Argentina Country Risk Report

Published 23 June 2015 | Quarterly

  • 58 pages
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  • Includes 3 free updated quarterly reports
 
$1,195.00
Argentina Country Risk Report

Core Views

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

  • Pre-election spending and rising interest payments will see Argentina's primary and nominal budget deficits widen in 2015. The Argentine government will tap its foreign reserves and dollar-linked domestic bond markets in order to finance the budget shortfall, exacerbating the country's weak external account position.

  • The Argentine government will allow the peso to depreciate over the coming months, as a drop in foreign currency reserves keeps downwards pressure on the exchange rate. We expect a more substantial devaluation to occur after the October 2015 presidential election, as political pressure will preclude a major currency adjustment ahead of the poll.

Key Forecast Changes

  • We revised up our real GDP growth forecasts for the latter half of our 10-year forecast period on the back of improved private consumption as a new government's impact on the economy begins to be felt.

  • We changed our 2015 real GDP growth forecast to positive as we now expect declining inflationary pressures and import controls to support growth.

  • We altered out 2015 election expectations from a run-off between Daniel Scioli and Mauricio Macri to a second round electoral victory for Daniel Scioli, the likely candidate from the ruling Frente para la Victoria.

Key Risks To Outlook

  • The risks to our 2015 fiscal forecasts are weighted to the downside. Revenue growth could come in below our expectations as high inflation could erode the private sector's purchasing power, leading to a wider fiscal deficit. This would offset the fact that Argentine expenditures would be lower in the absence of interest payments as the government is unable to pay US and...

Table of Contents

Executive Summary
5
Core Views
5
Key Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Scioli And Macri To Emerge As Presidential Frontrunners
8
As the Argentine general election in October 2015 nears, Daniel Scioli of the incumbent Frente para la Victoria (FpV) and Mauricio Macri
As the Argentine general election in October 2015 nears, Daniel Scioli of the incumbent Frente para la Victoria (FpV) and Mauricio Macri
of the centre-right Propuesta Republicana will emerge as the strongest presidential contenders
Table: POLITICAL OVERVIEW
8
Long-Term Political Outlook
10
Economic Reforms Key To Political Stability
10
Argentina scores above the Latin American average in our Long-Term Political Risk Index, but continued stability hinges on the
Argentina scores above the Latin American average in our Long-Term Political Risk Index, but continued stability hinges on the
government's ongoing policy pivot towards more market-friendly policies
Chapter 2: Economic Outlook
13
SWOT Analysis
13
BMI Economic Risk Index
13
Economic Activity
14
High Inflation Will Erode Real Consumption
14
Argentina's real GDP will contract in 2015 as currency controls and high levels of inflation weaken real wages and discourage fixed
Argentina's real GDP will contract in 2015 as currency controls and high levels of inflation weaken real wages and discourage fixed
asset investment
table: Economic Activity
14
Exchange Rate
16
ARS: Gradual Depreciation To Stave Off Devaluation Until 2016
16
The Banco Central de Argentina will allow for a slow weakening of the Argentine peso in 2015, as the bank looks to support foreign
The Banco Central de Argentina will allow for a slow weakening of the Argentine peso in 2015, as the bank looks to support foreign
reserves and shore up its external accounts
Table: BMI Curr ency For ecas t
16
Balance Of Payments
18
External Accounts To Improve On Shift To Business-Friendly Policies
18
A devaluation of the peso will flip Argentina's current account to a surplus and an improved business environment will make the country
A devaluation of the peso will flip Argentina's current account to a surplus and an improved business environment will make the country
more attractive for foreign direct investment beginning in 2016
TABLE : Curr ent Accou nt
18
Fiscal Policy
20
Election Expenditure Boost To Have Long-Term Effects
20
A new Argentine government, which comes into office in December 2015, will reduce the pace of current expenditure growth and narrow
A new Argentine government, which comes into office in December 2015, will reduce the pace of current expenditure growth and narrow
the primary deficit in 2016 after the outgoing Cristina Fernandez de Kirchner administration significantly increases government transfers
the primary deficit in 2016 after the outgoing Cristina Fernandez de Kirchner administration significantly increases government transfers
to build support for the Frente para la Victoria, ahead of elections in October 2015
Table: Fisca l Polic y
20
Sovereign Debt (Regional)
21
Challenging External Funding Environment Ahead
21
Latin America's major sovereigns will face a more difficult external funding environment in the coming quarters, as lower oil and metals
Latin America's major sovereigns will face a more difficult external funding environment in the coming quarters, as lower oil and metals
prices, and a strengthening US dollar are weakening the sovereign credentials of several economies
Table: External Financi ng Requir ements & Reserv e Buff ers
22
Table: Credi t, Debt & Li quidi ty
23
Business Monitor International Ltd www
com 3
Contents
Contents
Chapter 3: 10-Year Forecast
25
The Argentine Economy To 2024
25
Energy Sector To Bolster Long-Term Growth
25
Argentina's real GDP growth will remain weak over the next five years, amid a gradual reversal of the interventionist policies of
Argentina's real GDP growth will remain weak over the next five years, amid a gradual reversal of the interventionist policies of
President Cristina Fernandez de Kirchner
Growth will accelerate during the second half of our 10-year forecast, driven by rising
natural gas production and stronger inbound investment as the policy environment continues to evolve in a more business-friendly
natural gas production and stronger inbound investment as the policy environment continues to evolve in a more business-friendly
direction
Table: Lo ng-Term Macro eco nomic For ecas ts
25
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
Table: Opera tio nal Risk Index
30
Availability Of Labour
31
Table: La tin America - Avai labi lity Of Labour Risk
32
Table: Labour Force Emp loyment By Sector ('000),
33
Table: Top Ten Source Countries For Migrant Workers
34
Crime Risk
36
Table: La tin America -Crim e Risk
36
Table: Crim e Statis tics
37
Chapter 5: Key Sectors
39
Automotives
39
Table: Autos To tal Market - Historical Data And Forecas ts
39
Retail
43
Table: Food, Drink & Tobacco Spending
45
Table: Clothing & Foo twear Spending
45
Table: Househo ld Goods Spendi ng
46
Table: Personal Care Spending
46
Other Key Sectors
49
Table: Oil and Gas Sector Key Indicators
49
Table: Pharma Sector Key Indicators
49
Table: Defence and Securi ty Sector Key Indicators
49
Table: Telecoms Sector Key Indica tors
50
Table: Food and Drink Sector Key Indicators
50
Table: Infras truc ture Sector Key Indicators
50
Table: Freigh t Key Indicators
50
Chapter 6: BMI Global Macro Outlook
51
Global Outlook
51
Deflationary Pressure
51
Table: Global Assumptio ns
51
Table: Develop ed States, Real GDP Growth, %
52
Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Table: Em ergi ng Mark ets, Real GDP Growth, %
53

The Argentina Country Risk Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Argentina. It is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Argentina's economic, political and financial prospects through end-2019, just published by award-winning forecasters, BMI  Research.

Key Uses

  • Forecast the pace and stability of Argentina's economic and industry growth through end-2019.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the operating environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Argentina's country risks against regional peers using BMI's country comparative Risk Index system.
  • Evaluate external threats to doing business in Argentina, including currency volatility, the commodity price boom and protectionist policies.

The Argentina Country Risk Report by BMI  Research includes four major sections: Economic Outlook, Political Outlook, Operational Risk and Key Sector Outlook.

Economic Outlook:

How will the Argentina' economic policy-making and performance impact on corporate profitability over 2015-2019?

BMI provides our fully independent 5-year forecasts for Argentina through end-2019 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Argentina Country Risk Report features BMI's forecasts with supporting analysis for 2015 through to end-2019, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Index system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector obligations).
  • Global Assumptions - forecasts for each year to end-2019 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Argentina and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Argentina, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Argentina over the next 5-years?

BMI's Argentina country Risk Index evaluates the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Argentina Market - Political Strengths, Weaknesses, Opportunities and Threats facing Argentina.
  • Political Stability and Risk Assessment - BMI's Risk Index assesses explicit short- and long-term risks to political stability; latest positioning and trends for Argentina's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.
  • Long-Term Political Outlook BMI examines the structural risks to the stability of Argentina’s political system and the dominant public policy issues likely to affect decision-makers, and outlines scenarios for how the state could evolve in the medium to long term.

Key Benefits

  • Benchmark Argentina's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Operational Risk

What are the current operational risks and difficulties associated with doing business in Argentina?

The Operational Risk section gives an evaluation of current risks and difficulties associated with operating in the market. It also provides a brief overview of the regional Operational Risk Index which benchmarks Argentina against its neighbours.

Operational Risk Contents

The chapter provides a summary of the main threats in the country, within:

  • Labour Market Risk (Education; Availability of Labour; and Labour Costs)
  • Logistics Risk (Market Size and Utilities; Quality and Extent of the Transport Governance)
  • Trade and Investment Risk (Economic Openness; Government Intervention; and Legal Risks)
  • Crime and Security Risk (Crime; Terrorism; and Interstate Conflict risks).

The report also drills down in greater depth to address key issues in one of the following segments most critical to the market:

  • Transport network, economic openness, cost and availability of labour, crime risks, bureaucratic environment, market size and utilities, and interstate conflict.
  • Assess your company’s exposure to country specific operational and business risks, using BMI’s insight on the current dangers of operating in the market.
  • Evaluate Argentina’s risk profile against its regional peers, helping you understand the market’s strengths and weaknesses in relation to other countries.

Key Sector Outlook*

Which industry sectors in Argentina will grow fastest, and where are the major investment opportunities in the market?

BMI identifies investment opportunities in Argentina's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry, including recent sector developments and major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2015-2019, using BMI's proprietary industry modelling technique, which incorporates key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across and within each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

*Not all Country Reports contain the Key Sector Outlook chapter. Please enquire above for more information.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express