TTTHHHEEE AAARRRGGGEEENNNTTTIIINNNEEE EEEMMMBBBAAASSSSSSYYY IIINNN TTTHHHEEE UUUNNNIIITTTEEEDDD KKKIIINNNGGGDDDOOOMMM ECONOMIC & COMMERCIAL SECTION 65 Brook Street, London W1K 4AH Tel: 020 7318-1300 Fax: 020 7318-1301 [email protected] www.argentine-embassy-uk.org

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AAARRRGGGEEENNNTTTIIINNNEEE EEECCCOOONNNOOOMMMIIICCC OOOVVVEEERRRVVVIIIEEEWWW Recent official macroeconomic data • Economic activity up by 0.2% in September • Industrial activity up by 0.6% in October • Primary fiscal surplus of 702 million pesos in October • Tax collection up by 8.8% in October • Inflation rate at 0.8% in October • Unemployment at 8.4% in the third quarter Highlights of the latest Inflation Report by the Central Bank of the Argentine Republic

TTTRRRAAADDDEEE • Trade surplus of US$ 1.1 bn in October • Beef exports growing in y.o.y volume

IIINNNVVVEEESSSTTTMMMEEENNNTTTSSS • Growing trend for investments in Argentina • US$ 300 million in fiscal benefits for investments • New scheme for investments in Tierra del Fuego • Business leaders propose “investment statute”

OOOTTTHHHEEERRR NNNEEEWWWSSS • New Bill to promote software industry • Plan to renew fleet of cargo trucks • Growing trend in sales at shopping centres • YBI Award for Argentine entrepreneur • Best of Wine Tourism awards for Argentine winery

EEEMMMBBBAAASSSSSSYYY’’’SSS AAACCCTTTIIIVVVIIITTTIIIEEESSS • Traditional Argentine cuisine and wines • Seminar on IT and Internet business

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Recent official macroeconomic data

• Economic activity up by 0.2% in September According to the latest Economic Activity Monthly Estimate (EMAE) released by INDEC (the National Statistics Institute), the economy grew by 0.2% in September compared with August and by 0.6% compared with the same month of 2008. This is the third consecutive month in which the economy is growing after the decline recorded in May and June. The accumulated growth of the last 12 months compared with the previous 12 month period is 1.2% (Note: the EMAE index shows the progress of economic activity on a monthly basis).

• Industrial activity up by 0.6% in October INDEC’s figures of the Industrial Monthly Estimate (EMI) showed an increase of 0.6% (0.2% seasonally adjusted) in October compared with September and of 1.5% (1.2% seasonally adjusted) compared with the same month of 2008. The figures for each major industrial sector in October are: food and beverages: +5.0% (monthly) and +5.6% (y.o.y); tobacco industry: -2.0% (monthly) and -6.3% (y.o.y); textile industry: +6.9% (monthly) and +8.9% (y.o.y); paper and cardboard: -6.0% (monthly) and +8.8% (y.o.y); printing industry: -0.5% (monthly) and +2.3% (y.o.y); oil refining: -2.9% (monthly) and –17.9% (y.o.y); chemical industry: -1.2 % (monthly) and +8.5% (y.o.y); rubber and plastics industry: +0.5 % (monthly) and +8.2% (y.o.y); non-metallic minerals: +2.1% (monthly) and +2.7% (y.o.y); metallic basic industries: +8.1% (monthly) and -8.4% (y.o.y); motor industry: +3.5% (monthly) and -0.7% (y.o.y); other metal-mechanical industries: -6.5% (monthly) and -2.4% (y.o.y).

• Primary fiscal surplus of 702 million pesos in October The Ministry of Economy announced that the primary fiscal surplus (the difference between public revenue and public spending before debt payments) in October amounted to 702.2 million pesos (approximately US$ 185 million), which represents a fall of 73% compared with the same month of 2008. The government’s primary expenditure in October was 19.9bn pesos, while its primary revenue totalled 21.1bn pesos. This month’s government spending was heavily influenced by an increase of 90.3% in transfers to the provinces as a result of the automatic application of the “solidarity fund”. The amount transferred to the provinces and the city of Buenos Aires in October reached 389.7 million pesos.

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• Tax collection up by 8.8% in October According to AFIP (the Federal Agency of Public Revenue), total public revenue in October amounted to 28.4bn pesos (approximately US$ 7.5bn), while net tax collection (meaning what AFIP collects for public sector spending) increased by 8.8% on a y.o.y. basis, reaching 26.4 bn pesos (US$ 6.95bn). The y.o.y. tax collection growth was supported by positive outcomes in VAT, income tax, fuel taxes and other contributions.

• Inflation rate at 0.8% in October The Consumer Prices Index (CPI) for the city of Buenos Aires and the Metropolitan area showed an increase of 0.8% in October compared with September and of 6.5% compared with the same month of 2008. The accumulated figure for the ten months of 2009 is 5.8%. The sectors that showed the largest increases in October were education (1.4%), clothing (1.3%), other goods and services (1.3%) and household equipment and maintenance (1.1%), while smaller rises were recorded in transport and communications (0.3%), health care (0.3%), entertainment (0.6%) and home services (0.6%). The Wholesale Prices Index increased by 0.9% and the Construction Costs Index by 2.6% in October.

• Unemployment at 8.4% in the third quarter According to INDEC’s Permanent Households Survey (EPH), which is conducted in 31 major cities throughout the country, urban unemployment in the third quarter of 2009 was 9.1%. This figure shows an increase of 0.3% compared with the previous quarter and of 1.3% compared with the same quarter of 2008.

For further official figures, please visit the following websites: Ministry of Economy and Production www.mecon.gov.ar National Statistics Institute www.indec.gov.ar Federal Administration of Public Revenue www.afip.gov.ar

Highlights of the latest Inflation Report by the Central Bank of the Argentine Republic

• “In Argentina economic activity started to recover in the second half of 2009. In the case of supply, the recovery is driven by the manufacturing sector which has been favoured by the incipient improvement shown by international trade and domestic demand increase which generates stock rebuilding needs, especially in those sectors that adjusted their output the most in previous months.

• Regarding expenditure, the rise of private consumption should be noted together with a stabilisation of investment anticipating an upward trend for

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both variables in 2010. It is projected that next year there will be a GDP increase in line with the forecast of the 2010 National Budget Bill (PPN-10), that would be accompanied by an increase in labour demand following the reduction observed in the first half of 2009.

• The consistency and ratification of the exchange rate policy led to a consolidation of money demand during the third quarter of 2009. While the private sector means of payment increased their expansion pace, private sector time deposits grew firmly over the period. Thus, monetary targets were accomplished once again during the third quarter of 2009.

• The Central Bank put in place new measures to promote the development of credit to the private sector. Among them the simplification of the information required for submission of loan applications and the information requirements in order to evaluate the risk profile of applicants by financial institutions. Additionally, measures were taken aimed at generating a deeper interest rate future market, which is a significant condition to boost medium and long term credit.

• The Central Bank became a net purchaser in the foreign exchange market leading to an increase in international reserves in a context of decreasing deficit in the capital and financial account. The recent evolution of private capital flows resulting from a lower level of uncertainty adds to the currency inflow through the trade channel which would amount to about US$16 billion in 2009.

• The performance of the trade balance also allows the current account surplus to be sustained at historically high levels (3% of the GDP) thereby anticipating a balance within the same range in 2010. Exports are expected to improve next year resulting from the agricultural harvest expansion and a higher foreign demand for industrial products that would offset the hike in imports related to the recovery forecast for domestic activity. Terms of trade, meanwhile, would continue to be favourable while structural factors that support the prices of the main export products would help sustain quotations regardless of the downward pressure imposed on the market by the large world crop supply expected for the next harvest.

• To maintain macroeconomic strengths, progress should continue along the path traced to access voluntary credit markets. It is necessary to generate a programme that considers the payment of interest by using the primary surplus and allows accessing the credit market to roll over capital becoming due. Thus, the GDP/debt ratio will continue falling. In this sense, the recent signs given by the Ministry of Economy to return to the voluntary debt markets are complemented by the message of the Executive Branch on

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the PPN-10 which explicitly establishes advancing on the regularisation of the untendered debt from the 2005 swap proposal, Bilateral Institutions and other private creditors.

• In a context of aggregate activity recovery and improved commodity prices, the different domestic price indexes continue to show limited dynamics. Thus, for the price evolution to consolidate its downward trend it is required to maximize the convergence of fiscal, income (particularly wages) and competition policies, together with the monetary policy already implemented by the Central Bank.

• As the crisis comes to an end, the Argentine economy enters a new stage where the policy convergence and coordination before mentioned become the most important factor in forming expectations to set the bases for sustainable growth.”

The complete Inflation Report can be downloaded from the BCRA website: www.bcra.gov.ar

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• Trade surplus of US$ 1.1 bn in October Argentine international trade showed a surplus of US$ 1.1 million in October 2009, representing an increase of 16% compared with the same month of 2008. Exports amounted to US$ 4.8 bn, while imports totalled US$ 3.6 bn. The decrease in exports compared with October 2008 was the result of a 14% drop in export prices and 8% fall in export volumes. Imports fell by 29% compared with October 2008, as a result of a 13% reduction in prices and a drop of 18% in volume. The accumulated surplus for the first ten months of 2009 reached US$ 14.4 bn, representing an increase of 29% compared with the same period of last year. Total exports in the ten months to October 2009 totalled US$ 45.9 bn, while imports amounted to US$ 31.5 bn, decreasing by 25% and 37% respectively compared with the same period of 2008.

• Beef exports growing in y.o.y volume According to a report by the Institute for the Promotion of Argentine Beef (IPCVA), Argentine beef exports in October increased by 53.1% in volume

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compared with the same month of 2008, while they were moderately lower (-11.7%) compared with September 2009. Shipments in October of chilled, frozen and processed meat totalled 40,762 tonnes, worth about US$ 161 million. This figure was 7.8% below the US$ 175 million of September and 10.4% below the approximately US$ 180 million recorded in October 2008 (despite the large increase in volumes), mainly as a result of a drop in international beef prices. The average export FOB price per tonne in October 2009 was US$ 6,484 for chilled boneless cuts, US$ 3,064 for frozen boneless cuts and US$ 4,020 for processed meat. The Russian Federation remained the top destination in volume for Argentine beef in the first ten months of 2009, with approximately 120,000 tonnes, up by 89% y.o.y, followed by Chile (35,500 tonnes and +62%), Germany (29,700 tonnes and +17%), Israel (27,200 tonnes and +57%), Venezuela (23,000 tonnes and +178%), the Netherlands (16,800 tonnes and +35%), Italy (16,100 tonnes and +48%) and the UK (10,900 tonnes and +18%).

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• Growing trend for investments in Argentina According to the Ministry of Industry and Tourism, private sector investments in Argentina have increased in recent months and will continue in this growing trend in 2010. Most of these investments are aimed at the expansion of plants and production lines, improvement of industrial and commercial infrastructure, development of new business and generation of employment. Amongst major recent investments already in place or announced for the near future are: • Techint: 3 bn pesos for the enlargement of the plant in San Nicolas in order to double its production capacity; • Aluar: 1.15 bn pesos for the expansion of its plant to increase production to 105,000 tonnes of aluminum; • Beltrame: 200 million for the construction of a new plant to produce materials for the heavy industry; • General Motors: 440 million for the launching of a new model; • Repsol YPF: 1.3 bn pesos for the installation of a continuous catalytic transformer; • Petrobras: 304 million for electricity generation in Marcos Paz; • The Container Terminal of La Plata: 790 million pesos to expand its capacity to 500,000 thousand containers per year; • Aeropuertos Argentina 2000: 95 million pesos in 2010 to expand and modernize the Ezeiza airport; • IRSA: 600 million for the opening of the mall Dot Baires;

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• Wal Mart: 450 million pesos for the opening of 15 new stores in 2009 and 570 million for more openings next year; • Arcor: US$ 450 million for the expansion of its production and launch of new products in 2009/10. Other companies with recent investments in Argentina are Volkswagen, Honda, Mercedes Benz, IBM, Tata Consultancy Services, EDS, Capgemini, Accenture, Globant, Coteminas, Google, Gestamp, Telefonica, Motorola and Quilmes Beers, among others.

• US$ 300 million in fiscal benefits for investments The Minister of Industry and Tourism, Debora Giorgi, presented to over 400 small and medium entrepreneurs and representatives of chambers of industry the requirements for SMEs to access the fiscal quota of US$ 300 million in benefits established by the new Investment Promotion Law in force and whose first call for bids ends 21 December. The new law facilitates access to the best technology in the purchase of capital goods by both large companies and SMEs. The Minister said that these benefits represent significant increases in the rates of return on SMEs’ investment projects, noting that SMEs account for 67% of the workforce in Argentina and contribute to 40% of the value added by the economy.

• New scheme for investments in Tierra del Fuego Congress approved Law 26539, which establishes a new regime to promote technological production in the province of Tierra del Fuego. The new law modifies the system of internal taxes and VAT for certain electronic products. In the context of the new rules, a group of companies has already announced investments of approximately 300 million pesos for the period 2010-2014. Among these companies are BGH, Brightstar, Carrier, New San, Interclima / Iatec, Philips and Radio Victoria. Under this regime, New San will produce DVD and audio equipment and progressively incorporate new products like monitors, TV sets, GPS and digital cameras. Interclima will add to the manufacture of air conditioning equipment items such as microwave ovens, TV sets, LCD, cell phones, audio systems and computer displays. Philips will produce a new generation of flat-screen TVs at its plant in Rio Grande. The group Radio Victoria will launch a new line of monitors and digital cameras. Brightstar will increase its production of cell phones to 4 million at its plant in Tierra del Fuego, which makes equipment for Motorola and Blackberry.

• Business leaders propose “investment statute” Key note speakers at the 15th Industrial Conference organised by the Argentine Industrial Union (UIA) called for a basic agreement between the country’s main political and economic groups to promote a favourable business environment in order to reverse the fall in the investment rate,

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which this year has been affected by the global economic crisis. Business representatives from various sectors agreed on the idea of promoting an “investment statute”, which would ensure that all investments approved by the Government are not to be retroactively affected by administrative acts or new laws, thus creating more favourable conditions for prospective investors.

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• New Bill to promote software industry President Cristina Fernandez de Kirchner sent a Bill to the National Congress intended to improve and extend until 2019 the existing benefits promoting the software industry in Argentina, currently under Law 25922. The President said that the IT industry has an strategic role in Argentina and emphasised the favourable conditions of the country’s human resources for developing this sector, a fact which is reflected in its "exponential" growth of recent years. The new Bill includes an extension until 31 December 2019of the Scheme for the Promotion of the Software Industry, higher benefits for exporters and improvements in the mechanisms for taking part in the scheme. Amongst these benefits, the Bill provides that the companies exporting software may offset their income tax with a fiscal voucher equivalent to up to 70% of their contributions as employers to the social security system. The Bill also proposes an extension of the 60% income tax discount granted by Law 25922 to include gains from foreign source as well. The IT industry is one of the leading sectors of the extensive growth sustained between 2003 and 2009 in the Argentine economy. Within this period, about 400 software companies and computer services (SSI) were established, employment increased from 21,000 to 56,000 jobs, total turnover grew at an annual average rate of 21% (this year amounting to 8.9 bn pesos) and exports were multiplied by 3.5, reaching US$ 600 million so far in 2009. Furthermore, it is a very dynamic industry in terms of investment, with 82% of the sector’s SMEs having made investments in the year 2008.

• Plan to renew fleet of cargo trucks The Minstry of Industry launched a plan for the renewal of the fleet of cargo trucks, under which owners of vehicles of 30 years and older will be able to obtain an allowance of between 25,000 and 35,000 pesos in exchange for the old unit. They will also receive a credit line from the Banco Nacion at a special rate and term. This initiative aims to increase the effectiveness and safety of the cargo transport industry, replacing old units with new high

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power ones. It also implies an incentive for the local production of trucks.

• Growing trend in sales at shopping centres Sales in Argentine shopping centres and malls rose by 17.6% in October compared with the same month of 2008 and by 2.5% compared with September, according to figures recently released by INDEC. October sales at current prices amounted to 796 million pesos, representing an increase of 4% in volumes sold compared with the same period of 2008. This figure can be considered a real indicator of a recovery in the Argentine economy after the impact of the global economic crisis.

• YBI Award for Argentine entrepreneur Juan Ramón Nuñez, owner of The Light of Sound, an audiovisual company operating in a deprived area of Buenos Aires, has been named 2009 Youth Business International (YBI) Entrepreneur of the Year. Mr Nuñez was awarded for his ability to create a successful entrepreneurial career despite his hardships. First, he managed to make savings from his work as a scrap collector in order to set up a community radio station. Following its success, he was then able to launch his audiovisual operation with the help of YBI Partner Fundación Impulsar. His business, The Light of Sound, has not only become a successful business venture, but also plays an important role in bringing the local community together. He was honoured at a gala dinner hosted at St James’s Palace by the Prince of Wales. In addition, he will receive prize money of US$ 5,000 from YBI. Fundación Impulsar will also receive US$5,000 in recognition of its work in supporting him. The YBI Entrepreneur of the Year competition was set up in 2006 to celebrate the achievements of young entrepreneurs around the world. Young people who have been supported by the global network led by the Prince of Wales’ YBI – spanning some 40 countries– are eligible to enter the competition.

• Best of Wine Tourism awards for Argentine winery Algodon Wine Estates, a winery of San Rafael, Mendoza, was awarded the Gold Medal for Guest Lodges and the Silver Medal for Innovative Wine Tourism Experiences at the 2010 Best of Wine Tourism Awards. The international jury, composed of representatives of the nine cities of the International Network of Great Wine Capitals, unanimously took this decision in recognition of the first class accommodation and service, which includes not only lodges but a winery, a golf course and a restaurant. The competition "Best of Wine Tourism" aims to encourage creativity, boost wine sector initiatives, increase the standard of the facilities, promote the efforts of wineries, exchange knowledge between the member regions and provide a guide for visitors to the sites of excellence.

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• Traditional Argentine cuisine and wines On November 25 and 26 the event “Desafío al Martín Fierro” (Challenge to Martín Fierro) took place at the Official Residence in Belgrave Square. It consisted of two dinners, organised by the renowned chef from Mendoza Mr Lucas Bustos García, presenting traditional Argentine cuisine and wines. The menu, inspired by the “Martin Fierro”, the national poem which tells the story of the “gauchos” in Argentina, was made entirely with Argentine ingredients following 19th century recipes. Mr Bustos explained each dish and its history at the moment of serving. There was an exclusive selection of wines matching the different flavours of the food, provided by Ruca Malen, Altus, Catena Zapata and Trapiche, the wineries that accompanied Mr Bustos at this event. Guests included wine and cookery writers, restaurant managers and chefs, and wine and food importers and distributors in the UK.

• Seminar on IT and Internet business On 4 December the Embassy and the BACC will host the seminar “IT and Internet Business in Argentina. New Projects and Investments”, at the Official Residence, 49 Belgrave Square. Speakers from the National Agency for Investment Development ProsperAr, Google Argentina, Globant, Vates and Pasajesencasa.com will discuss their experiences and the opportunities offered by Argentina in this field, which has increasingly been growing in recent years and is attracting a number of the world’s major companies in the business as a base for regional or global operations. For further information and registration (limited places) please contact the Embassy’s Economic and Trade Section, [email protected] or the BACC, [email protected].

If you wish to sign up to receive this monthly Newsletter in your mailbox, please contact [email protected]. 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 e-mail to [email protected].

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