National Investment Promotion Agency Argentina Advantages of Investing Today Dr. Beatriz Nofal President National Investment Development Agency Argentina

National Investment Promotion Agency

Argentina

Advantages of Investing Today

Dr. Beatriz Nofal

President

National Investment Development Agency

Argentina

National Investment Promotion Agency 2

“Inclusive economic development entails investment promotion and a steady increase in productivity”

President Néstor Kirchner

Address to the Legislature

3/1/2006



Argentina faces a unique opportunity given its healthy macroeconomic situation and sustainable growth coupled with a favorable international scenario.

SUSTAINABLE GROWTH IN ARGENTINA

Four years steady growth at an average rate around 9%

Twin Surpluses: fiscal and external

Growth of exports and imports with

positive trade balance

Competitive and stable exchange rate

“Tight” monetary policy

Record profitability in prime companies

FAVORABLE INTERNATIONAL

SCENARIO

Steady growth of global economy and international trade

Favorable trade terms based on high price of “commodities” and natural resources.

Extraordinary international liquidity

Low global interest rates

Global splitting of value chains

New global consumption patterns (product differentiation)

Substantial accumulation of reserves with reasonable goals

Increasing demand for alternative energy sources


Argentina grew at an average annual rate of around 9% over the past four years, ranking among the fastest growing economies worldwide

8,4

3,9

0,5 0,8

8,8

6,2

4,9

2,1

9

6,3

2,3

1,3

8,7

5,2

3,6

2,4

8,8 9 9,28,5

Argentina Asia endesarrollo

Chile Brazil G7: Economíasmás

desarrolladas

2003 2004 2005 2006

Average: 8.9%Average: 8.7%

Average:5.4%

Average:2.8%

Average:1.7%

Source: ProsperAr based on IMF, WEO databases.

Developing Asia: includes 23 countries such as China, India, Indonesia, Philippines, Vietnam, Bangladesh, Fiji and Pakistan, among others.

Developing Asia

G7: Most developed economies


Growth is based on solid macroeconomic foundations that strengthen the country’s economy and rule out the possibility of a crisis in the mid term.

17,9 17,619,3

24,326,5

27,826,5

19,4

10,5

32

28,1

19,6

14,1

-15.000

-10.000

-5.000

0

5.000

10.000

15.000

20.000

25.000

30.000

Balance Fiscal Primario Saldo Cuenta Corriente

Fiscal and Current Account Surplus(in millions of pesos)

International Reserves(in billions of dollars)

Source: ProsperAr based on Ministry of Economy and Production.

Primary Fiscal Balance Current Account Balance


Argentina’s income per capita measured in terms of purchasing power parity (ppp) is the highest in the region.

GDP per capita in the main Latina American economies Year 2006*, in US$ PPP

6467

78988964

10580

12737

14838

Venezuela Colombia Brasil Uruguay Chile Argentina

* Estimated Source: ProsperAr based on IMF World Economic Outlook.


In addition, Argentina has a solid base of competitive structural factors and capabilities to offer the world a differential value proposition.

Diverse cultural capital and outstanding productions in various fields

Important international figures and works of art

Rich Urban life with a wealth of cultural possibilities

International destination chosen for its quality of life and tourism

Ability to learn, undertake endeavors and innovations

Strong industrial tradition

Modern infrastructure and technological availability

World-class agricultural and industrial commodities

ET with permanent and strategic outlook

Competitive SME center

Qualified Human Resources

High level of education and training

Prestigious Universities

Highly competent Research Centers

Highly competitive health indicators

Abundance of land and natural resources

A wide variety of mineral and energy resources

Diversity of regions, topography and climate

Public and private commitment to preserve nature and sustainable development

Knowledge CultureNature Skills


MERCOSUR + Venezuela (2)

GDP*: US$ 1.378 Billions

Population: 261 Millions of inhabitants

MERCOSUR (1)



MERCOSUR +

partners in FTA’s (3)



(1) MERCOSUR is a common market conformed in the beginning (1991) by Argentina, Brazil, Paraguay y Uruguay.(2) Venezuela was incorporated recently as a full member of the integration process in MERCOSUR, becoming the

“Mercosur 5”(3) Bolivia, Chile, Peru, Colombia y Ecuador are associated members.*Estimated 2006Source: ProsperAr based on IMF World Economic Outlook.

As a member of MERCOSUR, Argentina enjoys preferential access (0% of import duties) to a highly attractive market: 261 millions of consumers and joint GDP of U$S 1.400 billions in 2006.


Intra and Extra Mercosur Exports shows a significant dynamism. The internal exports started recovering, surpassing in 2005 the maximum level of 1998.

Extra Mercosur Exports Billions u$s

56 5871,277,4

93,4

118,2

142,4

665850

44434142,3

6061

164,3

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Source: ProsperAr based on INDEC

Intra Mercosur Exports

Extra Mercosur Exports

1990 – 2006

521,6% 173,3%

1990 – 1998

393,6% 42,1%

1998 – 2006

25,9% 173,3%

Internal and External Mercosur’s Exports increases ( %)

IntraMERCOSUR Exports. In billions u$s

4,1 5,17,2

1012

14,4

1715,2

17,715,2

10,212,8

17,3

21,120,420,1

25,6

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006


To accomplish the differential value proposition and continue with the steady growth trend at high rates, the flow of domestic and foreign investment is a key success factor


18,1%19,4% 19,9%

16,2%

14,2%

12,0%

15,1%

19,2%

21,5% 21,5%22,2%

23,5%24,8% 25%

18,0%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 I-2006 II-2006 III-2006 IV-2006

Investments over the past years reacted positively to the prevailing favorable conditions of the country and at the same time played a role in strengthening the economy.

GDFI/GDP RatioAt current prices. Expressed as Percentages

Source: ProsperAr based on DNCN, INDEC.


High investment/GDP ratios position Argentina among the main economies of the region

22,2% 21,9% 21,6%

19,3% 19,0% 18,5%

12,9%

20,1%

0%

5%

10%

15%

20%

25%

Brasil Argentina Colombia Chile México Venezuela Perú* Uruguay*

* Figure corresponds to total for 2005.Source: ProsperAr based on CEP.

Relación IBIF/PBI por país1º Semestre 2006, a precios corrientes

GDFI/GDP ratio by country

1st Quarter 2006, at current prices


Likewise, Foreign Direct Investment exhibits a dynamic performance over the past three years.

Source: ProsperAr based on INDEC

2.166 2.149

1.652

4.274

5.0084.809

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

2001 2002 2003 2004 2005 2006

Foreign Direct Investment in ArgentinaIn millions of US$

2006: Improvement in the composition of FDI

In 2006 Argentina's FDI levels was similar to those of 2005 (-3,9%), highlighting:

- The share of investment in the productive sector increased by US$ 276M (+6%)

- The main components of FDI are the investment in production capacity expansion of foreign companies with operations in Argentina; and the entrance of new TN companies;

-The M&A activity represents a very small share of total FDI

- Historical record in reinvestment of earnings. Reinvestment in 2006 ( u$s 2238 M) was 4 times that of 2005 ( u$s 655 M).

The investment of Argentina abroad increased 74% (from u$s 1151M to u$s 2008M).


However Argentina faces big challenges in terms of investment

To increase and sustain high investment/PBI ratios, aligned with the requirements of sustainable growth.

To improve the quality of investments

To increase our participation in foreign and regional flows of Foreign Direct Investment

To promote further value chain integration international companies in Argentina

To support internationalization of local companies

Challenges

The highest Gross Domestic Fixed Investment (GDFI) as a percentage of the GDP

Public investment accompanying investment of the private sector

Investments more directed to tradeable sectors of the economy.

Recovery of Foreign Direct Investment after 2004

Results


This process occurs within a favorable political/institutional framework for investments.

• Full enforcement of civil and democratic rights.

Argentina is a country where freedom prevails in every area, as confirmed by the Freedom in the World 2007 report.

• Democracy

Within a framework of freedom and full enforcement of the rule of law, our country has moved consistently towards strengthening the democratic system following the institutional crisis in 2000. The new composition and structure of the Supreme Court of Justice of the Nation is a milestone in this sense that reinforces the independence of the Judiciary.

• Respect for Human Rights

There is full respect for human rights. The Courts have reviewed cases related to crimes of lese humanity committed in the past; convicted those involved; and reopened new investigations to avoid impunity.

•Strategically Safe Country

Old-time conflict hypotheses with neighboring countries have been defused following the regional economic integration. There are neither terrorist groups, drug trafficking, gangs or organized crime activities. There are no differences between religious or ethnic groups that could affect the security, or the institutional and economic activity of the country.

• Country of choice among multinational companies

Argentina ranks 18th out of 25 countries of choice among the largest 100 multinational corporations, according to the UNCTAD report.

• Good quality of life

Argentina ranks 10th on the quality of life index prepared by the specialized publication International Living.

• Preferred international tourism destination

Argentina ranks 5th as preferred international tourism destination, according to the FutureBrand report . Buenos Aires was rated the 7th best city to visit (Travel & Leisure 2006).


Under this scenario, the National Investment Development Agency (Prosperar) was created, representing an institutional innovation key to boost the private sector investments: foreign direct investment, domestic investment and internationalization of local companies.

Government Model:

National Investment Council:- Chief of Cabinet- Minister of Economy and Production- Minister of Foreign Relations, International Trade and Worship

Advisory Councils:- Private and academic sector- International

Public-private coordination and

collaborationEconomic-Financial Autarchy

Legal status

Involvement in the field of public and private law

Ability to send correspondents to the interior of the country and abroad

Autonomy

Board members hold a 4-year term of office

The president’s rank is equivalent to that of a Secretary of State and the Directors rank to that of Undersecretary of State

Stability

Yearly rendering of accounts

Internal Audit Department in coordination with the National Audit Commission

Transparency


Legal Department

National Council on Development Investments

- Chief of Cabinet

- Minister of Economy and Production

- Minister of Foreign Relations, International Trade and Worship

Operations and Investment

Services Manager

Ms. Marcela Reganzani

Investment Strategy and Environment

Manager

Mr. Ricardo Rozemberg

Internal Audit Department

Public Relations, Marketing and

Communications Manager

Ms. Mariana Blanco

Superior International Advisory Council

Advisory Council: private sector

Office of the Assistant Manager of

Human Resources and Administration

Board of Directors*

President (1)

Dr. Beatriz Nofal

Members (2)

Mr. Daniel Falcón

Ms. Luciana Pagani

The institutional design of the Agency aims to facilitate public-private coordination and collaboration

*A President’s rank is equivalent to that of a State Secretary and Members to that of Undersecretary


The main mission of the Agency is to contribute to the sustainable economic growth by attracting FDI and encouraging the growth of the domestic business ecosystem. There are four major areas of activity to accomplish this mission:

Attract and generate

investment

General Investment Missions

Investment and innovation proposals based on current opportunities in competitive entities and sectors

Missions and actions focused on investment

Boost investment

environment

Program to established closed relationships with investors

Create a federal network to better serve the Investors

Offer Services to Investors:Foreign Direct

Investment/Local

Companies/Enterprising Development

Personalized reply to investors inquires

Large, Medium and Small businesses working together for a more prosperous ecosystem

Develop financial instruments to facilitate investment and innovation

Disclose to the world the new favorable situation in Argentina - sustainable growth and investment opportunities.

Create a country image aligned to its differential identity knowledge+nature+culture

Creating a differential image

for Argentina


• To Prosper, and that we all become more prosperous, is our ambition.

• To Prosper means to leverage in our achievements to propel a more competitive and innovative

Argentina with a higher level of income per capita and social equity.

• In order to Prosper the public and private sectors must submit a differential value proposition to

attract domestic and foreign investment, a key factor for growth.

• To Prosper, we will work for a vigorous investment environment, communicating Argentina’s value

proposition to the world, and contributing towards an active integration to investment flows and

international trade.

• In order to Prosper, our aim is to ensure Prosperity both to those companies that invest in our and

to their employees.

• In order to prosper, the National Investment Development Agency of Argentina,

ProsperAr, was created.

Basically, the agency aims to contribute so that investment in Argentina and prosperity become sinonymous.


Your partner to invest and prosper in Argentina


Annex


Natural Resources

Argentina has leveraged on the richness and diversity of its natural resources to develop highly competitive agribusiness activities

Soy ProductivityYear 2005. Argentina = 100

Corn Productivity Year 2005. Argentina = 100

Wheat ProductivityYear 2005. Argentina = 100

75

77

85

100

106

106

106

167

Rusia

Australia

Brasil

Argentina

India

EE.UU

Canada

China

27

41

53

72

79

100

117

126

India

Brazil

Rusia

China

Australia

Argentina

Canada

EE.UU

30

38

62

64

85

99

100

106

India

Rusia

Australia

China

Brazil

Canadá

Argentina

EE.UU

Source: ProsperAr based on FAO


Natural Resources and Agro-industry

…being a leading producer and/or exporter in various agroindustrial segments.

Source: ProsperAr based on FAO.

The Argentine territory has almost 250,000 km2 of farmland.

This large quantity of fertile land together with a competitive industry places Argentina as:

• The N° 1 world producer and exporter of Sunflower Oil.

• The N° 1 world exporter and 3rd leading world producer of Soy Oil.

• The N° 1 world exporter and 3rd leading world producer of Honey.

• The N° 1 world exporter of Horse Meat.

• The N° 1 world exporter of Pears.

• The 2nd leading world exporter of Peanut Oil.

• The 3rd leading world producer of Beef.

• The 3rd leading world producer of Soy Beans.

• The 3rd leading world producer and the N° 1 exporter of Lemons.

• The 5th leading world producer of Wine.


Industry

A long industrial tradition has enabled us to reach an expansive and diverse manufacturing ecosystem

A significant number of transnational

companies have been present in the

country for decades and progressively

participated in the generation of value

added activities.

A group of prime national companies

strongly internationalized and world-class.

A segment of flexible, innovative and

dynamic SMEs

As an example, the annual production capacity of local industry includes:

• 7 million tons of vegetable oils and over 20

million in by-products,

• Over15 million hectoliters of wine,

• 400 thousand tons of tanned leather,

• 1.2 million tons of paper,

• 200 thousand tons of PVC and over 1.5 million

tons of derivatives such as propylene and

polyethylene.

• 275 thousand tons of raw aluminum,

• 5 million tons of steel and

• 4.15 million tons of seamless and non-

seamless pipes,

• 550 thousand automobiles.


Socioeconomic Indicators

Argentina socioeconomic indicators are higher than the average for the region

Source: UNDP. 2006 Report on Human Development.

Socioeconomic Indicators Argentina Brazil Chile MexicoRegion

Average

Human Development Index (HDI) 0.863 0.792 0.859 0.821 0.795

Life Expectancy at Birth (years) 74.6 70.8 78.1 75.3 71.7

Infant Mortality Rate (0/000) 16 32 8 23 26

Health Care Expenses (PPA in US$ per capita) 1067 597 707 582 …

Undernourished Population <2.5 8 4 5 10

Population with sustainable access to improved water source

96 90 95 97 91

Deliveries performed by specialized staff (%) 99 97 100 95 87

Physicians/1000 inhabitants 301 115 109 198 …

Illiteracy (% over 15 years old) 2.8 11.4 4.3 9 10.8

Gross schooling rate 89 86 81 75 81

Researches in R&D (for every million inhabitants 1990-2003)

720 344 444 268 306


Education

Argentina is also characterized by its high educational and cultural level based on the high education standards, similar to developed countries

Source: ProsperAr based on GED 2006, UNESCO.

Adult Literacy Rate (+15 years)%

School Attendance ExpectationsIn years

88,6

89,7

90,4

90,9

91

92,8

93

95,7

97,1

97,2

98,4

Brazil

Am. Lat. y Caribe

Indonesia

China

Mexico

Colombia

Venezuela

Chile

Israel

Argentina

Italy

11,2

11,5

11,5

11,7

12,5

13,1

13,4

14,6

15,6

15,7

16,4

China

Indonesia

Colombia

Venezuela

México

Am. Lat. y Caribe

Chile

Brazil

Israel

Italy

Argentina


Environment

…within the context of a sustainable environment.

Environmental Sustainability Index elaborated by environmental experts from Yale and Columbia.

Argentina ranks 9th

among 146 countries in

environmental

sustainability

Environmental Sustainability Index Year 2005

75,1

73,4

71,8

71,7

70,8

64,4

63,7

62,9

62,7

62,7

62,2

61,7

61

60,9

Finland

Norway

Uruguay

Sweden

Iceland

Canada

Switzerland

Guyana

Argentina

Austria

Brazil

Gabon

Australia

N. Zeland

Documents

National Investment Promotion Agency Argentina Advantages of Investing Today Dr. Beatriz Nofal President National Investment Development Agency Argentina