APPENDIX 3
Supplementary Memorandum submitted by
the Argentine Ambassador
We are pleased with the opportunity given by
the extension of the Trade and Industry Committee's terms of reference
to widen to the remaining countries of MERCOSUR its inquiry into
trade and investment opportunities with Brazil.
The purpose of this document is to reflect the
relevance of Argentina within MERCOSUR, its fast growth and, therefore,
the big opportunities the country offers to British firms to trade
and invest.
I. ARGENTINA:
FACTS AND
FIGURES
Argentina is a relevant member, and co-founder
with Brazil, of MERCOSUR. It is a country of 2,750,000 square
kilometers, almost as extended as India. Its continental territory
lies between the tropic of Capricorn and sub-Antarctica's Patagonia.
It is populated by almost 40 million inhabitants, of which 97%
are literate and enjoy the highest social indicators of Latin
America. Ninety-eight percent of its population is of European
origin most of which settled in Argentina between 1860 and 1950.
Many British joined those waves of immigrations and have established
in Argentina. For example, today more of 40,000 inhabitants in
Patagonia are from Welsh roots.
Argentina: facts and figures
Capital City: |
City of Buenos Aires. |
Government: | Republic, Representative and Federal.
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President: | Dr Néstor Kirchner. The president is both the chief of state and head of government. President and vice president are elected by popular vote for four-year terms. The cabinet is appointed by the president.
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Official Language: | Spanish.
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Currency: | Argentine Peso ($).
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Religion: | In Argentina, it exist total freedom of cult, although the official religion is the Roman Catholic Apostolic. It is practicing other cults as the Protestantism, the Judaism, the Islamism, the Greek Orthodox religion, the Russian Orthodox one and others.
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Location: | Argentina is located in the south end of the American continent, limiting to the west with Chile, to the north with Bolivia and Paraguay, to the east with Uruguay, Brazil and the Atlantic Ocean; while to the south it is the Beagle Channel the one that marks its limits.
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Surface: | American Continental Area: 2.8 Million square kilometers. Total Area (American + Antarctic): 3.8 Million square kilometers (1,5 square miles). Is the second largest country in Latin America and the eighth largest country in the world.
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Politics Division: | 24 autonomous States with political, administrative and economic powers. (23 provinces and the City of Buenos Aires).
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Major cities: | Ciudad de Buenos Aires, Co«rdoba (City), Rosario, Santa Fe (City), Mendoza (City), San Miguel de Tucumán and La Plata.
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Climate: | It has a great diversity of climates, which range from sub-tropical in the Northeast to sub-Antarctic in the South. In the central region the climate is temperate, suitable for agriculture.
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Official Hour: | GMT -3 hours (normal/summer).
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Population: | 36.223.947 (Year 2001) Estimate 2006: 38.970.611.
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Urban Population: | 89%.
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Population Growth Rate: | 1.1%.
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Illiteracy Rate: | 2,6%.
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Life expectancy at birth: |
75,24 years. |
GDP (2005 est): | 177,4 billion US dollars.
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Annual GDP variation: | 9,2% in 2005, 8,7% in 2006 estimated.
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GDP per cápita (2006 estimated):
| US$ 4.936. US$ 13.813 (Purchasing Power Parity).
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Exchange Rate: | (2006) US$ 1 = $ 3,08.
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Inflation (2006 estimated): | 9%.
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Unemployment rate: | 10,1% (IV Quarter-2005).
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Foreign Direct investment flows
(Flows 2005):
| 4,6 billion US dollars (Stock 2004) 50,5 billions dollars.
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Exports (Year 2006): | Over 45 billion US dollars.
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Imports (Year 2005): | 28,6 billion US dollars.
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Regional integration: | The MERCOSUR (Southern Cone Common Market) is a common market comprising Argentina, Brazil, Paraguay and Uruguay. Bolivia, Chile and Peru are MERCOSUR Associate States, recently it was approved the incorporation of Colombia, Ecuador and Venezuela with the same status.
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II. BRITISH-ARGENTINE
LINKS AND
CO-OPERATION
Argentina shares two centuries of fruitful and strong cultural
cooperation and economic links with the United Kingdom. Since
mid-nineteen century to mid-twentieth century British investments
and bilateral trade with Argentina were very significant. Only
as an example it is worth to remember that most of the 40,000
kilometer's net of Argentine railways was built and operated by
British companies. Banking and Agriculture were also sectors with
deep British influence. In 1943, during the Second World War,
70% of British import of linen came from Argentina, as well as
14% of wheat, 29% of preserved beef and 35% of leather.
As for 1990, relevant British firms have invested in Argentina,
with a slowdown due to the economic crisis. The following are
some of the British firms which have invested in that period and
are currently operating in Argentina: BG; Shell; BP; Cadbury Schweppes
Plc.; Ladbroke Group International; BAE Systems; Knight Piesold
Ltd; Unilever; Tesco; Diageo; Anglian Water International; United
Utilities; Glaxo Wellcome Plc.; Halcrow Holdings Ltd; ICI; HSBC;
Rio Tinto; P&O, Sea Containers; BAT Industries Plc.; Clear
Channel International; Mersey Docks & Harbour.
Since the economic crisis British exports to Argentina, in
particular of capital goods, and Argentine exports to the UK have
been steadily increasing. Argentine exports to the UK are mainly
agri-food products but also some industrial products, like machinery,
steel products, cosmetics, glassware, rubber, etc. It is expected
that bilateral trade will be, in 2006, near its highest level
since 1990.
Argentina and the United Kingdom have signed recently several
bilateral agreements with the purpose to foster cooperation, trade
and investments.
Bilateral economic agreements
Agreement for the Promotion and Protection
of Investments (1990).
Convention for the Avoidance of Double Taxation
and the Prevention of Fiscal Evasion with Respect to Taxes on
Income and Capital (1996).
UK/Argentina Partnership, Action Agenda (1998).
Memorandum of Understanding on Cooperation
on Trade and Investments (1998).
Inter-Institutional Memorandum of Understanding
on Co-operation in the Transport Sector (1998).
Notwithstanding, recent British investments in Argentina,
in relative terms, are behind those of Spain, France, Germany,
Italy and Netherlands, whose business are actively engaged, including
through increased high level official visits to Argentina, in
taking advantage of the very favourable economic conditions and
future prospects. In that context it would be beneficiary for
both, the bilateral relation and British businesses to see a more
active support of UKTI, including through business missions to
Argentina.
III. INVESTMENT AND
TRADE OPPORTUNITIES
IN ARGENTINA
The Argentine economy is running through a very strong period
of expansion. Since 2003, its GDP has increased around 9% every
year, including in 2006. Economists are predicting strong GDP
increases for 2007. Together with this growth the main macroeconomic
variables are positive, including four years of unprecedented
fiscal surplus and the lowest unemployment rate in the last ten
years. In the same period exports have increased at an annual
average rate of 15%.
In Annex I you can find a document containing Argentina
Economic Indicators as December 2006.
It is important to remember that Argentina is emerging from
its worst economic, social and institutional crisis of its history,
which started in 1998 with four years of recession and exploded
in December 2001. Some of the social consequences of that crisis
still remain today and need active Government policies in order
to mitigate their effects.
Argentina is an open market economy in which State role is
about control and regulation with the goal of maximising people's
welfare.
Production means are in private hands, including most of
the utilities: communications, transport (railways, airports,
roads and ports), energy (power generation and grid, oil, gas,
nuclear, wind and sun generation), water, etc. Its heavy and medium
industries are in frank recovery. Particularly dynamic and innovative
is it sector of small and medium enterprises sector with its export
orientation.
Together with the development of its industry, Argentina
has obtained significant levels of knowledge in some high-tech
sectors as nuclear, satellites, software and biotechnology.
Argentina is renown by its very efficient agri-business sector.
The main reasons behind this success are the extension of its
territory (250,000 square km of arable land), variety of climates
(mostly temperate), excellent quality of agro-ecological conditions
and technology. All of these allow Argentina to be and remain
one of the main producers and exporters of food in the world.
Tourism is a sector which is booming due to its variety of
natural landscapes, diversity of culture and up to date infrastructure.
International visitors are increasing annually at rates above
10% and huge investments are being made in infrastructure.
Five years of high expansion of Argentine economy are opening
a new stage of investment and public works in order to support
its sustainability. It is important to note that Private, Public,
Partnership modalities have been identified by the Government,
including by a Law approved by Congress in 2004, and are already
implemented in different projects.
In Annex II we include a document prepared by the Investment
Agency of the Ministry of Economy, called Ten reasons to invest
in Argentina.
For the purpose of this document we have identified only
a few economic sectors for description, in the understanding that
many others are as much dynamic and growing.
1. The energy sector
Because much is said about the Argentine energy sector and
because it constitutes a good and critical example of the above
mentioned facts and shows the dynamics implies, we are including
the following information on decisions taken in that sector, in
2006:
Decisions taken in 2006 in the energy sector
Siemens AG, has been awarded major contracts
for the construction of two combined cycle power generation unit.
The total order is valued at US$ 1.6 billion. Commercial operation
is due to start in the first half of 2008.
Investment in the development of biodiesel
has recorded a strong growth between January 2005 and August 2006,
reaching US$ 285.5 million. On 19 April a Law promoting the production
of biofuels from grains and soybeans was enacted by the Congress.
Bolivia and Argentina signed on 29 June a
new gas agreement that will secure a large increase in export
volumes, when a new pipeline in northern Argentina will be completed.
Petrobras will invest US$ 420 million in
Santa Cruz in order to explore and operate two gas fields. The
company has already invested in that province nearly US$ 240 million
in the last three years. Gas reserves in the area could reach
26,000 million cubic meters.
Pan American Energy (a joint venture between
BP and Bridas) announced that their Argentine production of natural
gas was enlarged by 2,5 million cubic meters daily. This level
of production was reached once the Macueta-Piquirenda gas pipeline
started to function. The company invested U$S 110 million in the
building of this pipeline.
Winterhshall invested US$ 84 million in Argentina
to explore and produce gas and oil in 2006.
On 23 August the Argentine Government announced
the reactivation of nuclear activity in the country by deciding
to update its power plants (Atucha I and Embalse), by completing
a partially built nuclear power plant (Atucha II) and by studying
to build a new power plant and resume production of enriched uranium
and heavy water.
The Inter-American Development Bank announced
on 2 August a US$ 550 million loan to finance a 1,220 kilometers
500 kV electric power transmission line that will link the Northwest
and Northeast regions of Argentina. It includes the construction
of provincial and regional transmission and sub-transmission works
and a transformer station.
Occidental Petroleum Oil Company has recently
confirmed its intention to double oil production in Argentina
within five years. This project would demand a total investment
of US$ 1 billion.
Repsol YPF plans to increase investments
in Argentina's southern Chubut province to US$ 630 million over
the next three years.
The Argentine Congress approved in September
a new hydrocarbon law, which creates a fiscal incentive to stimulate
oil and gas production in the country.
The oil companies Repsol YPF and ENARSA have
started in December the first phase of offshore exploration in
the Argentine Sea. For three months the ship Geco Triton will
perform seismic exploration in the area called Marina Colorado
Basin. The cost of this operation amount to US$ 27 million.
The Government has called for tender to build
a 280 MW thermoelectric plant near the city of Rio Turbio in the
Patagonian province of Santa Cruz. Offers for the US$ 480 million
tender are due on 15 March 2007.
2. IT development and industry in Argentina
This is one of the most dynamic and active sectors in the
Argentine economy. Argentina leads IT development and production
in Spanish language which is a market of almost three hundred
millions people. The National Government considers this sector
of strategic relevance for the development of the country as a
whole. Congress, in 2004, has enacted two laws for meet that objective.
IT Sector: facts and figures
Employs 35,000 professionals;
Grows at an annual rate of 50%;
Its market growth attains 25% per year;
There are 660 IT companies;
Its main exports are directed to Latin America,
Spain, United States, México and European Union;
Argentine companies have opened 94 offices
abroad;
There are 120,000 IT students in 50 study
centers;
The sector represents 1.8% of Argentine GNP;
Argentina is leading in Spanish language;
Costs are highly competitive and infrastructure
is updated and;
There is a development strategy integrated
by technological clusters.
Argentina IT has developed new products and services oriented
towards the needs of international markets, in the following sectors:
Agri-businesses; Health and Medicine; Oil and Gas; E-learning;
Video Games; Banking and Financial Services; Website Development
and Interactive Marketing; Software Factory; Business Application;
Quality; Data Security and Protection; and Mobile Technology.
3. Agri-business sector
Argentina by its natural conditions, size and relatively
low population is one of the more efficient agri-food producers
and exporters in the world. Its geographic diversity allows tropical,
temperate and Mediterranean type of production. In the past it
was known by its beef and wheat. Today beef and cereal remain
important and quality products, but its production has expanded
to several types of crops and livestock.
Oil-seeds, in particular soy and its flour and oil, have
become the main exports of Argentina. The 2005-06 crop was above
40 million tons and very close to 2004-05 bumper crop. Argentina's
richness of soil and the extended use of modern and environmentally
friendly technology as direct till and biotechnology, allows Argentina
to be the first exporter of soy oils and soy meals. Some of the
externalities of this activity are the new ports, new process
factories and the technological developments attaint in agri-machineries,
seeds, farming techniques and biodiesel production.
Nowadays Argentina processes most of its crops and livestock
for domestic consumption and export. It's the fifth producer of
wine in the world, buoyant sector thanks to the high quality of
its wines and important foreign and local investments. It is also
an important dairy producer and exporter and a relevant fishing
country. Those productions are cultivated and processes with local
technology. As an example, Argentina is at the forefront of direct
till machinery technology.
Agri-business: facts and figures
2005-06 crops production was above 70 million;
Argentina is the first producer of sunflower,
sunflower oil, lemons, concentrated lemon juice, "yerba mate";
it is also the third producer of soy oil and honey; fourth of
de-hydrated apples; fifth of beef, concentrated apple juice and
wines; sixth of powder milk and cheeses; eighteenth of skim powder
milk and twentieth of beer;
Argentina is the first exporter of sunflower
oil, soy oil, pears, honey. It is also the second exporter of
peanut oil; third of beans; fourth of concentrated apple juice;
fifth of olives and powder milk; seventh of tea; eight of beef
and skim powder milk; 12 of wine; 18th of candies;
Argentina is the third food supplier to the
EU-25;
Most of Argentine agriculture is from extensive
production;
Argentina is the second country in certified
organic land;
Agriculture in Argentina has cero subsidies;
Argentina has a higher level of control for
food for domestic and export markets;
Traceability systems includes apples, pears,
citrus, beef, poultry, ovine meat, fish products, wines;
Argentina is a free country of BSE, Avian
Influenza, Newcastle and Foot and Mouth;
Extensive land production insures high standards
on animal welfare.
4. Tourism sector
Tourism has become in Argentina an important activity which
already accounts for about 7% of the GDP. The surge of tourism
in Argentina, particularly of incoming visitors, is based on three
basic pillars:
(a) the variety and beauty of its landscapes, which goes
from tropical jungles and rivers to the Patagonian lakes and glaciers
and from the infinite Pampa, to the longest and highest portion
of the Andes range;
(b) the Argentine culture, blend of native, Spanish, Italian
and other European cultures and;
(c) a modern and updated infrastructure, including hotels,
roads and ports and airports facilities.
In that context the Government is encouraging the formation
of joint ventures.
Tourism: facts and figures
In 2005, tourism represented 7,33% of Argentine
GDP;
Tourism employs 1,13 million persons, which
account for 7,14% of the work force;
Argentina is the second tourist destination
in South America with more than four million visitors in 2006;
From 2005 to 2006, tourism grew an 18% in
value and above 10% in visitors. Tourism as sector of goods and
services accounted in 2005, for 8,2% of total Argentine exports;
Until November 2006, 76 hotels were inaugurated.
There are more than 250 hotels under construction;
In 2007, one new domestic airline will start
to operate and al least two new international airlines. Aerol-«neas
Argentinas is increasing its fleet in 14 new airplanes. Many others
companies are increasing their frequencies.
5. Transport, another dynamic sector in the Argentine economy
Due to the high expansion of the economy, as well as with
an increased requirement of energy there is an increased demand
of transport. The following are some examples:
(a) Railways: The Government has pledged as one
of its priorities to foster the railways system as an efficient
mean of transport. In that context, in 2006 the Government called
several projects for tender.
2006 railways related tenders
To build a high speed train between the city
of Buenos Aires, the city of Rosario, Province of Santa Fé
and the city of Cordoba, Province of Cordoba;
To re-establish the Central Trans-Andes Railways
to link the cities of Mendoza and Guaymallen and the border with
Chile;
To exploit the Railways Line between the
city of Buenos Aires and the city of Posadas, Province of Misiones;
To build the multi-purpose terminal of passenger
and ferro-car in the city of Mar del Plata, Province of Buenos
Aires;
To build railways platform, tracks and operative
buildings at the Mar del Plata, Province of Buenos Aires Station.
Air transport: Government has called for a tender
to provide 30 bi-dimensional radars and three, three-dimensional
mobile radars. Government has also called for tender for 50 domestic
and international air routes.
Naval transport: Argentine boat yards are operating
at their maximum capacity, most of them are expanding or planning
to expand their capacity. In that context the Italian Gruppo Beltrame
recently announced in December 2006 its plans to build in Argentina
a plant to manufacture between 150,000 and 200,000 tons of thick
steel plates used in the naval industry. The range of activities
by Argentine boat yards goes from building freighters, tankers,
river barges, fishing boats and, yachts (motor and sailing boats)
and repair facilities. Argentina has 38 maritime ports and 25
river ports in the river Paraná and Uruguay which constitute
the first section of the Hidrov-«a Paraná-Paraguay.
Hidrov-«a Paraná-Paraguay
The Hidrov-«a (waterway) Paraná-Paraguay is a
3,450 km net of navigable rivers which links Argentina, Uruguay,
Paraguay, Bolivia and Brazil. In its first stage the project already
allows navigation of 300 foots of length and 36 foots of draft
ships in the River Paraná from the city of Buenos Aires
to Rosario, Province of Santa Fé (500 km). Smaller ships
can reach the city of Asuncio«n, in Paraguay (1,100 km further).
Only in Argentina twenty five ports, most of them recently built
and privately operated, lie in that shore. Seventeen million inhabitants
are already being served by this stage of the Hidrov-«a,
including most of the agriculture production of Argentina, Paraguay
and Uruguay and the mineral production of Bolivia.
IV. CONCLUSION
The above mentioned sectors are only a few of the ones which
could be of interest for British firms to invest, buy, sell or
establish joint ventures. British businesses, which are already
operating in Argentina, are showing that there is a wider area
of interest. We believe that there is room for an increase economic
cooperation between our two countries and that this aim can benefit
from an increase exchange of information, business men and Government
and Parliamentary representatives.
For nearly two centuries, strong human and cultural ties
as well as intensive trade have formed the basis of an enduring
relationship between Argentina and Britain. This historic affinity
between both people constitutes a springboard to foster cooperation
and association and to allow British businesses to profit from
the Argentine economy comparative advantages.
The Embassy stands ready to assist should the Committee need
further information and/or clarification on this matter.
January 2007
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