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

  • A substantial uptick in investment is unlikely while the current administration remains in power due to the government's history of interventionism. Nonetheless, declining inflation and import controls will support the country's private consumption and net exports balance, keeping growth in positive territory in 2015.

  • 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 and dollar-linked domestic bond markets 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....

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Argentina Operational Risk Coverage (9)

Argentina Operational Risk

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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 12 thoverall in our Labour Market Risk Index, with a score of 56.8 out of 100. Nevertheless, investors in Argentina face notable costs and difficulties with regard to labour force regulations, largely due to exorbitant ...

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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 murder...

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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 benefits...

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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. 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...

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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 score reflects...

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Argentina Industry Coverage (22)

Agribusiness

Argentina Agribusiness

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BMI View: The Argentine grain sector will continue to play centre stage over the medium term amid a deteriorating economic environment. With foreign reserves under pressure, grain exports (particularly soybean) will remain vital, but there remains 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 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...

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Autos

Argentina Autos

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BMI remains bearish on the outlook for the Argentine autos sector in 2015 and we forecast of a 6.3% decline in vehicle sales for the year. Following the 36.3% fall in vehicle sales in 2014, we believe further drags on sales will be generated by rampant inflation, falling consumer and business spending and the expiry of the government's subsidised car purchasing scheme. Ongoing currency controls and weakness in the Argentine peso in the country will also continue to push up vehicle prices, dragging on vehicle sales.

Consumer And Business Spending To Remain Low

Despite a slight rally in consumer confidence in Q115, our Country Risk team remains confident that inflation will average 17% for the year, leading to an erosion of household purchasing power and a 0.8% fall in overall private consumption in 2015 . This will drag on sales growth...

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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 14.5%. 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 from 2017-...

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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 so...

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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 View : We maintain our cautious outlook for the Argentine freight transport sector. The Argentine economy will contract for a second consecutive year in 2015 as government policies continue to discourage investment and high inflation weighs on real private consumption. We forecast a contraction of 1.3% in GDP in 2015, after an estimated contraction of 0.5% in 2014.

We caution that on top of its internal economic difficulties, the country is struggling with a considerable infrastructure deficit. Investment is needed across the board if the country's rail freight system is to handle increasing volumes over the coming years. Air freight is the only mode in which we expect growth in 2015, but with growth of just 0.15% forecast we caution that the outlook for volumes remains subdued. We expect road and rail volumes to...

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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, high inflation, capital controls, shortage of credit and government debt default all contributing to a recession and sharp contraction of the IT market in US dollar terms. We forecast another year of US dollar contraction in 2015 due to depreciation and inflation, but performance is forecast to be much stronger and we expect the market to move to a higher growth trajectory from 2016/2017 as confidence returns...

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Infrastructure

Argentina Infrastructure

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BMI View: We forecast a moderate return to growth for Argentina's construction industry at 1.5% in 2015, partly as a result of low base effects and an investment drive prior to the October presidential 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 (GFCF), which is a good proxy for infrastructure. They forecast real GDP to contract by 1.3% this year, which compares with estimated growth of -0.5% in 2014.

  • Consumer price inflation will remain elevated in 2015 on the back of an...

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Insurance

Argentina Insurance

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BMI View: Structurally high inflation in Argentina has severely restricted the development of individual life insurance, and will likely continue to do so through the forecast period. However, it has provided an environment in which the non-life insurers have been able to pass on increased claims (and other) costs on to their clients. In the meantime, group life insurance sales have been rising strongly, as employers have seen life cover as a valuable benefit with which to attract and retain key staff. These trends will likely persist through the forecast period, with the result that premiums rise steadily in both USD and real terms. However, in the short term, the likely weakness in the ARS will constrain growth in USD terms.

Like its counterparts in Iran and Venezuela, Argentina's insurance sector is shaped by the structurally high level of inflation. This affects the two main...

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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. The country has...

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Mining

Argentina Mining

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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 2019. 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. While the country's upcoming elections in Q415 are likely to lead to business environment improvements, economic and political headwinds remain in place, including elevated inflation, capital controls, and local content...

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Oil & Gas

Argentina Oil & Gas

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BMI View: Highly prospective acreage, a strengthening competitive landscape and supportive pricing dynamics will help insulate the Argentine shale sector from aggressive claw backs in industry spending. A shift toward a more centrist government after the October 2015 presidential election will open up significant investment opportunities in Argentina, particularly within the oil and gas sector. As such, the core Neuquen shale province will over the course of the next decade, although the more peripheral shale formations will see limited investment. Increased investment and a growing exploration drive point to a marked improvement in investor sentiment, and we expect this trend to continue over...

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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: Argentina's pharmaceuticals and healthcare sector is expected to experience improved growth rates through the next decade, standing slightly behind growth patterns in the other large markets in Latin America. Combined with expected improvements in the Argentinean business environment to take place with the next government administration since 2016, risks to our pharmaceuticals and healthcare forecasts are weighted to the upside. However, we expect a more mixed market growth picture through the rest of 2015, with expansionary fiscal policy ahead of general elections not able to offset modest consumer confidence...

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Power

Argentina Power

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BMI View: We have started to see improvements in Argentina's power sector in terms of increased availability of financing for planned new capacity and a strengthening in the country's thermal project pipeline. Nevertheless, the market remains underdeveloped relative to its potential and suffers from a combination of ageing generating capacity and distribution networks, difficult access to capital and a reliance on electricity imports. Due to a challenging business environment, we expect Argentina to remain primarily dependent on Chinese and Russian investment for capital-intensive...

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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 the...

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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 renewables...

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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 of...

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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 and 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, the country's shipping industry continues to struggle with external and internal headwinds such as rising inflation, government intervention, industrial unrest and bureaucratic requirements for businesses. 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.

...

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Telecommunications

Argentina Telecommunications

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BMI View : A fragile Argentine economy had a hugely negative impact on the telecoms sector in 2014, as high inflation and concerns about currency stability affected purchasing power. Inactive mobile number discounting added to the contraction of the mobile subscriber base in 2014. High penetration rate suggests that Argentinean market is close to the saturation point, BMI believes that this will be reached in 2018. On the upside, BMI upgraded its 3G/4G outlook after successful spectrum auction and the launch of the country's first 4G networks. Operators have also launched extensive capital expenditure programmes to expand their LTE networks. Meanwhile, NII Holdings divesting Nextel Argentina can change the competitive landscape in the country.

Key Data

  • Mobile connections contracted by 727,000 in 2014,...

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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 account...

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