Seminar on entrepreneurship Seminar on the Hidrovía

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1 THE ARGENTIINE EMBASSY IIN THE UNIITED KIINGDOM ECONOMIC & COMMERCIAL SECTION 65 Brook Street, London W1K 4AH Tel: Fax: NEWSLETTER Occttoobbeerr ARGEENTTIINEE EECCONOMIIC OVEERVIIEEW Recent official macroeconomic data The economy grows by 6.4% in August Industrial activity expands at a rate of 5.6% in September 70.8% of industries expect steady trend for the fourth quarter Primary fiscal surplus up by 38.5% Public revenue increases by 42.9% in September September inflation rate at 0.5% IINVEESSTTMEENTTSS IIN ARGEENTTIINA British report sees Argentina as an attractive investment market Argentina, a target for French investments Argentina, second largest market for Chilean investments Mining investments of over 40bn pesos in the next four years Rio Tinto to invest US$ 3.3bn in potassium chloride project Canadian mining company Yamana Gold starts production US$ 1.5bn investments in gas production AARGEENTTIINEE TTRRADEE Trade surplus of US$ 1.6bn in September Car exports to Europe five times higher Citrus exports on the rise Higher exports of poultry meat Higher exports of yerba mate and tea Hilton quota allocated OTTHEER NEEWSS President Kirchner s remarks at the Ibero-American Summit President Kirchner s meeting with Spanish Head of Government Energy demand increases by 6.2 in September Argentina and Chile to improve border crossings Growing prospects for the biofuel industry Forecasts for grain production More flights between Buenos Aires and London EEMBASSSYY S ACTTIIVIITTIIEESS Seminar on entrepreneurship Seminar on the Hidrovía

2 ARGENTINE ECONOMIC OVERVIEW Recent official macroeconomic data The economy grows by 6.4% in August According to the latest Economic Activity Monthly Estimate released by INDEC (the National Statistics Institute), the economy grew by 6.4% in August compared with the same month of This figure represents an increase of 0.9% compared with July 2008 and an accumulated growth of 7.6% for the first eight months of the year. Industrial activity expands at a rate of 5.6% in September INDEC s Industrial Monthly Estimate (EMI), showed a growth rate of 5.6% in September compared with the same month of 2007 and of 1.5% compared with August The accumulated growth for the first nine months of the year reached 6.1% compared with the same period of These figures show that industrial activity in the third quarter was 2.2% higher than in the second quarter of The fastest growing sectors from January to September 2008 on a y-o-y basis were the car and basic metal industries. The main sector slowing down was oil refining. 70.8% of industries expect steady trend for the fourth quarter The INDEC s industrial qualitative survey, which measures the expectations of companies, revealed that 70.8% of the firms surveyed anticipate a steady trend in domestic demand for the fourth quarter of 2008 compared with the same period of 2007, while 15.3% expect a rise and 13.9% a decline. With regard to exports, 58.3% of the companies surveyed foresee a similar level in the fourth quarter compared with the same period last year, while 22.9% anticipate a decline and 18.8% an increase. Primary fiscal surplus up by 38.5% The primary fiscal surplus increased by 11.1% in September compared with the same month of 2007, reaching 3.5bn pesos (just over US$ 1bn). As a consequence, the primary fiscal surplus amounted to 31.5bn pesos (US$ 9.5bn) in the first nine months of 2008, which represents an increase of 38.5% compared with the same period of Public revenue increases by 42.9% in September According to AFIP (the Federal Agency of Public Revenue), revenue in September was 42.9% higher than in the same month of 2007, amounting to 26.5bn pesos (US$ 8bn). The accumulated figure for the first nine months of 2008 reached bn pesos (US$ 67.4bn), 38.7% higher than in the same period of In September, revenue from taxes and from customs 2

3 rose by 28.9% and 112.8% respectively, while payments for social security were 44.1% higher. The net tax collection (meaning what AFIP collects for the use of the public sector) increased by 42.8% reaching, 23.8bn pesos (US$ 7.2bn). Public revenue growth in September was mainly due to VAT, income tax and export duties, which jointly account for 76.5% of the increase. September inflation rate at 0.5% The Consumer Prices Index (CPI) for the city of Buenos Aires and the Metropolitan area showed an increase of 0.5% in September, leading to an accumulated inflation figure of 6.1% in the first nine months of 2008 and of 8.7% in the last 12 months. The wholesale prices index went up by 0.5% and construction costs index by 1.4%. For further official figures, please visit the following websites: National Statistics Institute Ministry of Economy and Production Federal Administration of Public Revenue INVESTMENTS IN ARGENTINA British report sees Argentina as an attractive investment market According to the August 2008 issue of Tomorrow s Markets, a report of the UK Trade & Investment Department written in co-operation with the Economist Intelligence Unit and based on surveys conducted amongst companies and executives around the world, Argentina is placed in nineth position amongst the priority emerging makets for investment expansion - second in Latin-America after Mexico- not counting the four main emerging markets or BRICs (Brazil, Russia, India and China). The Head of the Argentine National Investment Agency (Properar), Beatriz Nofal, welcomed the findings of the report, which will contribute to informing potential British investors about the opportunities in Argentina. Argentina, a target for French investments French companies are showing a growing interest in taking part in future investment in the railway system, energy projects and hospital infrastructure in Argentina, said Jean-Pierre Loubinoux, head of the Movement of French Enterprises (Medef), who led a business mission to Buenos Aires at the end of October. After meeting the Minister of Federal Planning Julio De Vido and other government officials, Mr Loubinoux said that French companies such as 3

4 Alstom, Avera, EDF and the Suez group are interested in the modernisation of Argentine infrastructure, industries, capital goods and services. Argentina, second largest market for Chilean investments After falling from the dominant position in 2005, Argentina has now recovered a top ranking amongst the preferred destinations for Chilean investments. According to the 2008 third quarter report by the Chamber of Commerce of Santiago de Chile, Argentina ranks second, receiving 25% of all Chilean foreign investments and amounting to US$ 133 million, 15% higher compared with the same period of Chilean investments in Argentina are focused on the trade sector (55%) and the energy sector, particularly oil extraction (38%). Mining investments of over 40bn pesos in the next four years The Secretary of Mining, Jorge Mayoral, said that projects under way in the Argentine mining sector will attract investments of over 40bn pesos (US$ 12bn) in the next four years. Amongst projects entering the production phase soon, he mentioned those in Casposo (gold and silver), Calingasta, in the province of San Juan, which will require an investment of 280 million pesos, and in Pirquitas (silver, zinc and tin), in the province of Jujuy, with a planned investment of 750 million pesos. Rio Tinto to invest US$ 3.3bn in potassium chloride project The Argentine subsidiary of Anglo-Australian mining group Rio Tinto will start work in the first half of next year on a project to extract potassium chloride in Mendoza, with investments of US$ 3.36bn over the next 12 years in addition to the US$ 136 million already invested. The announcement came after a meeting of Rio Tinto s executives with President Cristina Kirchner to explain the progress of the project, which includes building a power plant, a port terminal and 900 kilometres of railway infrastructure to transport the product from Mendoza to the port in Bahía Blanca for export. Canadian mining company Yamana Gold starts production Canadian mining company Yamana Gold announced the beginning of operations of Gualcamayo gold mine, in the north of San Juan province. The mine is expected to produce 1.5 million ounces of gold in an estimated 10 year production period. Investments planned for this term will reach US$ 150 million, in addition to the US$ 100 million already invested in the exploration phase. US$ 1.5bn investments in gas production The Minister of Federal Planning Julio De Vido announced investments of nearly US$ 1.5bn in 18 gas projects in four provinces, under the Gas Plus programme, implemented last March. Of the 18 projects already approved, 4

5 14 will be developed in the province of Neuquén, while the rest will be located in Río Negro, Chubut and Salta. These investments will make possible the addition of more than 8.5 million cubic metres a year to the gas supply between 2009 and 2011, as well as increasing the system s reserves by 6%. ARGENTINE TRADE Trade surplus of US$ 1.6bn in September External trade surplus in September 2008 was US$ 1.6bn, with exports of US$ 6.9bn, 45% higher than in September 2007, and imports of US$ 5.3bn, 34% more than the same month a year earlier. The increase in export value was the result of rises in international prices (32%) and, to a lesser extent, of expanding sales volumes (10%). Sales of organic fats and oils, chemicals and derivatives from the food industry, cereals and land transport equipment are amongst the items leading the exports growth in September. On the imports side, increasing global prices (13%) and volumes of purchases (18%) were the main factors in the expansion trend. Imports of intermediate goods, accessories and capital goods led the way up. Car exports to Europe five times higher In the first half of 2008 Argentine car exports to European markets totalled 12,233 units, almost five times more than the 2,569 units exported to Europe in the first half of In terms of value, sales from the Argentine car industry to European customers in the first half of 2008 reached US$ million, more than three times higher than the US$ 73.3 million of the same period of Overall 70% of Argentine car exports still go to Brazil, followed by Mexico and other South American countries in order of importance. Citrus exports on the rise Citrus producers are experiencing one of the best years in 2008, with exports reaching US$ 590 million from January to August, a figure 109% higher than the same period of About 62% of citrus exports are of lemons, while oranges have a share of 17%, tangerines 14% and grapefruits 6%. Higher exports of poultry meat The Secretariat of Agriculture, Livestock, Fisheries and Food announced that in the period January-August 2008 exports of fresh poultry meat and processed products reached 122,630 tons for US$ million, showing 5

6 increases of 32% and 58% in volume and value respectively compared with the same period of Higher exports of yerba mate and tea The Secretariat of Agriculture, Livestock, Fisheries and Food reported that between January and August of 2008 exports of yerba mate and tea reached 51,410 tons for US$ 40.5 million, showing increases of 142% and 30% in volume and value respectively compared with the same period of Hilton quota allocated The Secretariat of Agriculture, Livestock, Fisheries and Food approved Resolution 337/2008, allocating the annual distribution of the Hilton quota amongst meat plants authorised to export to the European Union. With the approval of the Resolution, shipments of 25,200 tons of premium beef were authorised from plants which have complied with their commitments in An additional volume of 2,800 tons from farmer export projects will be allocated shortly by a separate resolution. OTHER NEWS President Kirchner s remarks at the Ibero-American Summit Speaking at the XVIII Ibero-American Summit of Heads of State and Government, which took place in El Salvador at the end of October and was focused on discussing the current global financial crisis, President Cristina Kirchner called for a reform of the current model of wealth accumulation in order to meet the needs of young people in the region for the future. In the context of the current international situation, the President explained the decision to moved the administration of pension funds from private companies (AFJPs) to the public sector as a result of the shortcomings observed in the management of those funds and the government s responsibility to ensure the interests of contributors. President Kirchner s meeting with Spanish Head of Government At a bilateral fringe meeting between President Cristina Kirchner and the President of the Government of Spain, José Luis Zapatero, at the XVIII Ibero-American Summit of El Salvador, the Argentine Head of State expressed her support for Spain's participation in the Summit of the G20, to be held in Washington on 15 November with the purpose of dealing with the global financial crisis. They also discussed issues relating to the Spanish companies with investments in Argentina, including the change of administration of the pension funds and the nationalisation of Aerolineas 6

7 Argentinas. Both leaders pledged to keep in touch so that no Spanish company be affected with regard to investments in Argentina. Energy demand increases by 6.2 in September Demand for energy in the Wholesale Electricity Market grew by 6.2% in September compared with the same month of It was the largest monthly growth in 2008, with a comsumption of 8,59 Gw/h. The accumulated demand for the first nine months of the year shows an increase of 2.5% compared with the same period a year earlier. Argentina and Chile to improve border crossings The governments of Argentina and Chile signed a cooperation agreement to improve thirteen of their sixty border crossings in the next two years, with a joint investment of US$ 43.5 million. The largest investments will be focused on the four main crossings of Cristo Redentor International Bridge, Jama, Cardenal Samoré and Pehuenche. Bilateral trade of goods carried by road through border crossings represent a volume of 4.3 million tons a year, at an average of 865 trucks a day. Growing prospects for the biofuel industry By the end of this year Argentina will be producing more than 10% of the world s biodiesel and will become the third world s largest producer, with estimated sales at US$ 1.5 million, according to a report by the Argentine Chamber of Renewable Energy. The paper indicates that by the end of 2008 domestic production of biodiesel will grow by 150%, reaching 1.4 million tons, just below the production of the United States and Germany. The report points out that the special conditions of the country for biodiesel production would place it as an energy power for the future. Forecasts for grain production Rains in October put an end to one of the worst droughts in Argentina for the last 100 years. The soil has already regained the moisture needed for planting and if these conditions continue the profiles should be completely recovered in the next two months, according to INTA, the National Institute of Agriculture Technology. On the other hand, the international economic crisis could have an effect on Argentina s next grain production cycle, causing a reduction of around 3.2%, according to a report by the Institute of Economic Studies of the Argentine Rural Society. A smaller planted area and a lower investment in seed and fertilizer could make the 2008/2009 cycle result in a harvest of 92 million tons, decreasing from the 95 million tons harvested in the previous cycle. Wheat and maize would be the most affected crops, falling 4.3 million tons and 2.8 million tons respectively, while soya-bean production would increase by 3.7 million tons. 7

8 More flights between Buenos Aires and London British Airways increased its flights on the Buenos Aires-London route from four flights a week to a daily service in both directions with a stopover in Sao Paulo. The British airline has done this as part of its development strategy in Latin America, particularly focusing on the corporate sector, which had been demanding additional services for the region. EMBASSY S ACTIVITIES Seminar on entrepreneurship A seminar on Entrepreneurship: sharing experiences from business initiatives between the UK and Argentina took place on 28 October at the Embassy, organised by the British Argentine Chamber of Commerce (BACC), Argentine Chevening Alumni Association (AChA) and the association Argentinos en Finanzas UK (AeFNI). The objective of this seminar was to promote entrepreneurship among young professionals interested in Argentina and the UK by sharing successful experiences. An interested audience of over 60 people followed the presentations and gathered afterwards at a reception sponsored by Aerolíneas Argentinas. Seminar on the Hidrovía The Argentine Embassy and the British Argentine Chamber of Commerce (BACC) will host the seminar Investing in the Hidrovía: Business Opportunities in the waterway linking the heart of South America with the Atlantic Ocean, to be held on 3 December. The objective of the seminar is to increase awareness of the second largest waterway system of South America -formed by the Parana and Paraguay rivers- which serves as a major channel for trade from the region to the outside world and offers a wide range of investment opportunities. Speakers from the Rosario Stock Exchange, Prefectura Naval (the coast guard service), Centro de Navegación (the shipping association), the agricultural sector and the corporate sector will take part in the panels. If you wish to sign up to receive this monthly Newsletter in your mailbox, please contact trade@argentine-embassy-uk.org. If you also wish to receive the Embassy s Cultural Bulletin, which includes a list of Argentine cultural activities in London and the UK, please send an to culture@argentineembassy-uk.org. 8

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