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Confidencial Nombre Autor/Empresa Version 1.0Embassy of India in Argentina
Chemical & AgrochemicalIndustryin Argentina December 2018
Confidencial Nombre Autor/Empresa Version 1.0
TABLE OF CONTENTS
1. EXECUTIVE SUMMARY 03
2. MARKET VISION AND STRUCTURE 04
Value chain structure 05
Purchasers of the chemical sector 06
Divisions, sectors and subsectors 07
Market size 08
Evolution of chemical output 09
Chemical output by sectors 10
Industry dimension 11
Production of agrochemicals 12
Agrochemicals: production vs demand 13
Agrochemicals: supply vs demand 14
Agrochemicals: national production vs imports 15
Geographical distribution of national
production 16
Market situation 2018 17
Prohibited and restricted chemicals 18
3. MAIN COMPETITORS 21
Main industry competitors 22
Main agrochemical sector competitors 23
4. S.W.O.T. ANALYSIS 24
5. PUBLIC POLICIES 29
6. INTERNATIONAL TRADE 31
Exports 32
Imports 33
Trade balance 34
Trade by sectors 35
Trade of agrochemicals 36
Main business partners 37
Argentine market share 41
7. FUTURE PERSPECTIVES 42
8. OPPORTUNITIES FOR INDIAN COMPANIES 44
9. CONSIDERATIONS FOR FOREIGN INVESTORS 46
Country overview 47
Current economic context 48
Taxation and labor 50
Relevant legislation 62
Exchange rates 63
10. CONCLUSION 64
11. USEFUL INFORMATION 66
2
The total output of the Argentine chemical industry in 2017 was worth USD 26 billion. It is estimatedthat in 2018 production will decrease by 5.3% approximately in keeping with the economic recession.Production is expected to begin to pick up in 2019.
While half of it is applied to end-use chemical products, only 14% corresponds to agrochemicals.Nevertheless, the production of agrochemicals is inadequate to meet the demand, which renders thisindustry heavily dependent upon imports. China positions itself as the main manufacturing country ofthe agrochemical imports.
Both the chemical industry, in general, and the agrochemical sector present good prospects in themedium and long term, despite the current recession. Agrochemical sales increased 6% last year andare expected to further grow this year.
The industry affords opportunities to foreign companies, either to export to Argentina or invest locally.
3
EXECUTIVE SUMMARY
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
MARKET VISION AND
STRUCTURE
4
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Oil and natural gas
5
▪ Olefins: ethylene, propylene, butylene, etc.
▪ Aromatics: benzene, toluene.
▪ Ammonia, methanol
RESOURCE CHEMICAL SUBSTANCES FINAL PRODUCTS
Minerals
Petrochemicals
▪ Sulfuric acid▪ Caustic soda▪ Chlorine▪ Hydrochloric acid,
others
Non-Petrochemical
Plastic resins
▪ Polyethylene▪ Polypropylene▪ PVC▪ PET
Fertilizers and pesticides
Cleaning and personal hygiene
Paints and varnishes
Plastic products
Rubber products
Manufactured synthetic fibers
Pharmaceutical products
Synthetic rubber
Imported supplies
CHEMICAL INDUSTRY
VALUE CHAIN STRUCTURE
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
6
PURCHASERS OF THE CHEMICAL SECTOR
PURCHASER INDUSTRIES
Paints and coatings
Cleaning and personal care
Cosmetics and perfumes
Pharmaceutical and medicine
Mining, oil and gas
Agriculture and stockbreeding
Construction
Plastic industry
Pulp and paper industry
Metal-mechanic industry
Automotive industry
Food and beverage industry
Textiles, footwear and leather goods
MANUFACTURES
Food and drinksAdditives for naphtha and lubricants
Soaps, detergents and cosmeticsBags, tubes and containers
Drugs and diagnosisFlexible foams
Fertilizers and compostExplosives and pyrotechnics
Pipes, accessories and profilesFibers and filaments
TiresPackaging and lamination
Industrial parts and auto partsSolvents, paints and inks
Varnishes and ThinnerTextiles, footwear and leather goods
CH
EM
ICA
L V
ALU
E C
HA
IN
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
7
DIVISIONS, SECTORS AND SUBSECTORS OF THE ARGENTINE CHEMICAL INDUSTRY
INTERMEDIATE-USE GOODS END-USE CHEMICAL PRODUCTS
Substances and basic chemicals
Agrochemicals and fertilizers
Speciality chemicals
Organic chemical
substances
Inorganic chemical
substances
Paints and varnishes
Cleaning and personal care
productsCosmetics
Medicines for human and animal use
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
MARKET SIZE
110,000Employees
20178
3,229 3.768.693TONS of locally demanded
agrochemicalsChemical
companies
TOTAL OUTPUT VALUE
USD 26 billionEXPORTS VALUE
USD 2.8 billionANNUAL VARIATION IN
PRODUCTION
-1%
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
The evolution of the Argentine chemical output can be described in two periods extended in the last 11 years. Between 2008-2014, the output expanded reaching a growth level of 10.2% in 2009, but slightly decreasing by 2014. Since 2015, when a new
administration took office, the economy has progressively headed into recession, which caused a shrinkage of the output. Production fell by 5.3% in 2018, but it is expected to start recovering in 2019.
5.8%
10.2%
2.4%3.7%
2.9%
-0.4%
2.1%
-1.8% -1.4% -1.0%
-5.3%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 (*)
9
EVOLUTION OF THE TOTAL CHEMICAL OUTPUT
Source: Compiled based on information provided by INDEC (National Institute of Statistics and Census).(*) Period January-October 2018
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Almost half of local chemical production corresponds to end-use products (paints, cosmetics, drug products, etc.). Only 14% of the total production corresponds to agrochemicals; nevertheless, this sector that has been
growing at an average annual rate of 5%. 10
48% 14% 16% 22%2017
End-use chemical products Agrochemicals Speciality chemicals Basic chimestrySource: Compiled based on information from CIQyP (Chemical and Petrochemical Industry Chamber).
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
CHEMICAL OUTPUT BY SECTORS
11
30% 17% 5%
Manufacturing production
representation of the GDP.
Chemical industry representation of the total manufacturing
production.
Chemical industryrepresentation of the
GDP.
INDUSTRY DIMENSION
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
The Argentine production of agrochemicals hit a record high in 2017 with a total production of 1.94 million tons. It was the second consecutive year of increase.
1.46
1.78 1.821.72
1.511.40
1.771.94
0.00
0.50
1.00
1.50
2.00
2.50
2010 2011 2012 2013 2014 2015 2016 2017
12
Source: Compiled based on information provided by CIAFA.
In millions of tons
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
PRODUCTION OF AGROCHEMICALS
Local production of agrochemicals has historically been insufficient to meet the demand. The total output produced in 2017 could only cater for half the demand. This is the reason why this segment relies heavily on
imports. 13
AGROCHEMICALS: PRODUCTION VS DEMAND
1.94
3.77
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2010 2011 2012 2013 2014 2015 2016 2017
Production Demand
In millions of tons
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Source: Compiled based on information provided by CIAFA.
As evidenced, total demand is met (with a small surplus) when the total supply is considered, i.e. local production plus imports.
14
AGROCHEMICALS: SUPPLY VS DEMAND
4.18
3.77
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
2010 2011 2012 2013 2014 2015 2016 2017
Supply Demand
In millions of tons
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Source: Compiled based on information provided by CIAFA.
In 2017, 53% of the agrochemicals traded locally were imported. Nationally produced agrochemicals have gained more market share increasing from 39% in 2010 to 47% in 2017; nevertheless, imports are still higher
than nationally produced agrochemicals. 15
AGROCHEMICALS: NATIONAL PRODUCTION VS IMPORTS
39% 41% 45% 44% 45% 52%43% 47%
61% 59% 55% 56% 55% 48%57% 53%
2010 2011 2012 2013 2014 2015 2016 2017
National Imported
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Source: Compiled based on information provided by CIAFA.
16
Mendoza
Córdoba
Buenos Aires
Santa Fe1.8%
2.6%
15%
72%
GEOGRAPHICALDISTRIBUTION OF NATIONAL
PRODUCTION
Neuquén
4.2%
Rio Negro
2.4%
Overall, chemical production is concentrated in the central region of the country.
The province of Buenos Aires concentrates most the total production, manufacturing 72%.
Santa Fe follows second with a 15% share.
Source: Instituto Petroquímico Argentino (Argentine Petrochemical Institute).
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
MARKET SITUATION 2018
17
During the January-October period, production showed an accumulated decrease of 5.3% caused by plants´ lockouts, shutdowns and a lower demand.
However, during the first semester of 2018 local sales increased by 3% due to the clearance of many companies´stock.
Dollar exports in June stayed in the same level as in last year June, but the annual accumulated exports still remain positive (+20%),
Within the industry, the sectors that produce basic organic products and thermoplastic productsrecorded a 10% increase in sales, whereas other sectors, such as the inorganic products segment, were
struck by a decrease in sales.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
18
ALDICARB
AMINOTRIAZOL
MERCURY BICLORIDE
BENDIOCARB
BISFENOL A
METHYL BROMIDE
CARBOFURAN
CHLORPIRIFOS
DAMINOZIDE
DICHLORVOS (DDVP)
ETIL AZINFOS
ETHION
FENITROTHION
FORMALDEHYDE
PHTHALATE
MALATHION
METHAMIDOPHOS
MERCURY
LEAD
PROPOXUR
CARBON TETRACHLORIDE
CHEMICAL CHEMICAL
To access the complete regulation with the comments and clarifications of each chemical restricted and prohibited in the Argentine Republic, contact the Ministry of Health. Find the contact details in “Useful information” section in this document.
Restricted chemicals in Argentina:
PROHIBITED AND RESTRICTED CHEMICALS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
19
Prohibited chemicals in Argentina:CHEMICAL CHEMICAL
2,4,5-T
3 CHLORINE -1,2 PROPANEDIOL
ABAMECTIN
COPPER ACETOARSENITE
FLUORHYDRIC ACID AND ITS SALTSMONOFLUOROACETHIC ACID AND ITS SALTS OF Na + and
K +ARYL ALCOHOL
ALDRIN
ALPHA NAFTIL TIOUREA
ARSENIOUS ANHYDRIDE
ARSENIC
SODIUM ARSENIATE
CALCIUM ARSENIATE
LEAD ARSENIATE
Na +, Ca + and K + ARSENIATE
Cu AND K ARSENITE
AMPHIBOLE ASBESTOS
CHRYSOTILE ASBESTOS
Barium, salts
BARIUM SULPHATE AND CARBONATE
CALCIUM BIARSENIATE
POLYBROMINATED BIPHENYL
POLYCHLORINATED BIPHENYLS
BLASTICIDIN-S
POTASSIUM BROMATO
BROMETHALIN
METHYL BROMIDE
BUTOCARBOXIM
BUTOXYCARBOXIM
CADUSAFOS
CAMPHECHLOR
CAPTAFOL
CALCIUM CYANIDE
SODIUM CYANIDE
CHLORDANE
CHLORMEPHOS
CHLORINBENCILATE
CHLOROETOXYFOS
CHLOROPHACINONE
CHLORFENVINFOS
MERCURY CHLORIDE
COUMAPHOS
COUMATETRALYL
CHLOROFLUOROCARBON
DDT
DEMETON-S-METHYL
DIAZINON
ETHYLENE DIBROMIDE
DICROTOFOS
DNOC
DIELDRIN
DIPHACINONE
DIFENACOUM
DINOCAP
DINOTERB
DISULFOTON
DODECACHLORINE
EDIFENPHOS
ENDOSULFAN
ENDRIN
EPN
RED SQUILL, scales, powders or dried bulbs.
CHEMICAL
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
PROHIBITED AND RESTRICTED CHEMICALS
20
CHEMICALSTRYCHNINE
ETHIOFENCARB
ETHOPROPHOS
FAMPHUR
PHENYLMERCURY ACETATE
FLOCOUMAFEN
FLUCYTHRINATE
FLUOROACETAMIDE
FLUOROALUMINATES
Na + AND K+ FLOURIDES
PHOSPHINE AND ALUMINIUM PHOSPHIDES
ZINC PHOSPHIDE
SODIUM FLUORACETATE
PHORATE
PHOSPHAMIDON
FORMALDEHYDE
METAL PHOSPHIDE
WHITE PHOSPHORUS
METAL PHOSPHIDE
FURATHIOCARB
CHEMICAL CHEMICALHCB (Hexachlorobenzene)
HEPTACHLOR
HCH (hexachlorocyclohexane)
HEPTENOPHOS
ISOXATHION
LINDANE
MALATHION
MECARBAM
METHOXYCHLOR
METHAMIDOPHOS
AZINFOS METHYL
MEVINPHOS
MONOCROTOPHOS
SODIUM MONOFLUORACETATE
MONOFLUOROACETAMIDE
MONOFLUOROETHANOL
STRYCHNINE NITRATE
OMETHOATE
OXAMYL
MERCURY OXIDE
1,4-DICHLOROBENZENE
p-DICLOROFENIL DIAZO TIOUREA
PARATHION
PARATHION-ETHYL
PARATHION-METHYL
PENTACHLOROPHENOL
PERSISTENT ORGANIC PESTICIDES
PROPETAMPHOS
STRYCHNINE SULFATE
SULFOTEP
METHYLARSENIC SULPHIDE
THALIUM AND ITS SALTS
TERBUFOS
TEBUPIRIMFOS
THIOFANOX
THIOMETON
TRIAZOPHOS
VAMIDOTHION
PARIS GREEN
WARFARIN
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
PROHIBITED AND RESTRICTED CHEMICALSProhibited chemicals in Argentina:
MAIN COMPETITORS
21
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Profertil, owned by YPF and Agrium, holds the largest market share: 15.9% Its main products are urea and ammonia.
Ranking Company %1 Profertil (YPF-Agrium) 15.9%2 PBB Polisur (Dow) 15.3%3 Unipar Indupa (Solvay) 9.3%4 Bunge 8.9%5 YPF 8.6%6 Petrobras 5.9%7 Petroken 1.6%8 DAK Americas 1.6%9 Petroquímica Cuyo 1.1%
10 Others 32%
22
Profertil (YPF-
Agrium)15.9%
PBB Polisur (Dow) 15.3%
Unipar Indupa (Solvay) 9.3%
Bunge8.9%
YPF 8.6%Petrobras 5.9%
Petroken 1.6%
DAK Americas1.6%
Petroquímica Cuyo 1.1%
Others 32%
In terms of sold tons
MAIN COMPETITORS IN THE CHEMICAL INDUSTRY
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Syngenta is the leader of sector with a 13.2% share, followed closely by Monsanto.
Syngenta13.2%
Monsanto13.0%
Dow Agrosciences
10.1%Profertil
10.0%Bayer8.1%
Atanor 7.8%Basf 5.7%
DuPont 5.3%
Red Surcos4.7%
Agrofina 4.6%
Adama 4.4%
Others 23.1%
Ranking Company %1 Syngenta 13.2%2 Monsanto 13.0%3 Dow Agrosciences 10.1%4 Profertil 10.0%5 Bayer 8.1%6 Atanor 7.8%7 Basf 5.7%8 DuPont 5.3%9 Red Surcos 4.7%10 Agrofina 4.6%11 Adama 4.4%12 Others 23.1%
23
MAIN COMPETITORS OF THE AGROCHEMICAL SECTOR
In terms of annual turnover
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
S.W.O.T. ANALYSIS
24
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
25
STRENGTHS
1. Good position and experience of the chemical industry Argentina
2. Technological and skilled human resources
3. Strict compliance with regulations in force
4. Regional scale market (MERCOSUR)
5. High level of formality
SWOT
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
26
OPPORTUNITIES
1. Presence of clusters
2. Implementation of a Strategic Industrial Plan 2020 with policies promoting a greater industrialization.
3. Possibilities of complementation with Brazil.
4. Low per capita consumption of chemicals providing growth margin.
5. Peripheral markets.
SWOT
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
27
WEAKNESSES
1. Low vertical integration
2. Some facilities are obsolete.
3. The decreasing participation of national companies causes the main decision centers to be located abroad
and obliges companies to compete for the localization of investments with other alternatives.
4. Reduced domestic market. Setting up plants on an international scale becomes difficult.
5. High logistic costs due to long distances to large international markets.
SWOT
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
28
THREATS
1. Unforeseeable evolution of the economy of the country
2. Weak legal framework
3. Lack of incentive policies providing for development.
4. Low interconnection between the productive chains.
5. In investment terms, high risk country index, which translates into a low credit rating.
6. Distortive tax scheme that impacts on working capital.
7. Scarce access to financing.
SWOT
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
PUBLIC POLICIES
29
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
30
Regulation Description
Strategic Industrial Plan 2020
It is a long-term strategic plan presented by the government in 2011. It establishes a set of specific and general guidelines to be achieved in 2020 for the development and consolidation of the national industry. These guidelines lay focus on 11 segments (chemical industry, among others), which represent 80% of the total industrial GDP.
Agreement with Brazil on the management of chemical substances and products
It seeks to promote the draft of proposals and the implementation of actions and management tools that apply to chemical substances and products throughout their lifecycle to ultimately reduce their adverse impact on health and the environment. Its specific goals include cooperation in shaping policies, rules and other regulatory instruments.
Joint Resolution 1/2018
Under this resolution, the Ministry of Agribusiness and Environment and the Ministry of Sustainable Development created an Interministerial Taskforce on Good Phytosanitary Practices that will be in charge of developing public policy recommendations based on scientific evidence to control and regulate the use of agrochemicals. This resolution is expected to strengthen the national agricultural policies for a better management of phytosanitary products.
Latin American Petrochemical Annual Meeting
This is an annual event organized by the Latin American Petrochemical and Chemical Association. It brings together the main companies, chambers and associations of the sector, providing a suitable business platform to boost business management and promote business in the sector.
PUBLIC POLICIES
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
INTERNATIONAL TRADE
31
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
$2,314
$2,793
$3,833 $3,581
$2,872 $3,133
$2,114
$2,761 $2,787
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2009 2010 2011 2012 2013 2014 2015 2016 2017
Chemical exports have remained stable in 2017 compared to the previous year. They are expected to further remain stable in 2018 at USD 2.8 billion, close to the average USD 2.9 billion recorded in recent years.
32
EXPORTS
Source: Compiled based on information from INDEC and Argentine Customs.
Evolution of Argentina´s chemical
exports
(in million dollars)
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Chemical imports show a slight but steady decrease since 2012, which totaled USD 5.162 million in 2017. 33
IMPORTS
Evolution of Argentina´s chemical
imports
(in million dollars)
$3,771
$5,536
$6,852 $6,273 $6,226 $6,153
$5,484 $4,920
$5,162
$-
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
$8,000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Source: Compiled based on information from INDEC and Argentine Customs.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
-$4,000
-$2,000
$-
$2,000
$4,000
$6,000
$8,000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports Imports Balance
The chemical industry structurally runs a trade deficit, evidencing a heavy reliance on imports.34
TRADE BALANCE
Chemical TradeBalance Evolution
(in million dollars)
Source: Compiled based on information from INDEC and Argentine Customs.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
The sector with the largest market share in exports is speciality chemicals with a 35% share. By contrast, 50% of imports correspond to basic chemical products.
35
30%
35%
10%
25%
Exports
Basic chimestry
Speciality chemicals
Agrochemicals
End-use chemicalproducts
50%
10%
15%
25%
Imports
TRADE BY SECTORS
Source: Compiled based on information from CIQyP (Chemical and Petrochemical Industry Chamber).
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
-$1,500
-$1,000
-$500
$-
$500
$1,000
$1,500
$2,000
2009 2010 2011 2012 2013 2014 2015 2016 2017
Exports Imports Balance
The agrochemical sector follows the same pattern as the overall chemical industry: it presents a structural deficit. Agrochemical exports record much lower levels than agrochemical imports.
36
Agrochemicals TradeBalance Evolution
(in million dollars)
INTERNATIONAL TRADE OF AGROCHEMICALS
Source: Compiled based on information from INDEC and Argentine Customs.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Main destinations of Argentine exports of
chemicals
Argentina´s main trading partner in chemical exports is the United States, which holds a 29.1% market share. It is followed by Brazil in second place with a 12.1% share.
37
Source: Compiled based on information from INDEC and Argentine Customs.
United States 29.1%
Brazil 12.1%
Netherlands 10.7%Germany 5.5%
Paraguay 4.0%
Chile 4.0%
Spain 3.7%
Uruguay 3.2%
Japan 3.2%
Bolivia 2.4%
Others 22.0%
MAIN BUSINESS PARTNERS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Main destinations of Argentine imports of
chemicals
China is the main supplier of chemical products in Argentina, with a 24.4% import share, followed by the United States in second place with a 19.7% share. India ranks fifth with 4.2%.
China 24.4%
United States 19.7%
Brazil 12.9%Germany 5.3%
India 4.2%
France 2.5%
Australia 2.5%
Mexico 2.0%Spain 2.0%
Switzerland 1.9%
Others 22.6%
38
Source: Compiled based on information from INDEC and Argentine Customs.
MAIN BUSINESS PARTNERS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Half of the Argentine exports of agrochemicals are destined to Latin America. Paraguay and Brazil are the main destinations with a 10.8% and a 10.7% share, respectively. Closely followed by Peru with a 10.6% share.
Paraguay10.8%
Brazil 10.7%
Peru 10.6%
Mexico 9.2%
Germany 8.8%Colombia 5.8%
France 5.5%
Venezuela 5.2%
Australia 5.2%
United Kingdom 4.1%
Others 24.1%
39
Source: Compiled based on information from INDEC and Argentine Customs.
Main destinations of Argentine exports of
agrochemicals.
MAIN BUSINESS PARTNERS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
A total of 21.6% of Argentine imports of agrochemicals come from China, the main supplier. The United States and Russia follow in second place with a 15.7% and a 15.6% share, respectively.
China 21.6%
United States 15.7%
Russia 15.6%Morocco
12.3%
Mexico 5.3%
Netherlands 4.0%
Norway 3.3%
Chile 2.4%
Brazil 2.2%
Lithuania 2.1% Others 15.6%
40
Source: Compiled based on information from INDEC and Argentine Customs.
Main destinations of Argentine imports of
agrochemicals
MAIN BUSINESS PARTNERS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
41
ARGENTINE MARKET SHARE
CHEMICALS
The Argentine chemical market represents 0.58% of
the global market.
AGROCHEMICALS
The Argentine agrochemical market represents 1.13% of
the global market.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
42
FUTURE PRSPECTIVES
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
43
FUTURE PERSPECTIVES
1. Argentina has potential to increase the supply of raw materials through investments in the oil and gas industry.Efficient and well integrated chemical companies, together with a qualified workforce, will facilitate the growth ofthe country's chemical industry.
2. Apart from that, the quality, infrastructure, market, technology, and vast experience in hydrocarbons andrefineries secures an auspicious future for the industry.
3. Despite affected by the recession in the short term, recent M&As of chemical companies point out to aprosperous future in the medium and long term.
4. A better integration of MERCOSUR and the harmonization of industrial and business policies with Brazil willboost the advantages for the Argentine chemical industry.
5. The Argentine chemical industry is expected to show signs of recovery in 2019, after a decrease in productionin 2018.
6. The consumption of agrochemicals increased by 6% in 2017 and is expected to continue growing thanks to thereduction and elimination of withholdings and the growth of planted areas.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
44
OPPORTUNITIES FOR INDIAN COMPANIES
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
45
OPPORTUNITIES FOR INDIAN COMPANIES
1. The Argentine market offers skilled labor and a relatively sound infrastructure. In addition, it is a strategic country to exportto the other member countries of MERCOSUR.
2. The country´s long-term potential for the development of unconventional resources, mainly shale oil and shale gas,represents an opportunity to increase the level of production and hydrocarbon reserves. Thus, it is expected that newinvestment opportunities arise in different segments of the industry, especially in those materials that have higher demand(polyethylene and propylene).
3. The presence of clusters facilitates and enhances the development of companies in the sector; thus, offering Indiancompanies the possibility to enter into agreements with local companies and profit from an economy of scale.
4. Half of the agrochemicals consumed in Argentina are imported. This provides great business opportunities for exporters inIndia, one of the largest producers of agrochemicals.
5. However, there is a large set of imported generic agrochemicals that could be formulated or synthesized in the country,which offers opportunities to investors.
6. In the period 2010-2017, the consumption of agrochemicals grew by 36%. It is expected to grow at 5% annual rate in theupcoming years.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
CONSIDERATIONS FOR FOREIGN INVESTORS
46
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
44.494.502Total population
ARGENTINE PESO
National currency
2018 ESTIMATED INFLATION
47%ESTIMATED GDP GROWTH
-2.6%
47
21.824.372Men
22.670.130Women
COUNTRY OVERVIEW
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
22.8%25.6%
28.4%
38.5%
27.5%
40.3%
24.6%
47.0%
2011 2012 2013 2014 2015 2016 2017 2018 (*)
Argentina is one of the countries with the world´s highest inflation rate. The inflation rate is expected to reach 47% by late 2018, almost doubling last year´s inflation. Such scenario creates an extra difficulty at the time of conducting businesses that does not
occur in most countries. The Argentine economy lacks stability in terms of prices. 48
Source: Compiled based on information provided by INDEC.(*) Estimated
Inflation
CURRENT ECONOMIC CONTEXT
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
-2.5%
2.9%
-2.6%-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
2011 2012 2013 2014 2015 2016 2017 2018 (*)
CURRENT ECONOMIC CONTEXT
Argentina's GDP has been expanding and shrinking alternatively portraying the volatility of the economy. GDP is expected to contract 2.6% in 2018.
By the end of 2018 the unemployment rate reaches 10.8%.49
Source: Compiled based on information provided by INDEC.(*) Estimated
10.8%
Unemployment rate
GDP
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
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TAXATION AND LABOR
In Argentina, tax collection efforts are carried out at national, provincial, and municipal level by levying taxes on income, assets, and consumption.
The agency in charge of collecting taxes, monitoring, and controlling taxation at national level is AFIP (Spanish acronym for Argentine Revenue Service).
Consequently, taxes are classified into three tiers: national, provincial, and municipal.
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TAXATION AND LABOR. NATIONAL TAXES.
INCOME TAXAll income is subject to tax. Local subsidiaries of foreign legal entities are regarded as resident businesses and are, therefore, subject to tax. The applicable tax rate is 35% and applies to total income. Non-resident businesses with no branches or permanent offices in Argentina are only subject to local income tax.
VALUE ADDED TAX (VAT)VAT applies to the values of goods and services at every stage of production. General VAT rate is 21%; nevertheless, the rate for certain goods and services is set at 10,5% or 27%. Imports are subject to the same VAT rate as local goods and services. Exports are exempt from VAT.
MINIMUM PRESUMED INCOME TAX
Minimum Presumed Income Tax is payable by legal entities, which are imposed a 1% rate on the value of all their assets located either in Argentina or abroad. It is also applicable to assets located in Argentine and owned by foreign individuals or legal entities with a permanent establishment in the country. This tax will be eliminated in 2019.
PERSONAL PROPERTY TAXThis tax is imposed on individuals and undivided estates with respect to assets valued at over ARS 1.050.000 (USD 27.000 approx.) as of 2018. As of this year, residents are taxed 0,25% on personal property.
EXCISE TAXESExcise taxes are levied on the consumption of specific goods, such as tobacco, alcoholic drinks, and luxury items; they are payable by manufactures or importers.
FINANCIAL TRANSACTION TAXES - CREDITS AND
DEBITS ON BANK ACCOUNTS AND OTHERS.
A 0,6% general tax is levied on withdrawals and credits on bank accounts transacted by entities governed by the Financial Institutions Act. Furthermore, transactions in cash are subject to a 1.2% rate if conducted through payment systems in lieu of current accounts.
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TAXATION AND LABOR. NATIONAL TAXES.
Argentina has entered into double taxation agreements with the following countries to provide relief from double taxation on businesses, personal income, capital, and assets:
Bolivia Brazil Finland Norway Spain Switzerland The Netherlands Russia Mexico
Australia United Kingdom Chile Denmark Germany Belgium France Italy Sweden Canada
DOUBLE TAXATION AGREEMENTS
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TAXATION AND LABOR. PROVINCIAL TAXES.
GROSS INCOME TAX
Gross Income tax is applicable to the revenue generated by businesses engaged in trade, industrial activities, agriculture, finance, or professional services. It is levied on each commercial transaction at a rate that ranges from 1,5% to 5%, according to the industry and area. Nevertheless, certain primary and industrial activities are exempted from this tax.
STAMP DUTYThis is a provincial tax placed on the execution of notarial and private documents, including agreements and other large-amount transactions.
REAL ESTATE TRANSFER TAX
Real estate owners are subject to an annual tax on their real property based on the fiscal value of the land free of any improvements and on the improvements of land, if any. The payable amount is estimated pursuant to the laws in force each fiscal year, which set forth the applicable values and rate scales according to the type of property.
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TAXATION AND LABOR. MUNICIPAL TAXES.
Municipalities collect taxes imposed on industrial safety services, lighting and cleaning services, etc. These taxes are calculated based on public revenue or other criteria, such as the number of employees.
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TAXATION AND LABOR. TAX INCENTIVES.
Tax regulations provide for incentives for certain activities such as mining, forestation, software development, renewable energies, research, biotechnology, and biofuel production.
Generally, such incentives consist in:
Tax stability for a specified period Tax credits Preferred tax rates VAT Exemption
A tax-free area has been established in southern Tierra del Fuego where all the activities and transactions conducted are exempted from all national taxes, except for specific activities and transactions, which are levied a reduced rate.
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TAXATION AND LABOR. LABOR LAW.
Labor Law no. 20,744
Permanent employment contract
Employment contracts in Argentina generally fall within this category, which means the labor relationship may extend permanently unless a cause of termination arises. The law provides for a three-month probation period. The employer must register the relationship with the relevant authority before the lapse of this period. Moreover, the parties are subject to the rights and obligations arising out the employment contract during this period, but either party may terminate the employment without cause. In such case, the employee is not entitled to severance payment.
Special employment contracts
In order to provide an adequate framework, the law sets forth special forms of employment:
1. Fixed-term contracts2. Seasonal employment contracts3. Contingency employment agreement4. Team employment contracts
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TAXATION AND LABOR. LABOR REGULATIONS.
COMPENSATION (SALARIES AND WAGES) STATUTORY ANNUAL EXTRA PAY
Employees' compensation may be fully paid in cash or it maybe paid both in cash and in kind, i.e. food or accommodation.In such case, payments in kind cannot exceed 20% of the totalcompensation amount.
The employer has the obligation to:
Wire-transfer the employee´s salaries to a bank account on their names.
Provide a salary slip
Comply with the statutory term of payment: salaried employees must be paid at the end of the month, whereas wage earners must receive their compensation on a weekly or monthly basis.
All workers are entitled to a thirteenth salary, which isofficially referred to as Statutory Annual Extra Payment.Such payment is made in two installments: 50% of the totalamount is granted by June 31 and the remaining 50% byDecember 31.
MINIMUM SALARY AND WAGE
The law establishes the minimum salary and wageamount. As of July 2018, such amount is set at ARS 10.000(USD 260 approx.) for monthly salaries and ARS 50 (USD1.30) for hourly wages.
Given Argentina´s high inflation rates, salaries are adjustedseveral times a year.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Annual vacation is paid time off employers grant to theiremployees.
The length of vacations varies according to the employee´sseniority:
1. From 6 months to 5 years of service: 14 calendar days2. From 5 to 10 years of service: 21 calendar days3. From 10 to 20 years of service: 28 calendar days4. Over 20 years of service: 35 calendar days
New employees who have rendered services for less thanhalf the business day of the year are entitled to one vacationday for every 20 days of service.
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TAXATION AND LABOR. LABOR REGULATIONS.
The law provides for paid maternity leave which extendsfrom 45 days before childbirth to 45 days after delivery.
Once this period elapses, women workers can choose to:
1. Resume working under the working conditions beforethe leave.
2. Terminate the employment contract unilaterally.3. Request an unpaid extension of the maternity leave
for an additional period ranging from three to sixmonths.
Women workers are entitled to a daily thirty-minute breakto breastfeed her child. This entitlement lasts for one yearafter childbirth.
ANNUAL VACATION PAID MATERNITY LEAVE
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TAXATION AND LABOR. LABOR REGULATIONS.
Employers have the obligation to provide insurance toemployees to cover labor risks. To such end, they must eitherself-insure or hire a risk labor risk insurance company (inSpanish Aseguradoras de Riesgos del Trabajo or ART), inorder to compensate in the event of work accidents anddiseases.
The employer must obtain an insurance policy within thirtydays of the commencement of the employmentrelationship.
Businesses undertake to make the relevant contributions inconnection with social security services for their employees.Such contributions include family allowances, union healthinsurance, pensions, and contributions to unemploymentfunds. Contributions represent 27% of the gross salary ofemployees that render services and 23% of the gross salary ofthe rest of the employees.
The minimum working age is 16 years old.
LABOR RISKS COMPULSORY LIFE INSURANCE
SOCIAL SECURITY MINIMUM WORKING AGE
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None of the parties can terminate the employment contractwithout giving prior notice. The minimum notice period is setby the law as follows:
1. For the employee: 15 days2. For the employer: 15 days for employees under probation
period, one month when the worker's length of service isless than five years, and two months, when the length ofservice exceeds five years.
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TAXATION AND LABOR. LABOR REGULATIONS.
The employer has the obligation to register theemployment relationship with the relevant authorities. Inthe event of termination of contract, the employer mustgive relevant notice to the Social Security Registry.
The duly registration of the employment relationshipallows workers to enjoy the social security benefits grantedby the law.
DISMISSAL EMPLOYMENT RELATIONSHIP RECORDS
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
In Argentina, working time is 48 hours per week with a limit ofnine hours a day (six hours a day for work performed underhazardous conditions). Night working time is limited to seven-hour shifts. Overtime is permitted with certain restrictions.Overtime rate is 50 per cent, for work performed onweekdays and Saturday mornings, and 100 per cent for workperformed thereafter and on public holidays. The lawestablishes the maximum overtime limit which shall notexceed 200 hours per year or 30 hours per month.
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TAXATION AND LABOR. LABOR REGULATIONS.
Most workers are unionized. Historically, the power andinfluence of union was moderate, but it has increased inthe last few years to such an extent that workers are alsoprotected by collective bargaining agreements.Moreover, these workers may also opt for joining a union.
OVERTIME LABOR UNIONS
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RELEVANT LEGISLATION
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LEGAL FRAMEWORK
The Argentine Law provides for the protection of foreign investors and their projects. Argentina hasentered into several bilateral investment treaties with other countries. It is a member country of theMultilateral Investment Guarantee Agency (MIGA), which provides guarantees to protectinvestments against non-commercial risks.
INVESTMENT MODEL
Foreign investors can start their businesses in three ways: setting up a foreign branch, acquiringownership in an existing company or creating a new company.
CORPORATE AND BUSINESS ACT
Law No. 19,550 (amended and renamed as General Corporate and Business Law No. 26,994). Setsforth the different business forms available. The most popular business forms among foreigninvestors are Sociedades Anónimas (S.A.)— Corporations— and Sociedades de ResponsabilidadLimitada (S.R.L.) — Limited Liability Companies or LLCs.
FOREIGN INVESTMENT LAW
Law No. 21,382 Sets forth the conditions for foreign investors to invest and transact business in thecountry. It further provides for the expansion of existing investment undertakings.
TRANSFER OF FUNDS
The funds received as capital contribution from foreign residents can be entered into the country orbe kept abroad, there are no regulations in this respect.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
Date ARS/USD Date ARS/USD Date ARS/USD Date ARS/USD
jan-13 4.96 jul-14 8.18 ene-16 13.93 jul-17 17.44
feb-13 5.02 ago-14 8.33 feb-16 15.04 ago-17 17.72
mar-13 5.09 sep-14 8.43 mar-16 15.22 sep-17 17.55
apr-13 5.17 oct-14 8.49 abr-16 14.70 oct-17 17.76
may-13 5.25 nov-14 8.53 may-16 14.43 nov-17 17.79
jun-13 5.34 dic-14 8.56 jun-16 14.44 dic-17 18.05
jul-13 5.44 ene-15 8.61 jul-16 15.17 ene-18 19.36
aug-13 5.49 feb-15 8.70 ago-16 15.13 feb-18 20.17
sep-13 5.75 mar-15 8.79 sep-16 15.32 mar-18 20.56
oct-13 5.86 abr-15 8.88 oct-16 15.45 abr-18 20.54
nov-13 6.03 may-15 8.96 nov-16 15.57 may-18 24.19
dec-13 6.33 jun-15 9.05 dic-16 16.10 jun-18 27.26
jan-14 7.07 jul-15 9.16 ene-17 16.21 jul-18 28.29
feb-14 7.86 ago-15 9.26 feb-17 15.91 ago-18 30.96
mar-14 7.94 sep-15 9.38 mar-17 15.83 sep-18 39.41
apr-14 8.01 oct-15 9.50 abr-17 15.67 oct-18 38.08
may-14 8.06 nov-15 9.64 may-17 16.00 nov-18 37.49
jun-14 8.14 dic-15 13.30 jun-17 16.37 dic-18 38.82
EXCHANGE RATES
The Argentine peso was subject to a sharp devaluation in the second semester of 2018. It depreciated by 101% against the US dollar during 2018. 63
Monthly average exchange rates.
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CONCLUSION
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Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
CONCLUSION
65
Overall, the Argentine chemical industry is highly competitive, even at international level, but such competitiveness hasbeen weakened as a result of the economic recession. This translates into a drop in consumption, which has an unundoubtedly adverse effect on the production of many industries. However, the economy is expected to improve in thenext year, which could help reactivate production. The outlook for the medium and long term is promising, as theincrease in demand and the efficient use of resources is expected to enable a growth in production.
It is essential to ensure legal security and predictable rules to secure new investments. The improvement ofMERCOSUR and the consolidation of a regional market under free trade conditions with harmonized macroeconomicpolicies will have an important enhancing effect for investments in the chemical sector in Argentina in the short andmedium term.
However, and despite the scarcity of public policies promoting development, the chemical industry currently presentsdifferent opportunities for direct and indirect investment. The potential investments in the country to produceagrochemicals that are currently imported could help reduce trade deficit, which is further facilitated given thepresence of clusters.
Argentina is a strategic country to develop the regional market due to its importance in MERCOSUR. The geographicalproximity and the reduction or elimination of tariff barriers among the members of the block makes intraregional trademore competitive.
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USEFUL INFORMATION
66
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina
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Chemical and Petrochemical Industry Chamber (CIQyP)
Address: Av. Córdoba 629– 4th Floor– City of Buenos AiresPostal Code: C1054AAF
Phone: (54-11) 4313-1000 - Web site: www.ciqyp.org.ar
Fertilizers and AgrochemicalsArgentine Industry Chamber (CIAFA)
Address: Bartolomé Mitre 1332– 4th Floor– City of Buenos AiresPostal Code: C1036AAZ
Phone: (54-11) 4381-2742 - Web site: www.ciafa.org.ar
Petrochemical and ChemicalLatianomerican Association (APLA)
Address: Carlos Pellegrini 1069– 7th Floor office “A”– City of Buenos AiresPostal Code: C1009ABU
Phone: (54-11) 4325-1422 - Web site: www.apla.lat
Chamber of Agricultural Health and Fertilizers (CASAFE)
Address: Reconquista 661– 1th Floor office “A”– City of Buenos AiresPostal Code: C1003ABM
Phone: (54-11) 4893-7772 - Web site: www.casafe.org
USEFUL INFORMATION
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Embassy of India | Buenos Aires, Argentina
Commercial Sector: [email protected] | [email protected] | [email protected]
Tel.: (+54 11) 4326-3895
Website: www.indembarg.gov.in
© 2018 Embassy of India in Buenos Aires, Argentina. All rights reserved.
Embassy of India in Argentina | Chemical and Agrochemical Industry in Argentina