +15.0%; compound annual growth rate (CAGR) to 2018: +9.5%

  • Total food consumption (USD) growth (y-o-y) in 2014: -7.2%; CAGR to 2018: +0.9%

  • Per capita food consumption (local currency) growth (y-o-y) in 2014: +14.1%; CAGR to 2018: +8.6%

  • Per capita food...

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Freight Transport

Argentina Freight Transport

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BMI maintains its cautious outlook for the Argentine freight transport sector. Argentina's economic recession will persist in 2015, and will be deeper than we previously anticipated due to very weak private consumption and gross fixed capital formation. Argentine real GDP will contract in 2015 due to tepid private consumption and fixed investment growth. We forecast real GDP growth of -0.3% in 2015, a downward revision from our previous forecast of 1.0% growth. This will follow estimated growth of -0.5% in 2014, which we have also revised down from our previous expectation of a 0.2% expansion. Persistent weakness in gross fixed capital formation will also contribute to the continued slowing of Argentina's economy in 2015. The country's business environment will remain poor under the leadership of President Cristina Fernández de Kirchner. Policies such as capital controls and import restrictions will continue to deter foreign investment...

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Information Technology

Argentina Information Technology

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BMI View: The economic crisis in 2014 had a major disruptive impact on the Argentine IT market, with the devaluation of the peso, import restrictions, skyrocketing inflation, capital controls, shortage of credit and government debt default all contributing to a recession. We estimate the IT market expanded in local currency terms, but contracted by 26% in US dollar terms. We expect another year of US dollar contraction in 2015 due to depreciation and inflation, but over the medium term the outlook is for a gradual improvement in the economic environment, particularly from 2016/2017...

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Infrastructure

Argentina Infrastructure

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BMI View: We forecast a return to growth for Argentina's construction industry at 1.3% in 2015, partly as a result of low base effects and an investment drive prior to the October residential elections. Growth will be driven by energy and transport infrastructure projects where Chinese and Russian investors will play a key role.

Key Trends And Developments

  • Our Country Risk team forecasts Argentina's economic recession will persist in 2015 and will be deeper than we previously forecast due to weak private consumption and gross fixed capital formation which is a good proxy for infrastructure. They forecast real GDP to contract by 0.7% this year, which compares with estimated growth of -0.5% in 2014.

  • Consumer price inflation has continued to accelerate in the months since the January 2014 currency...

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Insurance

Argentina Insurance

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BMI View: We think that two key trends will persist over the medium term, with the result that premiums will rise in real terms in both major segments through the forecast period. There are also two positive wildcards, which pertain mainly to the life segment. These are the possibility of tax incentives for life insurance and retirement savings and the potential for financial markets to be a lot more stable in 2015.

At the end of October 2014, the regulator confirmed that total insurance premiums had risen by nearly 6% in real ARS terms over the year to the end of June. The growth was boosted by the life segment and the motor vehicle sub-sector of the non-life segment. Premiums for most other lines were broadly unchanged in real...

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Medical Devices

Argentina Medical Devices

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BMI Industry View: The Argentine medical device market has fallen in the regional ranking. We forecast a low 2013-2018 CAGR of 4.8% in US dollar terms, which reflects the impact of the projected depreciation of the local currency. A relatively large domestic manufacturing sector is operational but imports remain very high, in spite of an apparent shortage of consumables reported in 2014...

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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.

Headline Forecasts (Argentina 2012-2018)
  2012 2013 2014f ...

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Petrochemicals

Argentina Petrochemicals

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With gas on the decline and a cautious approach to investment in the country's shale potential, Argentina's petrochemicals industry is unlikely to see growth over the next five years, according to BMI's latest Argentina Petrochemicals Report.

The Argentine petrochemicals industry faced a major challenge in 2014 when growth from the previous year was wiped out by a contraction in plastics and rubber production. This coincided with a downturn in the economy. Tepid private consumption growth is expected to continue into 2015, leading to further pressure on local producers.

Gains reported in ethylene and polyethylene (PE) in 2013 were reversed in 2014 with the downturn likely to have undermined that recovery with the total cracker utilisation rate at around 15% below full capacity. At the same time, PE was also under pressure, partly as a result of market dynamics with the influx of lower priced PE...

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Pharmaceuticals & Healthcare

Argentina Pharmaceuticals & Healthcare

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BMI View: Despite economic activity forecast to continue to decline over the medium-term, Argentina's gradual transition towards more pragmatic and market-friendly economic policies will likely benefit key economic sectors in the long-term, including the pharmaceutical industry. We sustain our view that undervalued local drugmakers could be acquisition targets for foreign firms willing to enhance their footprint in the region as the economy stabilizes. On the upside, the rise of non-communicable diseases will sustain growing demand for medicines, while improved coordination between the...

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Power

Argentina Power

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BMI View: We have upwardly revised our forecasts for Argentina's power sector this quarter, due to increased availability of financing for planned new capacity and a strengthening in the country's thermal project pipeline. Nevertheless, at present the country continues to suffer from poor power infrastructure and insufficient installed capacity, as highlighted by an agreement to start importing power from Bolivia by the end of 2015. Last year sovereign default has further damaged the business...

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Real Estate

Argentina Real Estate

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BMI View:  Argentina's commercial real estate sector has been largely resilient to ongoing chaos in the country's economic and political environment over the past few years, having enjoyed a prolonged period of growing demand and low vacancy rates across much of the market. However, there are now increasing signs that weakening private and consumer sentiment are making their way into the sector, as businesses adopt a more conservative outlook and households find themselves hit by rising inflation and falling wages. While the real estate sector holds strong long-term potential, we caution that it will find itself having to weather a storm over the next two years, with risks weighted firmly to the downside.

Negative GDP growth, rising inflation and a restrictive investment environment are just some of...

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Renewables

Argentina Renewables

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BMI View: Despite an attractive regulatory framework and ambitious government plans for expansion, we maintain a relatively bearish outlook towards the Argentine renewables industry. An unappealing business environment and limited project financing opportunities will continue to limit the sector's growth potential over the forecast period.

Argentina's positive regulatory framework for renewables on the surface looks appealing to investors. For example, the country has adopted an ambitious target of sourcing 8% of its electricity demand from renewables by 2016, offers various tax incentives to renewable...

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Retail

Argentina Retail

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BMI View: Despite a troubling economic landscape and a rather uncertain political future, foreign players are still looking to invest in Argentina. There is hope of an economic boom following the October 2015 elections, as import restrictions are thought to be lifted. While high inflation will dampen the real value of household spending growth in the short term, we expect price levels to moderate over the medium term and rising household spending to provide investment opportunities in the retail sector.

Household spending is set to increase across all sectors in 2015. However, spending on alcoholic drinks & tobacco, personal, insurance & other spending, education, and clothing & footwear are set to experience the highest growth rates. This can be partly explained by the burgeoning middle class, as the majority...

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Shipping

Argentina Shipping

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BMI View: We maintain our cautiously optimistic view on the Argentine port sector. The country enjoys a good commodities mix but continues to struggle with external headwinds as well as internal difficulties such as rising inflation and labour unrest. Weaker private consumption will dampen imports while a weaker exchange rate will marginally improve the competitiveness of exports, with knock-on effects for port volumes.

Argentina's economic recession will persist in 2015, and will be deeper than we previously anticipated due to very weak private consumption and gross fixed capital formation. Argentine real GDP will contract in 2015 due to tepid private consumption and fixed investment growth. We forecast real GDP growth of -0.7% in 2015, a downward revision from our prior forecast of -0.3% growth. This will follow estimated growth of -0.5% in 2014, which we have also revised down from our...

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Telecommunications

Argentina Telecommunications

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BMI View : A 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 a result BMI has downgraded its outlook for 2014.Meanwhile BMI upgraded its 3G/4G outlook after successful spectrum auction and the launch of the country's first 4G networks. There are also 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 supports this trend and enables operators to lower their costs, supporting the market's long-term growth potential.

Key Data

  • Mobile connections...

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Water

Argentina Water

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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...

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