Investing in Argentina Industry Approach

Financial Advisory Services Argentina

November 2017

Content

• Argentina – Country’s Overview • Industry Snapshot • Consumer Goods & Retail: Food, Beverages & Tobacco • Financial Services • Agribusiness • Telecommunications, Media & Technology • Energy

Politics & Government

System of Government: Federal republic with three branches of government. Executive (President), Legislative (Congress) and Judiciary (Supreme and Lower Courts).

Federal Government:The country is divided into 23 provinces plus the autonomous city of Buenos Aires. Provinces have their own constitutions and executive, legislative and judicial branches of government.

Congress: Divided into two houses: the Senate and the House of Representatives. Members are elected by popular vote. In the case of the Senate, members are elected for six-year terms. In the House, members are elected for four-year terms.

Government Regime

Executive Legislative Judiciary (President) (Congress) (Supreme & Lower Courts) Representatives President - Senate: 72 (3 per Supreme Court: 5 /Members Province + 3 for the members Buenos Aires City) - House of Representatives: 257 Elections Every four years - Senate: mandates Selected by the based on a two-round last 6 years. Elections president, with the system: the candidate are held every 2 years Senate approval, wins if he receives in which 1/3 of the and remain in either 45% of the vote Senate is voted. charge as long as or 40% and is 10% - House of they have the right ahead of the second Representatives: conduct. candidate. If not, a mandates last 4 years. When a member run-off takes place. Elections are held every turns 75 years old, 2 years in which half of his is re-named the chamber is voted. every 5 years, as long as his is able to comply with the charge’s responsibilities.

Source: National Investment and Trade Promotion Agency information.

GDP Real Growth (%)

3,3 3,4 4 2,4 2,6 2,7 2,7 2,7 2 0 -2 -1 -4 -2,5 -2,2 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Average Exchange Rate (AR$/US$)

30 22,22 23,6 19,07 20,81 20 14,76 16,6 8,08 9,23 10 4,54 5,46

0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F Inflation Index (%)

60 38,1 41,4 40 25,3 23,4 26,5 26,2 17 20 10,8 7,9 6,3 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F National Reserves (US$ Bn)

60 54,5 43,2 38,4 40 30,5 31,4 25,5 20

0 2012 2013 2014 2015 2016 2017F

Source: EIU and BCRA (Central Bank).

Country Risk (%)

12 10,7 9,9 10 7,9 8 5,9 6 4,8 3,6 4 2 0 2012 2013 2014 2015 2016 2017 Trade Balance (US$)

20 15 15 10 5 6 5 5 0 0 -5 -5 -5 -10 -6 -7 -6 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F Fiscal Deficit/GDP (% of GDP)

0 -1 -2,1 -1,9 -2 -2,7 -3,4 -3 -4 -4,8 -5,3 -5 -5,9 -6 -6,3 -6,4 -6 -7 2012 2013 2014 2015 2017 2017F 2018F 2019F 2020F 2021F

Source: Deloitte’s analysis based on EIU, Ambito Financiero, INDEC.

Total Foreign Debt (US$ Bn)

300 256 233 245 250 210,0 222 190,0 201,4 200 160,0 147,0 145,0 150 137,0 100 50 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F Total Public Debt/GDP (% over GDP)

70 56 57,9 57,2 56,4 60 54,0 54,5 54,4 54,7 50 41,3 36,7 39,4 40 30 20 10 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F

Debt Interest Payments/GDP (% of GDP)

4,0 3,7 3,7 3,2 3,0 2,5 1,9 2,1 2,1 2,0 1,6 1,6 1,3 1,0

0,0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Source: Deloitte’s analysis based on EIU, Ambito Financiero, INDEC.

Regional Main Activities Argentina has a highly diversified economy. It's key sectors are: Northwest Agriculture agribusiness, pharmaceuticals, Mining automobiles, energy & resources Gas and biotechnology. Argentina is world leading producer of foodstuffs: third Northeast producer of soybean, fourth Agriculture producer of sunflower and Forestry Cuyo between the largest beef Mining producers. In addition, it has the Winery world’s fourth-biggest shale oil Pampas reserves and the second-biggest Agriculture shale gas reserves. It is very rich Cattle Raising in terms of mining resources: Industry gold, cooper, silver and lithium – world’s third largest reserves, behind Bolivia and Chile.

GDP by Activity (2015) 17% 20% Patagonia Oil & Gas Fish 2% Fruits 2% 13% 3% 3% 3% 10% The leading industrial sectors 4% are: food processing, 4% 4% 8% beverages, chemicals & 7% pharmaceuticals, oil refining, Manufacturing Wholesale, Reatail & Repairs motor vehicles and auto parts. Real Estate Logistics Regarding services, the main Agriculture Financial Services sectors are wholesale, retail, Public Administration & Defense Education transport and communications. Health Services Mining The service sector is the largest Construction Leisure job creator. Electricity, Gas & Water Other

Source: Deloitte’s analysis based on EIU, INDEC.

Foreign Direct Investment Stock (US$ B)

160 137,00 140 123,00 120 109,00 99,00 95,00 100 88,00 90,00 80,00 83,00 80 72,00 60 40 20 - 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Identified Investment Opportunities (US$ B) The National Government has identified investment opportunities for approximately US$ 240B across multiple sectors as described below:

Transportation & Federal Power & Infrastructure Infrastructure & Renewable Energy + US$ 80B Public Works + US$ 35B + US$ 60B

RE & Urban Mining Oil & Gas Development + US$ 30B + US$ 25B + US$ 5B

Telecom & High Agribusiness Tourism Technology + US$ 2B + US$ 1B + US$ 2B

Source: INDEC and National Investment & Trade Promotion Agency.

Deal Volume

100 91 78 68 77 71 56 50

0 2012 2013 2014 2015 2016 2017YTD Acquirer’s Origin – 2016 (Volume)

North America Europe 12% 12%

Asia & Oceania 6% Latin America 70%

Recent Deals

Year Target Acquirer Acquirer Deal Ticket Origin (US$ M) 2016 Petrobras Pampa Energía Argentina 897 Argentina 2016 Telecom Fintech Group Mexico 812 Argentina 2016 Grupo Mabe Ontex Group Belgium 444

2016 Nextel Grupo Clarín Argentina 178 Comunicaciones 2016 Campo Austral BRF Brazil 85

Source: Deloitte’s analysis based on Mergermarket & Thompson Reuters information.

Imports FOB (US$ B)

100 78 83 71 70 74 65 62 62 66 57 53 50

0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F Imports Ranking Imports by Partner

2014 2015 2016 Brazil China Brazil 1° 1° 1° 24% 26% US China 2° 2° 2° Germany Mexico US 3° 3° 3° 2% 2% France Germany 4° 4° 4° 3% Italy 3% 19% 3% Japan Mexico 6° 5° 5° 5% 13% Spain Rest Exports FOB (US$ B) 100 80 76 80 68 68 73 57 58 57 60 63 50

0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F Exports Ranking Exports by Partner

2014 2015 2016 Brazil 16% China Brazil 1° 1° 1° US China 2° 2° 2° 8% Chile Spain US 3° 3° 3° 53% 8% Germany Chile 4° 4° 4° 4% Netherlands 3% Canada Spain 6° 6° 5° 2% 2%2%2% Uruguay Rest Source: EIU, INDEC.

Population Characteristics Population density: Age distribution: 10.7 persons/km2 25.5% under 15 64.3% between 15-65 10.2% over 65

Population: English proficiency: High th 43.6M inhabitants (19 in the World – Education First English Proficiency Index)

Literacy rate: 98% GDP per capita: US$ 21,430

Official Language: Spanish

Age Distribution (in Millions)

65+ 2,431,674

15-65 13,135 12,654

0-14 5,027 5,195

-15 -10 -5 0 5 10 15 Millions

Men Women

Source: Deloitte analysis based on INDEC information.

Unemployment (%)

10 8,5 8,6 9 8,1 7,8 7,5 7,4 8 7,2 7,1 7,3 7,2 7 6,5 6 5 4 3 2 1 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F 2022F

Average Wage (US$ per month)

1.200

978 992 938 957 955 1.000 902 931 842 868 777 800

600

400

200

0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Source: EIU, INDEC

Analphabetic Index – 2010 Social Census (%)

5 4,7

4 4,2 3,1 3

% 2,8 1,6 2 1,4 1,2 1,2 1,3

1 1,3 1 0,8 0,8 0,9 0 10-14 15-17 18-24 25-29 30-49 50-64 65 + Male Female

English Level (EF EPI over 72 countries)

20 19 19 19 18 16 15 15 14 12 10 8 6 4 2 0 2012 2013 2014 2015 2016

#1 in 9,8 average Expense in LATAM (14 years of Education: countries) education 15% of GDP

Source: INDEC, EF EPI

Autonomous City of Buenos Aires Mendoza City

Location: NE of Buenos Aires Province Location: N of Mendoza Province Population:12,8 Million (32% of total) Population: 0,9 Million (2,3% of total) International Airports: 2 International Airports: 1 Ports: Yes Ports: None

Cordoba City Rosario City

Location: NW of Córdoba Province Location: SE of Santa Fe Province Population: 1,4 Million (3,6% of total) Population: 1,2 Million (3,1% of total) Population: International Airports: 1 International Airports: 1 Ports: None Ports: Yes

Source: INDEC, IGN.

Airports

- +50 airport terminals along the country - Most of them are Ports managed by Aeropuertos 2000 – private operator - +40 ports along the - +30M passengers per country year - Main ports: Buenos Aires City and Rosario - Water flow throught the Río de la Plata, Paraná, and Uruguay rivers and Mar Argentino

Railway System

- 50,000kms of railway network - Largest in Latin America - Connected with limit Roads & Highways countries - Buenos Aires City - +500,000kms of roads network has 7 different - 35,000kms are national lines roads - +5,000kms of highways - Less than 35% are paved roads

Source: Ministerio de Transporte, Red Vial Argentina, Aeropuertos 2000

Key

Airport Terminals

Ports

Source: Ministerio de Transporte, Aeropuertos 2000, Aduana Argentina

The New Administration presented an US$ 80Bn investment plan in transportation to develop nationwide improvement in road/highways, railways, ports and airports infrastructure.

Transport Infrastructure Investment Plan (US$ Bn)

Concession and construction Roads 48 opportunities for 43,000kms of roads and highways.

Recovery of national freight railway Freight Rail 15 so as to be able to transport up to 100M tns per year.

Improve the metropolitan railway Passenger Rail 8,5 network of 241 stations.

Maintain and expand the fleet of Rolling Stock 3,2 passenger rail cars.

Modernize three lines and build a new Metropolitan BA Subway 1,4 one to improve the Buenos Aires metro area subway.

Modernize, expand and operate the BA Port 1,5 Buenos Aires Port – largest in the country.

Investment opportunities to improve Other 5,6 and expand airports and ports and increase urban mobility across the country.

Source: National Investment & Trade Promotion Agency.

When investing in Argentina, foreign investors usually set their business using the investment vehicles described in the following table. All of them created and are regulated by the Inspección General de Justicia (IGJ).

Type Minimum Capital Quota Holders Observations

Corporation AR$ 100,000 IT may have one (Sociedad Anónima) (SAU) or more than one shareholder Single Owner AR$ 100,000 One shareholder -Shareholder cannot Corporation be another SAU. (Sociedad Anónima Unipersonal) Limited Liability No minimum, but 2-50 shareholders Members limit their Company (Sociedad should be adequate liability to the par de Responsabilidad in relation with the value of the quotas Limitada) corporate purpose of they agreed. the entity Branch of a Foreign Not necessary to Laws from country Books should be Company (Sucursal) allocate capital of origin kept separately from HQs.

In addition to the above listed, there are other forms of investment entities that foreign investors have to establish their business in Argentina: • Partnerships: no minimum capital, all partners are jointly and severally liable for the partnership’s obligations. • Joint Ventures: temporary associations to develop a specific work. • Cooperating Groups: common organization between several parties to develop or improve certain phases of its clients activities. It has a contractual basis. • Cooperating Consortium Agreement: similar to Cooperation Groups, but members may not agree jointly and severally liable for the obligations. • Trusts: structure which allows an endeavour to isolate certain assets or property to use them for specific purposes.

Source: National Investment & Trade Promotion Agency.

Financial Activities Insurance Activities (FEA No 21,526) (Law No 12,988 & 20,091)

The Central Bank (BCRA) is responsible Only issuers authorized by the for regulating and supervising financial Superintendence of Insurances (SNN) institutions, authorizing the operation, may perform insurance activities. merger or transfer of activities and Only Corporations incorporated in authorizing the establishment of Argentina, branches with assigned local foreign bank branches or capital and SOEs can perform representative offices in Argentina. insurance activities.

Capital Markets Oil & Gas Regulations Law No 17,319: Exploration and production regulation, as well as - Law No 17,811 (as amended by Law the hydrocarbons exploration, No 26,831): enacts the rules for the development and production. public offering regime. Hydrocarbon operation needs a Federal - CNV (Argentine Securities concession or permit. Commission) states the regulatory Law No 13,660: Downstream framework – all agents and issuers regulation. have to be authorized and comply with Exploration should be approved by the requirement determined by CNV. E&M ministry through a biding process.

Mining Energy & Resources (Mining Code – Law No 1,919) (Law No 24,065, 26,190 & 27,191) A concession is needed to develop mining activity, in which the Legal framework divides the sector in: concessionaire must pay an annual generation, transmission, distribution royalty to Federal/Provincial and demand. Government. New regulation for the Renewable Mining activities have tax incentives Sources of Energy (RSE) which states which should be analysed before the tax benefits for the ones in charge of investment. projects – need to be certified by RSE Program.

Source: National Investment & Trade Promotion Agency.

The Argentine tax system is composed of Federal, Provincial and Municipal taxes. It is a self-assessment system (or enterprise) and its period it’s the calendar year.

Federal Taxes Provincial & Municipal Taxes

Income Tax Turnover Tax Value Added Tax Real Estate Tax Minimum Presumed Income Tax Stamp Duty Personal Assets Tax Tax on Vehicles Tax on Financial Transactions Tax on Public Advertising Customs Duties Others

Main Business Taxes Corporate Income Tax • Rate: 35% flat • Territoriality: for resident companies, worldwide income is taxable. Branches must keep a separate book for its operation in Argentina. • Period: it is reported and paid annually. Value Added Tax (VAT) • Rate: general is 21% - 27% for electricity, natural gas and water supply and 10,5% is applied to some activities. • Territoriality: Argentinian transactions except for exports which pay zero rate – imports VAT can be recovered through tax refunds. • Period: it is reported and paid monthly. Minimum Presumed Income Tax • Rate: 1% flat (minimum value of assets in the country: AR$ 200k) • Territoriality: all assets in Argentina and abroad owned by local companies. • Period: it is reported and paid annually. • Observations: it complements income tax whenever the income tax liability does not exceed the minimum presumed income tax.

Source: National Investment & Trade Promotion Agency and Deloitte own analysis based on AFIP.

Industry Highlights The Argentine Consumer Goods industry is the largest in the region after Brazil and Mexico. Yet, the high levels of inflation and the weak economic growth that the country experiences since the consumer spending boom halted in 2012 has not helped the industry develop. Furthermore, Cambiemos’ economic policy making has not helped reactivate the sector and combined with a local-currency depreciation, the retail market in 2016 is smaller than it was in 2012 in US-dollar terms.

The Economist Intelligence Unit forecasts that retail sales will rise sharply in nominal, local-currency terms to US$130bn by 2020, but this will mostly be explained by high levels of inflation pushing up prices. Instead, the real retail sales growth will average 2.20% in 2016-20 in US-dollar terms, as consumer confidence improves and inflation subsides. Industry Subsectors Industry Subsector Main Players

Non-Perishable Food

Ready Meals

Dairy

Bakery, Biscuits & Snacks

Non-Alcoholc Beverages

Alcoholic Beverages

Tobacco

Source: The Economist Intelligence Unit

The market for non-perishable food in Argentina is significant. Argentines eat an average of 9,1 kilograms of pasta per year, and remain as the sixth nation that consumes more dry pasta in the world according to the International Pasta Organization. It is also estimated that each Argentine national eats an average of 10 kilograms of rice per year. Hence, the focus of the Non-Perishable subsector will focus on its biggest segment: Rice, Pasta and noodles. In 2016, Euromonitor Intelligence estimated that the market for rice, pasta and noodles grew 4% in retail volume terms and 24% in current value growth, thus reaching a value of ARS17,100 million. Companies have reinvented the consumption of dried pasta to boost consumption, while rice registers the highest growth of 7% in retail volume terms in 2016. However, the high levels of inflation have made the average unit price of the standard unit in the industry rise by 19%.

Lead Players Market Concentration Ratio

Molinos Río de la Plata is the leading The 4 firm Herfindahl-Hirschman and dominant firm in the Non-Perishable Index of market concentration: food subsector as its portfolio Monopolist companies account for approximately 10.000 49% of the market. Other competitors = that fall behind the market leader are Molinos Ala (5%), Unilever (4%) and Dos Hermanos (2%).

Molinos Río de la Plata’s swide variety of brands in different price bands allows them to be the most important company High within the category.

2.500 Current Market Source: Euromonitor Intelligence 2017, 2.446 International Pasta Organization. Concentration Moderate

1.000

Low 1 Perfect Competition

Market Share Footprint in Company Origin Brands Rice, Pasta & Argentina Noodles

Alicorp Argentina Production <1%

Import & CV Trading Argentina 2% Distribution Production & Dos Hermanos Argentina 2% Distribution El Sol de Bella Argentina Production <1% Vista Gualtieri Argentina Production <1% Hermanos La Cachuera Argentina Production <1% La Salteña US Production 2% (General Mills) Ladislao Popelka Argentina Production <1% y Cia Import & Lee Kwon Chan Argentina <1% Distribution Import & Liu Li Wei Argentina <1% Distribution Molino Arrocero Production & Argentina 1% Milenum Distribution Production & Molinos Ala Argentina 5% Distribution

Molinos Río de la Production & Argentina 49% Plata Distribution

Oblimar Argentina Production <1%

<1% Sagemuller Argentina Production

UK- Unilever Netherland Production & 4% s Distribution

Villa d’Agri Argentina Production <1%

The ready meals market in Argentina is considered by many as an under-developed niche. According to Nielsen Consulting, the market revenues reaches AR$1200 million and has a potential grow significantly, as the argentina per capita average consumption is of 1,6 kilograms, 60% less than Chile’s and Brazil's per capita demand for the products in the segment. Yet, in 2016 the ready meals market declined by 8% in retail volume terms but increased by 34% in current value terms to reach ARS986 million. Dried ready meals registers the worst performance with a fall of 10% in retail volume terms in 2016. The rationale behind lower levels of consumption for these product-types is that homemade meals have been substituting ready meals as a result of the economic crisis.

Lead Players Market Concentration Ratio Molinos Río de la Plata is the leading firm The 4 firm Herfindahl-Hirschman in the Ready Meals food subsector as its Index of market concentration: portfolio companies account for Monopolist approximately 46% of the market. 10.000 = Other competitors that fall behind the market leader are McCain (16%), Unilever (12%) and Buenos Aires Food (7%). High In the past years Molinos Río de la Plata increased its retail value share in ready meals by 15 percentage points. This Current Market 2.565 excellent performance was down to the Concentration repositioning of its brand Gallo in dried 2.500 ready meals, which pushed the Knorr brand from Unilever into second place. Moderate

1.000

Low 1 Perfect Competition

Source: Euromonitor Intelligence 2017, Nielsen Consulting Report 2016.

Market Footprint in Share Company Origin Brands Argentina Ready Meals Buenos Aires Food (Dr Germany Production 7% Oetker)

Carrefour France Distribution <1%

Family Group Argentina Production <1%

Coto Argentina Distribution <1%

Día Spain Distribution <1%

Production & General Mills US Distribution 4%

Jumbo (Grupo Chile Distribution <1% Cencosud)

Molinos Rìo de Production & Argentina 46% la Plata Distribution

Production & McCain US 16% Distribution

Production & BRF Brazil 4% Distribution

Production & Unilever UK-Netherlands 12% Distribution

Walmart US Distribution <1%

Source: Euromonitor Intelligence 2017.

Yoghurt and Sour Milk Other Milk Products

The Yoghurt and Sour Milk market The Market for Other Dairy remained declined by 3% in 2016. The current the unchanged in terms of retail volume value of the market is about ARS 13,200 in 2016. Euromonitor international million. The drinking yoghurt market estimates that the market value for this declined by 1% compared with a 35% rise segment can be estimated at ARS in the average unit price in the segment. 10,700 million. This suggests the strong consumer Danone is leading the market with a preferences for Yoghurt and Sour Milk in retail value share of 36%. Other Argentina. industry key players are Sancor and Danone continues to dominate yoghurt Mastellone Hnos that through their and sour milk products in 2016 with a brands hold 22% and 16% of the market share of 69%. The second market market share for the segment. share position is detained by Sancor with 17%.

Drinking Milk Products Market Concentration Ratio

In 2016, the annual per capita quantity of The 4 firm Herfindahl-Hirschman pasteurized, UHT and Chocolate milk Index of market concentration: Monopolist consumed in Argentina was of 40,10 10.000 liters, and represented a 10% decrease = with respect with 2015, according to the Ministerio de Agroindustria. The drinking Milk Products category 5.079 Yoghurt & Sour Milk remained relatively constant in terms of High retail volume in 2016. The increasing demand of drinking yogurt combined with the rise in cost per average unit has had a negative impact on the performance of the dairy products. 2.500 Mastellone Hnos leads the market with a 2.072 Other Diaries retail value share of 41% in 2016. The Drinking Milk Products second most important player is Sancor 2.022 with 16% of market share. 1.000 Low Perfect 1 Competition

Source: Euromonitor Intelligence 2017, Ministerio de Agroindustria 2017.

Market Market Market Footprint Share Share Share Company Origin in Brands Drinking Youghurt Other Argentina Milk and Sour Diary Products Milk

Carrefour France Distribution <1% N/A <1%

CencoSud Chile Distribution <1% N/A <1%

Coto Argentina Distribution <1% N/A <1% Production & Danone France 3% 69% 36% Distribution

Día Argentina Distribution <1% <1% 2%

Production & La Sibila Argentina <1% N/A N/A Distribution Lácteos Production & Argentina <1% 1% 1% ConoSur Distribution Production & Mastellone Argentina Distribution 41% N/A 16%

Production & Milkaut Argentina 3% 2% 1% Distribution

Switzerlan Production & Nestlé 5% N/A <1% d Distribution

Production & RPB SA Argentina <1% N/A N/A Distribution

SanCor Production & Argentina 16% 17% 22% Cooperativas Distribution

Sucesores de Production & Alfredo Argentina 7% 5% 6% Distribution Williner The Coca-Cola Production & US 6% N/A N/A Company Distribution Production & Veronica SA Argentina <1% N/A <1% Distribution

Wal-Mart US Distribution <1% N/A <1%

Source: Euromonitor Intelligence 2017.

Salty Snacks Products Biscuits The annual per capita consumption of Consumers in Argentina buy 7kgs of Salty Snacks in Argentina is of 1 kg, biscuits per year, according to and remains relatively low when Kantar Worldpanel. The overall compared to that of Uruguay (1,6kg), market value of the Argentinean and Chile (2,3 kg). biscuits market grew by 7.21% Even though consumption has fallen totaling to 310.88 Million Kgs in considerably in the past few quarters, 2016. the segment is considered an Arcor is the leading firm in Biscuit interesting niche by several players segment with 49% of the market, eager to expand. followed by Mondelez with 16%, Pepsico is the leading and dominant Granix with 4%, and Don Satur with firm in this segment with 80% of the 3%. market, followed by 5 Hispanos with 10%.

Alfajores & Sweet Snacks Market Concentration Ratio Products The 4 Firm Herfindahl-Hirschman Consumers in Argentina buy 24 Index of market concentration: alfajores per year, according to study conducted by CCR in 2015.Kids and Monopolist 10.000 teen-agers, raging from 8 to 18, account for 80% of the demand of the product in Argentina. 6.508 Salty Snacks Market Arcor is the leading firm in this segment with 30% of the market, followed by Mondelez with 19%, Jorgito with 17%, = High and Guaymallén with 4%. The sweet snacks market is lead by 2.742 Sweet Snacks Market Arcor, whose brands account for the 46% of the market. Mondelez follows the lead with 24%, and Ferrero and 2.670 Biscuit Market Bonafide have mantained a good part of 2.500 the market with 5% each. Moderate 1.566 Alfajores Market Source: Euromonitor Intelligence 1.000 2017, Kantar World Panerl, CCR 2015, El Cronista. Low 1 Perfect © 2017 Deloitte & Co. S.A. All rights reserved. Competition Consumer: Food, Beverage & Tobacco Main Players: Biscuits & Snacks

Market Market Market Market Footprint in Share Company Origin Brands Share Share Share Argentina Sweet Biscuits Alfajores Salty Snacks Snacks

Production & 5 Hispanos Argentina N/A N/A N/A 10% Distribution

Production & Arcor S.A Argentina 49% 30% 46% <2% Distribution

Bonafide Production Argentina N/A <1% 5% N/A

Production & <1% Cachafaz Argentina <1% <1% N/A Distribution

Production & Don Satur Argentina 3% N/A N/A N/A Distribution

Production & Fantoche Argentina N/A <1% <1% N/A Distribution

Production & Fel Fort Argentina N/A <1% <1% N/A Distribution

Ferrero S.A. Production Italy N/A N/A 5% N/A

Guaymallén Production Argentina N/A 4% N/A N/A

Production & Granix Argentina 4% N/A N/A N/A Distribution

Production & Havanna Argentina N/A <1% 5% N/A Distribution

Jorgito Production Argentina <1% 17% N/A N/A

La Nirva Production Argentina N/A <1% N/A N/A

Molinos Río Production & Argentina <1% <1% <1% <2% de la Plata Distribution

Production & Distribution Mondelez S.A USA 16% 19% 24% <2%

Production & Pepsico Distribution USA <1% <1% N/A 80%

Production & Tia Maruca Argentina 2% N/A N/A N/A Distribution Source: Euromonitor Intelligence 2017. © 2017 Deloitte & Co. S.A. All rights reserved. Consumer: Food, Beverage & Tobacco Main Players: Bakery Industry Highlights Market Concentration Ratio In the past years, wheat flour production An estimation of the Herfindahl- dropped due to draught conditions suffered Hirschman Index of market during the 2013 harvest, which caused an concentration is: exorbitant price hike of more than 30% in 10.000 Monopolist artisanal/unpackaged bread. Consequently consumers switched to lower-priced bakery Current Market products, in which biscuits was the main Concentration beneficiary. High Artisanal bread is an important element of the = Argentinean consumer’s food basket, which over the last years has been left behind due to the 2.500 trend towards healthy, natural food. Moderate Highly Concentrated Industry: • Grupo Bimbo is the leading firm in this sub- industry with a significant foothold on the 1.000 market as it is estimated that its portfolio brands account for approximately 80% of the Low market. Perfect 1 • The 25% left of the market can be traced Competition back to national bakeries and 2nd brand products.

Main Players

Footprint in Company Origin Brands Market Position Argentina

Balcarce Argentina Production National Bakery Breviss Argentina Production National Bakery Carrefour France Dist. & Retail 2nd Brand Product Cencosud Chile Dist. & Retail 2nd Brand Product Coto Argentina Dist. & Retail 2nd Brand Product Doña Noly Argentina Production National Bakery Grupo Bimbo Mexico Production Regional Leader La Perla Argentina Production National Bakery

Molinos Cañuelas Argentina Production & Dist. National Bakery Riera Argentina Production National Bakery Walmart USA Dist. & Retail 2nd Brand Producs

Sports Drinks Carbonate Beverages Sports Drinks saw a total volume Carbonates sees volume decline of 1% growth of 4% and reached 87 million in 2016 to reach 6,300 million liters. liters in 2016. The growth of inferior brands given Pepsico’s Gatorade leads the much economic uncertainty catapulted smaller market of Isotonic Beverages Manaos as the new star Brand in the with 63% of the market share, followed sector. by Coca-Cola’s Powerade with 32%. Coca-Cola FEMSA is the leading firm in It is noteworthy to mention that the Carbonate Beverages sub-industry Powerade has been experiencing strong as its portfolio brands account for growth as its market share rose from approximately 51% of the market, 21% in 2013 to the actual level in 2016. followed by Pepsico and the argentine- national RefresNow which account for 13% and 7%, respectively.

Bottled Water Market Concentration Ratio In 2016, the market total volume sales The Herfindahl-Hirschman Index grew 2% to reach 5.2 billion litres. of market concentration: During 2016 the total sales of second- Monopolist brands accelerated significantly. 10.000 The bottled water market in Argentina is = a competitive market led by Grupo Danone’s portfolio companies accounting Sport Drinks 4.993 (2-Firm HHI) for the 21% of the market share. The group has one of the widest distribution High networks in the country. The argentine IVESS follows the lead Carbonate Beverages 2.855 with 11% of the market volume. Coca (4-Firm HHI) Cola Femsa’s (7%), Nestlé’s (6%) and Pepsico’s (3%) fall behind another 2.500 Argentine water-supplier, Cimes, that falls third according to Euromonitor with Moderate 8% of the bottled water market volume. 1.000 675 Bottled Water (4-Firm HHI) Low Source: Euromonitor Intelligence 2017. 1 Perfect Competition

Market Market Market Industry Footprint in Share Share Share Company Position Brands Arg. Bottled Sports Corbanate (Lead-Mid-Small) Water Drinks Drinks

Coca-Cola Leader Production 7% 32% 51% FEMSA

Production & Nestlé S.A. Leader 6% N/A N/A Distribution

Production & Distribution Pepsico S.A.I.C. Leader by third party 3% 63% 13% (Cervecería Quillmes)

Production & Distribution Grupo Danone Leader 21% N/A N/A done by 3rd Party

Production & Refres Now Medium N/A N/A 7% Distribution

Production & Prodea Medium N/A N/A 4% Distribution

Production & Cimes Medium 8% N/A N/A Distribution

Production & IVESS Medium 11% N/A N/A Distribution

Nutreco Production & Medium 1% N/A N/A Alimentos Distribution

Production & Pritty SA Small <1% N/A 6% Distribution

Not focused on Carrefour Distribution <1% N/A 3% the Segment

Not focused on Coto Distribution <1% N/A 2% the Segment

Source: Euromonitor Intelligence 2017.

Wine Beer In 2016 the wine industry is recovering Argentina is traditionally a wine-drinking from a decline in 2015, registering total country but, the total consumption of volume growth of 5% to reach sales of wine has been declining in the past few 1.1 billion liters. The industry is years. Beer has been gaining popularity predicted to post a total volume CAGR and since 2012 has beaten all other of 2% until 2021. alcoholic beverages with a per capita FeCoViTa is the leading firm in wine consumption of 44,7 liters. segment with 26% of the market. The The Beer industry appears to be highly Grupo Peñaflor follows the lead with concentrated specially after AbInbev’s 22% of the market volume. Licores merger with SABMiller. Recent studies Argentinos (7%) and Bodegas y Viñedos show that AbInbev accounts for 71% of Garbin (7%) fall behind RPB, that the market followed by CCU and Isenbeck accounts for 8% of the wine market which account for 22% and 4%, voiume. respectively.

Spirits Drinks Market Concentration Ratio The Spirits market exhibits a more The Herfindahl-Hirschman Index of market competitive environment than the beer concentration: market, given the high levels of product Monopolist differentiation across its actors. Within 10.000 this sub-industry, the Fernet is the product with the strongest foothold. Fratelli Branca accounts for 50% of the Beer Market Fernet market, while Grupo Cepas 5.541 (3 Firm HHI) follows the lead with 15% of it. The argentine Fratelli Branca sets the lead with 27% of the spirit market = High volume and accounts for 50% of the 2.500 Fernet sales in the country. Pernod Spirits Market 1.319 (4 Firm HHI) Ricard occupies the second place with 21%, Sabia Campari with 10%, and Wine Market Grupo Cepas with 7% of the market 1.319 (4 Firm HHI) volume. 1.000 Low Perfect 1 Competition Source: Euromonitor Intelligence 2017.

Mark Marke et Market Footprint in t Company Origin Brands Shar Share Argentina Share e Wine Beer Spirits

Production & AB InBev Belgium 71% N/A N/A Distribution

Production & Grupo Cepas Argentina N/A 7% 3% Distribution

Compañía de Production & Cervecerías Chile 22% N/A N/A Distribution Unidas

Fratelli Production & Argentina N/A 27% N/A Branca Distribution

Pernod Production & France N/A 21% N/A Ricard Distribution

Production & Diageo UK N/A 6% N/A Distribution

Sabia Production & Argentina N/A 10% N/A Campari Distribution

Grupo Production & Argentina N/A N/A 22% Peñaflor Distribution

Cervecería Production & Argentina Argentina 4% N/A N/A Distribution Isenbeck

FeCoViTa Production & Argentina N/A N/A 26% Coop Distribution

Production & RPB Argentina Distribution N/A N/A 9%

Bodegas y Production & Viñedos Argentina N/A N/A 6% Distribution Garbin Bodegas Production & Valentín Argentina N/A N/A 3% Distribution Bianchi

Moet Production & France N/A N/A 3% Hennessy Distribution

Licores Production & Argentina N/A N/A 7% Argentinos Distribution

Llorente y Production & Argentina N/A N/A 2% Compañía Distribution

Source: Euromonitor Intelligence 2017.

Industry Highlights Market Concentration Ratio According to data from the Ministerio de The 2-firm Herfindahl-Hirschman Salud, besides the fact that 21% of women Index of market concentration: and 30% of men in Argentina smoked in 2013, the annual per capita consumption of 10.000 Monopolist argentines aged 15 or older is 1.014 cigarettes. Prices remain low, in spite of the recent Current Market 5.629 introduction of a new regulatory framework Concentration in the industry. Yet, health warnings are compulsory, advertising directed at younger High generations is prohibited and marketing is = banned from television between 8 am and 2.500 10 pm.

Highly Concentrated Industry: Moderate • Phillip Morris International is the leading firm in this sub-industry with a quasi-monopoly on the market as two of its portfolio brands account for 1.000 approximately 70% of the market. • The other main player is British Low American Tobacco that accounts for 27% of the Argentine Market of Tobacco. Perfect 1 Competition Main Players

Company Origin Industry Footprint in Brands Market Position Argentina Share (Lead-Mid- Small)

Massalin Particulares 70% US Leader Production (aprox.) Phillip Morris International

British American 27% UK Leader Production Tobacco (Aprox.)

Source: Euromonitor Intelligence 2017, Ministerio de Salud.

Deal Volume Deal Volume

Acquirer’s Origin – 2016 (Volume)

North America Europe 8% 19%

Asia & Oceania 5% Latin America 65%

Unknown: 3% Recent Deals

Year Target Acquirer Acquirer Origin Deal Ticket

2017 Dilexis S.A. Tía Maruca Argentina N/D

2017 Potigian Private Investor Argentina N/D Golosinas 2016 Sancor Vicentín SAIC Argentina 100 Million (Youghurt & Dessert Production Unit) 2016 Viña Cobos SA Molinos Río de la Argentina 12 Million Plata 2016 Main Process Agrana Austria N/D

Source: Deloitte’s elaboration based on Mergermarket & Thompson Reuters information.

In Argentina, the financial services industry -under the category “financial intermediation and other services” – accounted for 3,8% of GDP in 2015, according to the Instituto Nacional de Estadística y Censos (INDEC). Currently, the industry employs about 164,000 workers, or 2,5% of the registered labour force, in line with the Ministry of Labour. There is scope for substantial growth in banking in the country in the medium term given a population of just over 43M, high per-head incomes (by comparison with much of the rest of Latin America) and very low level of private-sector credit as a percentage of GDP.

Argentina in the Region - 2016

Argentina Brazil Chile Colombia Mexico Peru

Deposits/ 29,2 109 54,4 35,6 28,1 74,6 GDP

Loans 75.034 921.988 217.894 146.558 201.163 70.161

Financial 105,2 669,6 568,9 336,2 262,3 211,4 Assets/ GDP

Deposits over GDP

100,0

80,0

60,0

40,0

20,0

0,0 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F

Argentina Brazil Chile Colombia México Perú

Source: BCRA, World Bank, EIU.

Financial Assets over GDP (% of GDP) 800 700 600 500 400 300 200 100 0 2010 2011 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F 2021F Argentina Brazil Chile Colombia México Perú Financial Regulation

Argentina has multiple regulators for different types of financial firms: • The Banco Central de la República Argentina (BCRA) is responsible for the oversight of Banks and finance companies. In addition it is responsible for the monetary policy, the payment system, overall financial stability and the issuance of notes and coins. • The Superintendencia de Seguros de la Nación (SSN) provides oversight for primary insurers, reinsurers and agents. • The Comisión Nacional de Valores (CNV), supervises securities and derivate markets, brokers and investment funds.

Industry Subsectors

Main Players Amount Foreign Domestic Financial 83 Entities

Insurance 184 Companies

Asset Managers 814 (funds)

Specialty 200 aprox. Financing Companies

Source: BCRA, EIU.

A programme of policy adjustment is ongoing and will reduce economic distortions. However, up to now, banks are still affected by a weak economy and high nominal interest rates. Credit remains low as a percentage of GDP, at an estimated 13% over GDP in 2015. Growth in credit to private sector remains high in nominal terms, and negative in real terms due to high inflation registered in October 2016. Personal lending had also rapid growth (44% year to year) from Ahora 12, an Interest-free 12-month credit plan announced in 2015. Currently revamped into Ahora 18 in order to boost consumption. Total Loans (US$ Bn) Total Deposits (US$ Bn) 200 100 80 150 60 40 100 20 50 0 0 2014 2015 2016 2017F 2018F 2019F 2020F Time & Savings Deposits ST Loans LT Loans Current-Account Deposits

Lending Interest Rate (%) Deposit Interest Rate (%) 35 31,2 30 30 25,8 24,3 24 24,9 25 20,4 21,2 25 18,8 20 17,1 16,5 20 16,5 14,1 14,9 15 15 12 10 10 5 0 5 0 2012 2013 2014 2015 2016 2017F2018F

Argentinians are modest users of bank accounts. Around 50% of the adult population had an individual or shared account at a formal financial institution in 2014, according to the World Bank. Even though 19% of those surveyed, reported that they had borrowed money, just 8% received loans from financial institution while another 6% had borrowed from family. In the same way though 23% of respondents said that they had saved money, only 4% did so at a financial institution.

Source: BCRA. IMF, EIU.

Main Players Concentration in the banking sector is high. By the end of 2015, the top five Banks represented over 55% of the market in terms of deposits. The top ten Banks over 70%. In terms of assets, the largest domestic Banks are the state-owned: Banco de la Nación Argentina, which accounts 25,5% of total assets, the private Banco de Galicia y Buenos Aires (7,5%) and the Buenos Aires province-owned Banco de la Provincia de Buenos Aires (7,4%). The main foreign Banks are Spanish-owned Banco Santander Río (8,3% of total assets) and BBVA Banco Francés (5,9%), HSBC (UK, 3,8%), Banco Patagonia (Brazil 3,2%), Industrial and Commercial Bank of China (China, 3,2%), Citibank (US, 3,2%) –recently acquired by Santander Río -, and Banco Itaú (Brazil, 1,2%). While the new government focuses on ironing out some of the macroeconomic distortions, there will be significant scope for M&A activity.

Ranking Santander Río Galicia y Buenos Aires Francés SA Macro SA HSBC Bank Credicoop Coop. Patagonia SA Industrial Citibank Hipotecario Assets Superville SA Loans Prov. De Córdoba Nuevo Santa Fe SA Deposits San Juan SA Itau Argentina Comafi SA La Pampa SEM Nuevo Entre Ríos Banco Industria Santiago del Estero SA Otros 0 10.000 20.000 30.000 40.000 50.000 60.000 70.000 80.000 90.000100.000

Source: BCRA.

The insurance market is still small and remains highly fragmented. There were 186 insurance companies in service by the end of 2016. The high levels of GPD per head in the past decade have improved penetration of insurance services in the local market. There has been rapid growth in premiums in recent years, according to the Superinendencia de Seguros de la Nación (SSN): premiums rose to AR$211.000M in June 2016, representing year-on-year growth of 38%. As share of GDP, premiums represent around 3%, which is well below the OECD average of 8% of GDP and suggests significant scope for catch-up with mature markets.

Main Subsectors

Property Personal Retirement Life Insurance Insurance Insurance Insurance

Issued Premiums per Subsector (Q of Premiums)

300.000

211.027 250.000

200.000 153.321

150.000 108.913

Millions 80.626 100.000 59.388 45.006 33.396 50.000

0 2010 2011 2012 2013 2014 2015 2016 Property Personal Life Retirement

Source: Superintendencia de Seguros de la Nacion.

Property Insurance Companies – 2016 (by Premium in AR$)

Fed. Patronal 13.946 Caja Generales 9.481 Sancor 7.066 Allianz 6.628 San Cristobal 6.306 B. Rivadavia 5.326 Total Premiums: QBE Bs As 4.841 AR$ 117.189 M Segunda 4.463 Zurich 4.366 Amount of Mercantil Andina 3.960 Companies: 109 Provincia 3.767 Nación 3.746 Top15 Share: Meridional 3.588 72% Royal & Sun Alliance 3.559 MAPFRE 3.533 Others 32.613 -5.000 5.000 15.000 25.000 35.000 Millions Personal Insurance Companies – 2016 (by Premium in AR$)

MetLife 2.224 Caja Generales 2.199 Galicia 2.074 Cardif 1.964 Nación 1.862 Sancor 1.784 Total Premiums: Provincia 1.473 AR$ 27.696 M BBVA Consolidar 1.311 Zurich Santander 1.191 Amount of CNP 752 Companies: 84 ACE 664 Assurant 657 Top15 Share: Caruso 628 72% Fed. Patronal 586 Opción 539 Others 7.788 0 10.000 20.000 30.000 Millions

Source: Superintendencia de Seguros de la Nacion.

Life Insurance Companies - 2016 (by Premium in AR$) BHN Vida 1.383 Prudential 977 HSBC Vida 935 Zurich International Life 846 Origenes Vida 660 SMG Vida 577 Total Premiums: MAPFRE Vida 509 AR$ 8.314 M Binaria Vida 357 Provincia Vida 305 Amount of Instituto Salta 299 Companies: 36 Segunda Personas 294 Top15 Share: Qualia 254 95% Plenaria 170 Mañana 157 Tres Provincias 153 Others 438 -5.000 5.000 15.000 25.000 35.000 Millions Retirement Insurance Companies – 2016 (by Premium in AR$)

Estrella Retiro 2.524 Nación Retiro 337 Orígenes Retiro 225 Segunda Retiro 144 Total Premiums: HSBC Retiro 136 AR$ 3.581 M San Cristobal Retiro 90 Amount of Binaria Retiro 52 Companies: 13 Inst. Entre Ríos Retiro 39 Credicoop Retiro 24 Top15 Share: 100% MetLife Retiro 5 SMG Retiro 4 Fed. Patronal Retiro 1 Galicia Retiro 0 -5.000 5.000 15.000 25.000 35.000 Millions Source: Superintendencia de Seguros de la Nacion.

Labour Risk Insurance Companies - 2016 (by Premium in AR$) Prevención ART 10.905

Galeno ART 10.105

Provincia ART 9.319

Experta ART 7.664 Total Premiums: Asociart ART 5.458 AR$ 53.889 M

Segunda ART 4.029 Amount of Swiss Medical ART 3.812 Companies: 12

Berkley ART 943 Top15 Share: 100% Omint ART 822

Liderar ART 384

Others 449

-5.000 5.000 15.000 25.000 35.000 Millions

Source: Superintendencia de Seguros de la Nacion.

Argentina’s fund-management industry was busted by the 2001-2002 crisis, and afterwards, in 2008, by the time the government nationalized the system of private pension funds. The Argentinian mutual-fund segment is smaller than the now-extinct pension-fund market: around U$S17Bn under management - much less than in other Latin American countries. Only around 150k Argentines (over a 43-million population) invest in mutual funds, compared with 20M investors in Brazil. Most investments are in money-market and bond funds, with only a short percentage of assets dedicated to shares.

Top Ten Mutual Fund Managers in Argentina

Bancarized Non-Bancarized Local Foreign Local

Source: Deloitte’s analysis based on EIU and CNV.

Top ten change agencies 2014

Number of 13,9 Agency operations 13,9 Libres Cambio S.A. 13,861 11,2 Andina Internacional Cambio y Turismo S.A. 13,859 10,7 Transatlántica S.A. 11,161 9,3 Cambio García Navarro, Ramaglio y Cía S.A. 10,726 9,0 Cambio, Excursiones, Turismo Columbus S.A. 9,281 6,9 Montevideo Cambio y Turismo S.A. 9,035 6,7 Tourfé S.A. 6,942 6,7 Valuar S.A. Agencia de Cambio 6,707 Thaler Agencia de Cambio S.A. 6,659 6,2 García Navarro y Cía S.A. 6,204 Others 74,820

Top ten credit cards emisors 2014

Number 7,0 Debt > 90 Agency of credit days cards 1,7 Tarjeta Naranja S.A 7.034.800 9,46% 1,3 CMR Falabella S.A 1.712.420 5,57% 0,9

Cencosud S.A 1.322.979 5,86% 0,7 American Express Argentina S.A 908.343 1,08% 0,5 Tarjetas Cuyanas S.A 718.609 12,06% 0,4 Tarshop S.A 491.270 18,48% 0,3 Gramit S.A 377.840 7,83% Tarjetas del Mar S.A 321.985 9,4% 0,3 Italcred S.A 293.550 51,72% 0,3 Sistema de Crédito de Entre Ríos S.A 278.324 1,84% 2,2 Others 2.238.414 -

Source: BCRA.

Deal Volume 20 40% 14 10 10 10 7 20% 4 3 0 0% 2012 2013 2014 2015 2016 2017 Q1 Deal Volume Participation on Period Activity Acquirer’s Origin – 2016 (Volume)

North America Europe 10% 10%

Latin America 80%

Recent Deals

Year Target Acquirer Acquirer Deal Ticket Origin (US$ M) 2017 Banco Investor Group Argentina N/D Interfinanzas 2016 Citi Argentina Santander Río Spain (Retail Bank) 2016 RSA Insurance Suramericana Colombia 615 Latin America 2016 Tarjetas del Investor Group Argentina 15 Mar 2016 MBA Lazard Lazard France N/D Asset Mgmt

Source: Deloitte’s analysis based on Mergermarket & Thompson Reuters information.

Industry Highlights Argentina is one of the leading countries in the commercialization of soybeans, wheat and meat. In addition to that, Argentina is also an important producer of wool and wine. Nevertheless, the major part of wine consumption is done domestically. - In Argentina, 20.3 million of hectares are devoted to the production of soybeans. The states where the majority of the this commodity is grown the regions of Buenos Aires, Cordoba and santa Fe. - Sugarcane and citrus plantations are also largely present in Argentina. Indeed, the citrus were generally introduced as a protection against the instability of the sugar market. The Jujuy and Salta provinces are largely used to the growth tobacco. Moreover, The west of the Paraña River is mainly utilized to cultivate cotton. - Livestock are traditionally reared in the Pampas province, it is the most renowned and valuable commodities in Argentina. Indeed, the local producers have been able to adapt quickly and accurately to the riskiness of the market. They switched between breeds when one has a better yield and change their way of feeding their production by substituting the Alfalfa feed with sorghum grain to have a better meat. - Additionally, Corrientes and Entre Ríos are also know for their cattle raising production following those of the pampas. The Criollo cattle is manly reared in the Chaco province. Finally, the majority of the sheep are produced in Patagonia, the south region of Argentina.

Industry Subsectors Activity Main Players Soybean, corn, wheat, Cereals & barley, Oilseeds sunflower, production sorghum, peanut Animal Animal raising Raising & and animal Animal protein Protein production Production Fruit Apples, Pears Production & Citric Nutritional Animal products for Feed animal feed Sugar Sugar production

Agriculture Activity/GDP (%)

10 8,45 8,29 7,95 8 6,85 7,19 6 6

0 2010 2011 2012 2013 2014 2015

Weather Conditions Argentina's climate is generally temperate but there are major regional variations due to its length. from the extreme heat in summer of the northern Jujuy and Salta regions, through the pleasant climate of the central pampas, to the sub Antarctic cold of Patagonia’s glacial regions. Throughout the country January is the warmest while June and July are the coldest.

Average Temperature (average °C - by month)

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

25 22 22 19 15 12 12 14 15 18 21 23

Average Precipitation (average Mm and days - by month)

Ja Feb Mar Apr Ma Jun Jul Au Sep Oct No Dec n y g v Mm 10 90 90 100 80 30 50 50 50 80 80 90 0 Days 9 8 9 10 7 9 8 8 8 11 10 9

Source: Global Economy, Ministerio de Agricultura, Ganadería y Pesca, Weatherbase.

Production (M of Tns) 100 Growth AR: 2,0x 50 BR: 2,8x

0 PY: 2,9x PE: 1,0x UY: 117x Argentina Brazil Paraguay Peru Uruguay

Yield (000 Tns/Ha) 2017 3,0 Yield 2,0 AR: 2,9 1,0 BR: 3,3 PY: 2,8 0,0 PE: 1,5 UY: 2,5 Argentina Brazil Paraguay Peru Uruguay

Exports (M of Tns)

60 Growth 40 AR: 1,2x 20 BR: 4,0x 0 PY: 2,5x PE: - UY: 212x Argentina Brazil Paraguay Peru Uruguay

Source: USDA.

Production (M of Tns) 20 Growth 15 AR: 0,9x 10 BR: 4,1x 5 PY: 2,9x 0 PE: 1,0x UY: 2,5x

Argentina Brazil Paraguay Peru Uruguay

Yield (000 Tns/Ha)

4,0 2017 Yield 3,0 AR: 3,3 2,0 BR: 3,2 1,0 PY: 1,9 0,0 PE: 1,5 UY: 3,7

Argentina Brazil Paraguay Peru Uruguay

Exports (M of Tns) Growth 10 AR: 0,9x 5 BR: 466x PY: 6,7x 0 PE: 4,3 UY: 55x

Argentina Brazil Paraguay Peru Uruguay

Source: USDA.

Production (M of Tns) 100 Growth 80 AR: 2,5x 60 BR: 2,3x 40 20 PY: 2,7x 0 PE: 1,2x UY: 1,7x

Argentina Brazil Paraguay Peru Uruguay

Yield (000 Tns/Ha) 2017 10 Yield 8 AR: 8,4 6 BR: 5,4 4 2 PY: 4,6 0 PE: 3,2 UY: 5,2

Argentina Brazil Paraguay Peru Uruguay

Exports (M of Tns) Growth 30 AR: 2,7x 20 BR: 5,1x 10 PY: 4,1x 0 PE: 2,5x UY: 17,5x

Argentina Brazil Paraguay Peru Uruguay

Source: USDA.

Industry Footprint in Position Company Origin Brands Argentina (Lead-Mid- Small) United- Grains/ Cargill Lead States Oilseeds/ Flour Wheat/ United- Bunge Soybean/ Corn/ Lead States Sunflower Grains/ Louis Dreyfus Oilseeds/ France Lead Company Dairy/ Rice

Beans/ Archer Daniels United- Proteins/ Rice/ Middle Midland States Soy

Crop/ Oilseeds/ Nidera (COFCO) China Middle Oil Crops/ Rice/ Adecoagro Argentina Lead Dairy Crops/ Cresud Argentina Sugarcane/ Middle Dairy Corn/ Soy/ Grupo Los Argentina Sunflower/ Middle Grobo Crop

Molinos Juan Argentina Starch/ Flour Small Semino S.A

Morixe Argentina Wheat/ Cereals Small Hermanos S.A

Lartirigoyen y Argentina Crop/ Oilseeds Medium Cía

Asociación de Crop/ Oilseeds/ Cooperativas Argentina Medium Storage Argentinas

Agricultores Crop/ Oilseeds/ Federados Argentina Medium Storage Argentinos

Source: USDA.

Cattle Heads (Q of heads) 200 150 100 50 0

Argentina Brazil Uruguay

Total Slaughter (Q of heads) 40 Slaughter/ 30 Cattle 20 AR: 25% 10 BR: 20% 0 UY: 18%

Argentina Brazil Uruguay

Beef Exports (M of Tns) 2000 1500 1000 500 0

Argentina Brazil Paraguay Uruguay

Source: USDA.

Beef Production & Consumption (000 of Tns) Drivers 3000 Prod: slow growth 2500 because producers will try to grow their 2000 herds in the ST to 1500 increase output and 1000 take advantage of 500 export market. 0 Cons: declining due to health trend and increases in price.

Beef Production Beef Consumption

Pork Production & Consumption (000 of Tns) Drivers Prod: growth to the 500 expanding of the 400 domestic market – 300 less imported 200 product. 100 Cons: it is expected 0 to outperform poultry levels – which gained market due to lower prices.

Pork Production Pork Consumption

Poultry Production & Consumption (000 of Tns) Drivers Prod: will growth as 3000 it is the cheaper 2500 meat, it can benefit 2000 from the beef 1500 consumption slow 1000 down. 500 Cons: it will benefit 0 from high beef prices.

Poultry Production Poultry Consumption

Source: USDA, BMI, EMIS.

Industry Footprint in Position Company Origin Brands Argentina (Lead-Mid- Small) Inversora Juramento S.A Livestock Argentina Lead INVJ raising Carlos Casado S.A Livestock Argentina Middle raising Livestock Cabaña Pilagá Argentina raising/ Middle Breeding Cresta Roja Argentina Poultry Lead Processing Meat (Beef) RioPlatense Argentina Lead Processing Meat (Beef) Frigorífico Gorina Argentina Lead Processing

Meat (Beef) BRF Brazil Lead Processing

Meat (Beef) Ciaber (Compñía Bernal) Argentina Middle Processing Meat (Beef) Processing – JBS Brazil Hamburger/ Lead Sausage Producer Meat (Pork) Processing – Frigorífico Rydhans Argentina Lead Sausage Producer Meat (Pork) Processing – Paladini Argentina Lead Sausage Producer Meat (Beef) Arre Beef Argentina Lead Processing

Source: Company’s Website.

Apple Production (000 Tns)

1000

500

Argentina Brazil Uruguay Apple Exports (000 Tns) 300 250 200 150 100 50 0

Argentina Brazil Uruguay Pears Production (000 Tns)

800 600 400 200 0

Argentina Brazil Source: USDA.

Argentina Lemons Production (000 Tns)

1500 1200 900 600 300 0

Argentina Lemons Exports (000 Tns)

400 300 200 100 0

Argentina Source: USDA.

Footprint in Industry Position Company Origin Brands Argentina (Lead-Mid-Small)

San Miguel Argentina Citrus Lead

Costa Limay Argentina Apple/ Pear Middle

Cosur S.A. Middle Argentina Apple/ Pear Grupo Battaglio

Cofrutas SA Argentina Fruits/ Flowers Middle

Argesa Argentina Citrus/ Fruits Middle Argentina

Dole Nat S.A. United States Fruits Lead

Fruits/ Canale Group Argentina Small vegetables

SA Veracruz Argentina Fruits/ Citrus Small

Tres Ases SA Argentina Peache/ Apple Middle

Via Frutta SA Argentina Apple Middle

Apple/ Citrics/ Expofrut Argentina Pear/ Grapes/ Lead Onion/ Garlic

Ecofrut Spain Apple/ Pear Middle

San Formerio Apple/ Pears/ Argentina Middle S.R.L Peaches Patagonian Fruits Trade Argentina Apple Middle S.A.

Moño Azul Argentina Apple Middle

Los Juanes S.A. Argentina Apple/ Pear Middle

Kleppe S.A. Argentina Apple/ Pear Middle

Source: Company’s Website.

Company Origin Footprint in Main Brands Industry Position Argentina (Lead-Mid-Small)

Ruminants, Swine Provimi USA Middle & Poultry Ruminants, Swine, Alltech Argentina Middle Pet & Poultry Ruminants, Swine Biofarma Argentina Leader & Poultry

Ruminants & Brouwer Argentina Small Swine

Ceres Argentina Ruminants Middle

Ruminants, Swine, Cladán Argentina Small Pet & Poultry DSM Ruminants, Swine, Holandesa Middle Pet & Poultry Swine, Pet & Ensol Argentina Middle Poultry Nutrefeed, Argentina Ruminants Small

Ruminants, Swine Nutriser Argentina Small & Poultry

Ruminants, Swine Vetifarma Argentina Middle & Poultry

Metrive Argentina Pet & Ruminant Middle

Royal Canin USA Pet food Leader (Grupo Mars)

Purina (Nestlé) Switzerland Pet food Leader

Gepsa Argentina Pet food Middle

Agroindustrias Argentina Pet food Middle Baires SA

Garay SRL Argentina Ruminants Middle

Agrocereales Argentina Swine/ Ruminants Middle Argentina SRL

Production & Consumption (000 of Tns)

2000 1500 1000 500 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F Sugar Production Sugar Consumption Main Players

Industry Footprint in Position Company Origin Brands Argentina (Lead-Mid- Small)

Sugar and Ledesma Argentina Lead Alcohol - Retail

Ingenio San Sugar and Argentina Middle Isidro Alcohol

Atanor Sugar and US Middle (Albaugh) Alcohol

Tabacal Sugar and Argentina Middle Agroindustria Alcohol - Retail

Ingenio J. Minetti (Arca Mexico Sugar - Middle Continental)

Source: USDA, Company’s Website.

Deal Volume & Value 10 9 20% 6 5 5 4 10% 2 1 0 0% 2012 2013 2014 2015 2016 2017 Q1 Deal Volume Participation over Period Activity

Acquirer’s Origin - 2016 (Volume)

Asia & Oceania 25% Latin America 75%

Recent Deals

Acquirer Deal Ticket Year Target Acquirer Origin (US$ M) Aceitera 2017 Bunge Ltd US N/D Martinez Grupo Los VSAP 2016 Argentina 75 Grobo Agriservices LP

2016 Rasic Hnos Proteinsa Argentina 121

Black Bamboo Marfrig (One 2016 (Foresun China 75 Asset) Group)

2016 LDC Semillas Galba SA Argentina N/D

Source: Deloitte’s elaboration based on Mergermarket & Thompson Reuters information.

© 2017 Deloitte & Co. S.A. All rights reserved. Industry Snapshot Telecommunications, Media & Technology Telecommunications, Media & Technology Industries Overview Industries Highlights Telecommunications: Although Argentina’s telecommunications infrastructure is generally developed, opportunities to increase coverage and speed remain: • Argentina has nationwide broadband access but internet speeds are 15% lower than those of regional peers. • Argentina’s mobile phone penetration is high (141%) but coverage is not uniform across the country and is often poor due to insufficient cell tower coverage. The government has made cell and internet access expansion development a priority which is opening a number of opportunities for private investment Media: Argentina in one of the leaders in the South America media market, under favorable legislation, the industry has consolidated and a large number of companies have appeared. Technology: • The software and IT services sector in Argentina is made of 3,800 firms, ranging from globally consolidated multinationals to a growing network of highly innovative small and medium-sized local enterprises. Argentine companies’ global projection in this sector is expanding as one quarter of its production is exported to international markets. • As Latin America is becoming one of the most attractive E-commerce acceptance market around the world, the E-commerce sector in Argentina is growing rapidly and the country is expected to become a regional leader in this area. Industries Subsectors

Main Players Industry Foreign Domestic

Telecomunications

Media

Technology

Source: National Investment & Trade Promotion Agency.

• The expansion of Argentina’s cell coverage presents Deployment Mobile a USD 2 billion investment opportunity. Coverage • There are three top players in the mobile telephony segment—Claro (owned by Mexico's América Movil), Telecom Personal (a subsidiary of Telecom Argentina), and Movistar (owned by Spain's Telefónica). Each operator holds about one-third of market share. • Telecoms investment are expected to grow at an average rate of 12.9% a year during the five-year forecast period, to reach AR$ 64.7 billion (or US$ 2.8bn) by 2021. • Mobile revenue growth will also be supported by strong growth of the smartphone market in Argentina. In 2016, only 37% of the population owns a smartphone – considerably low against the region. • In Argentina there are approximately 15,000 active cell sites (mobile towers), this number is meant to double in order to ensure an acceptable quality of service. The Government will facilitate this development. • There is ample room for Neutral Infrastructure Operators (tower builders/operators) to enter this market as neutral operators own 62% of cell sites worldwide vs. 0% in Argentina. Mobile • Growth in mobile telephony will be led by data industry transmission and mobile broadband. Substantial contributes to investments have been undertaken by telecoms 12.9% companies to allow them to develop their value- 3.7% Average of GDP added services, including mobile data, and, expected ultimately, increase average revenue per user. growth rate per year 65,000 Mobile Subscriptions (per 100 people) during the jobs next 5 years directly 160 supported 140 by mobile 120 ecosystem 100 80 60 40 20 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Source: EIU, National Investment & Trade Promotion Agency, GSMA Intelligence.

• Telefónica de Argentina (a subsidiary of Spain's Telefónica) and Telecom Argentina remain the two dominant forces in the fixed-line market, together accounting for about 90% of total fixed lines. The remaining 10% is divided between co-operatives and incoming operators. • Elsewhere in Latin America the development of triple-play and quadruple-play services has helped to support take-up of fixed-line telephony to some extent. This has not been the case in Argentina, where persistent disputes between the government and Grupo Clarín, the country's dominant media conglomerate, have prevented progress in this area. However, the more business-friendly government in office is expected to allow progress to be made on this subject. • Despite these changes, new investment will be required to improve bandwidth in order for the triple-play and quadruple-play markets to grow significantly.

Fixed Telecommunications Revenues (US$ M)

3,5 3,456

3 Millions

2,5 2,257

2 1,8695 1,863

1,5049 1,4121 1,4147 1,5 1,3583 1,312

0,5

0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Source: EIU, National Investment & Trade Promotion Agency.

• The expansion of Argentina’s fiber optic network Federal Fiber Optic over the next 2 years presents a US$ 307 M Network investment opportunity: • US$ 240 M in fiber optic deployment • US$ 67 M in fiber optic enabling equipment • The expansion of the fiber optic network aims to connect 1.2K small towns across the country and to ensure access to quality broadband for a further 29 million Argentines within two years, lowering the cost of internet access. • The current fiber optic network covers more than 32,000 km but only 30% of the fiber is active. • The Federal Internet Plan network will use ARSAT’s fiber optic network as a provider of data transport services at whole sale level and provide access to local internet service providers, cooperatives, municipalities and SMEs. • There is much scope for catch-up in internet penetration and the expansion of fibre-optic broadband in the five years forecast period, given that prices continue to fall as new services for both businesses and consumers develop, and as take-up of mobile broadband technology increases. • Even though Argentina is the regional leader in terms of fixed broadband penetration rates, the country lags behind in terms of internet 16.6% connection speeds. Broadband penetration, the highest in the region Internet Penetration (per 100 people)

90 78,6 79,6 74 76,7 80 69,4 70,9 64,7 70 59,9 60 55,8 50 40 30 20 10 0 2012 2013 2014 2015 2016 2017F 2018F 2019F 2020F

Source: EIU, National Investment & Trade Promotion Agency.

Main Players in the Mobile Sector

Market Company Origin Brands Share Claro Mexico 33%

Movistar (Teléfonica Argentina) Spain 32%

Telecom Personal (Telecom Argentina) Argentina 32%

Nextel (Grupo Clarín) Argentina 3 %

Main Players in the Fixed Sector

Market Company Origin Brands shares

Telecom Argentina Argentina 45 %

Teléfonica Argentina Spain 45 %

Others - 10 %

Main Players in the Internet Sector

Market Agency Origin Brands share Teléfonica Argentina Spain 35 %

Arnet (Telecom Argentina) Argentina 33 %

Fibertel (Cablevisión – Grupo Clarín) Argentina 31 %

Others - 1%

Source: EIU, National Investment & Trade Promotion Agency.

• Argentina in one of the leaders in the South America media market, under favorable legislation, the industry has consolidated and a large number of companies have appeared; the accelerated growth of Internet sites and availability of broadcasting media online offers more possibilities to grow in the near future. • There are more than 150 daily newspapers in the country, more than 100 commercial radio stations and more than 16 million Internet users. • Argentina reportedly has one of the world’s highest viewing rates for cable TV and the second-highest number of Web surfers in South America. • Argentina’s main news publications are: Clarín, La Nación, Crónica, El Cronista Commercial, Página 12, Diario Popular and La Prensa. • International news agencies covering Argentina include: New York Times, Reuters, Yahoo and BBC News. • The three most important news agencies in Argentina are: • The state agency Telam, entered in a restructuring. • DYN run by major newspapers, is partly own by the two biggest newspapers Grupo Clarín and La Nación. • Noticias Argentinas (NA), belongs to the group that controls Diario Popular. • These national agencies supplies information to national and provincial media.

Main Players (1/2)

Company Origin Activity Brands

TV, radio, press, Grupo Clarín Argentina publishing

Grupo Argentina TV, Radio América

Sports TV Torneos Argentina broadcasting

La Nación Argentina Press, TV, Radio

Grupo Argentina Press Ambito

Turner Entertainment, Broadcasting USA production and System distribution

Source: CACE, Forbes Argentina.

Main Players (2/2)

Company Origin Activity Brands

DirecTV USA Satellite television

The Walt Disney TV, radio, publishing, USA Company films and music

Albavisión USA Television and radio

Televisa Mexico TV, radio and publishing

Source: CACE, Forbes Argentina.

• The software industry in Argentina is one of the economic sectors with great stability and continuous growth. • The IT sector has had one of the most dynamic performances between the non-traditional sectors in Argentina in recent years. Between 2002 and 2012, the sector’s revenue in US$ grew 17% per year, while exports expanded by 20% per year. Currently, foreign sales 25% of the represent 25% of the sector’s revenue. production is • Employment also increased substantially, the industry exported. employs almost 69,000 people, more than half of which are professionals with tertiary or university degrees. • There is a number of leading multinational companies operating locally which reflect the international renown for the competitive advantages offered by the local market. • Local small and medium-sized companies’ innovative and high-quality solutions are earning increasing international recognition, reflected by the expansion of their activities abroad and new markets. 85.000 • Software and IT service companies located in Argentina’s students in large urban centers enjoy the benefits of the ongoing 79 IT synergy and collaboration between leading international education firms, local companies and universities. centers • There are diverse IT poles and technology clusters that offer an ideal scenario for the development of profitable high-potential projects. • Argentina ranks among the top 13 countries in the world in terms of the effectiveness of its processes in the areas of software development, operations and maintenance. More than • The Spanish-speaking market, where Argentina is already a 3.800 firms leader, offers additional possibilities to develop software operating in and IT services in Spanish. Likewise, e-government, the local logistics, distribution and trade solutions, as well as market tourism, all have high growth potential for the development of applications and services within the country. LATAM Technology Unicorns

Source: EIU, National Investment & Trade Promotion Agency.

• The purchase system of imported products "door to door" is limited as a result of taxation (except books), in addition to the applying restrictions according to AR$ 68,5M is the the amount and quantity of annual shipments. total Argentinian e- • A new Code with specific and advanced legislation Commerce market regulating e-Commerce in the area of consumer law envisages the creation of an entity of control of the competition and electronic consumer defense to address the problems of the e-Commerce sector in 11,2M people were the country. active o e-Commerce • The Argentinian E-commerce market has not reached in the past 6 months the same maturity than e-Commerce markets in Europe or US. LATAM and Argentinian e-Commerce markets are still in the “growth” period. • 68% of sales on the e-Commerce market in Argentina 98% of adult are concentrated in the Gran Buenos Aires region. Internet users have already purchased online

About MercadoLibre: the largest national Unicorn • MercadoLibre hosts an e-Commerce platform where sellers set up online businesses that auction off items to registered buyers. The marketplace of MercadoLibre is however only a part of the company’s portfolio that includes other services such as MecadoPago, its integrated payment system, or MercadoEnvios, its shipping operations. • The growth of MercadoLibre has been exponential. The company went from having 66 million registered users in 2011 and a net income of US$ 76.8M to a net income of US$ 106M and more than 145 million registered users in 2016. • Since 2001, MercadoLibre entered into a strategic alliance with eBay, which holds about 18% of the company's stock.

Founded: May 8, 1999 (17 years ago) Headquarters: Buenos Aires, Argentina Employees: 3,500 Net Income: U$D 105.8M Argentinian E-commerce market share: 61%

Source: EIU, Forbes Argentina, CACE, National Investment & Trade Promotion Agency, GSMA Intelligence.

Main Players

Company Origin Footprint in Argentina

Mercado Libre Argentina E-Commerce

Globant Argentna IT and Software development

OLX Argentina Online marketplace

Despegar.com Argentina Online travel agency

Google USA Internet, computer software and hardware

Cloud computing, cognitive computing, IBM USA information technology

Amazon USA E-Commerce

Intel USA Semiconductors

Computer software, Computer hardware, Microsoft USA Consumer electronics, Digital Distribution

Siemens Germany Conglomerate

Source: EIU, National Investment & Trade Promotion Agency, GSMA Intelligence.

Deal Volume & Value

30 30%

20 20%

10 10%

0 0% 2011 2012 2013 2014 2015 2016 2017

Acquirer’s Origin (Volume)

North America Europe 43% 7%

Asia & Oceania 1% Latin America 50% Africa & ME 0%

Recent Deals Year Target Acquirer Acquirer Deal Ticket Origin

FinTech 2016 Telecom Argentina Mexico 812 Group Sofora FinTech 2016 Mexico 550,60 Telecomunicaciones SA Group

2016 Nextel Comunicaciones Grupo Clarín Argentina 178

Private 2017 Grupo América Argentina - Investor

Source: Deloitte’s elaboration based on Mergermarket & Thompson Reuters information.

© 2017 Deloitte & Co. S.A. All rights reserved. Industry Snapshot Energy Energy Industry Overview Industry Highlights Prevalence of subsector Argentina has an immense capacity for investments within E&R in energy production; from large shale oil and Argentina in 2016- 2017 gas resources, to unique favorable winds, (Volume) and everything in-between. Argentina's energy sector is characterized by the extraction and production of energy from coal, oil and gas, electricity, biofuels, nuclear, 19% and alternative renewable energy sources. 23% In the past, the energy supply has been constrained by ongoing tariffs and energy subsidies. The country’s past of economic crisis and recurring devaluation periods, combined with the nationalization of the country's largest oil and gas producer, YPF, 31% in 2012, has resulted in a lack of interest 27% from investors in Argentina's energy potential. However, the new Administration, is determined to liberalize tariffs and boost investment in the sector. Although the long term goal is to eliminate price distortions, Renewable Mining Oil & Gas Electricity Macri’s Administration wants to maintain prices high to stimulate investment in the medium term. Industry Specifics

Subsectors Activity

Regarding oil & gas, the value chain is composed of; upstream activities, meaning the exploration, extraction and production, midstream activities, which include Oil & Gas transportation, storage and wholesale marketing, and lastly, downstream activities, which include the refining of petroleum crude oil, processing and purifying of raw natural gas, as well as the commercialization and marketing of these. The electricity subsector is the divided between Generation, Transmission and Electro Distribution of power. The consumption is then divided between Residential, 40%, Industrial, 30%, and Commercial, 25%. Energy is considered renewable when it is collected from sources that are sustainable and most importantly, that they are non-depletable, and thus, Renewable replenished naturally within short period of times. A few of the resources used to Energy generate power that are considered renewable are sunlight, wind, rain, currents, and geothermal heat. Mining is the process of first prospecting for the possible presences of ores underground, then extracting large amounts of ores in rock, deep underground, Mining dressing the ore, and finally, smelting the ore. Mining opportunities in Argentina include Lithium, Boron, Silver, Gold, Copper, Lead, Uranium, Nickel, Potash and Zinc.

Source: EIU, National Investment & Trade Promotion Agency.

Opportunity Background Argentina is Latin Americas largest producer of natural gas, holding the worlds second largest shale gas reserves, behind China. Argentina is also the regions fourth largest oil producer, behind Venezuela, Mexico and Brazil. Natural gas is the country’s main source of energy, and it is their main form of electricity production, it depends on natural gas for 50% of their energy needs.

Opportunity Detail (USD BN)

Vaca Murerta 20,0 (per year)

Off-Shore 5,0 7 basins totalling 500 O&G thousand sqkm

O&G Related 2,3 Infrastructure Exploration Potential

Basins in Production Industry Highlights

Country Outlook Recent Activity Oil Argentina houses 24 basins, under land The most recent regulatory norms and water, of which 5 are in production. establish the duration of the new 4th global reserve of shale oil. Capacity to concessions. 25 yrs for conventional refine 657,000 barrels per day. Large % basins, 35 yrs for non conventional and of demand is accounted for by the 30 yrs for offshore. 7000 million USD transport sector. announced investments in the 1st half of 2016.

Gas Abundant supply of natural gas, mainly China and Russia's national oil used in the production of electricity. companies, Sinopec and Gazprom, have Tariffs keep prices high. Consumption of signed a memorandum of understanding natural gas accounts for over 50% of with YPF to jointly develop shale from total energy consumption. Above global the same basin standards of 25%.

Biofuel Increased consumption of biofuels for the Open contracting for renewables: 65MW transport sector. Soybeans are being for Biomass and 15MW for Biogas. used as feedstock to produce biodiesel as a result of its position as the 3rd largest producer of soy.

Source: EIU, National Investment & Trade Promotion Agency.

Main Players

Company Origin Footprint in Argentina Market Share

YPF Argentina Oil & Gas - Fully integrated in the 43% market value chain: engaged in the share of exploration and production of oil and production of oil gas, and the transportation, refining, & gas and 58% in and marketing of gas and petroleum the petroleum products. segment. Pan Argentina Exploration and production of 18% market American hydrocarbons, as well as the refining share with Energy into gas and petroleum. regards to hydrocarbons.

Royal Netherlands Shell is engaged in the complete value Shell has 630 gas Dutch chain, upstream, midstream and stations in (Shell downstream of crude oil, gas, and Argentina, which Group) petroleum products. Shell is also sell around 2,800 offering liquefied petroleum gas (LPG). millions of litres per year. TOTAL France Involved in the exploration and Approximately production of oil and gas, refining and 26% of the share finally marketing and services. The of gas production. products produce include lubricants, LPG, fuels and fluids.

Pampa Argentina Participates in the natural gas 3.9bn market Energia upstream, created a integrated cap, 10.8% electricity company as well as being market share in integrated in the oil & gas value chain. power generation. (Recently bought Petrobras AR).

Axion Argentina- Possesses the third most important Represents Energy China refinery in the country. around 15% of Argentina’s refining capacity

Source: Company’s websites.

Opportunity Background Argentina constantly deals with power outages and inefficiencies. The country's power generation base is too expensive, due to the historical lack of competition. The country is ambitious to make sure that there is always sufficient power supply, and that the generation of it becomes much more environmentally friendly, all while lowering its costs. The country has received or allocated almost no investment in power generation over the last four years. In this time the demand for power has continued to grow, meaning that there is a lot of space for investment in this space. Argentina sources its power generation from various methods, including natural gas, renewables, hydroelectric (through multipurpose dams), thermal (thermal generation plants) and nuclear. 500 kv lines Opportunity Detail (USD BN)

Thermal 5

Power Grid 5

Nuclear 2,8

Industry Highlights

Country Outlook Recent Activity Electro Argentina is the third largest The current administration declared an energy power market in its region, after emergency state, starting from December 2015 up Brazil and Venezuela. Tariff until the end of 2017 in order to abolish freezes and high regulation have conservation policies and avoid further power constrained investment in power outages in Buenos Aires. The country expects to generation. Tariffs have begun to add 10 GW of gross capacity sourced from rise and will continue to until the renewable energy and an additional 8 GW of producers adjust to subsidy cuts. capacity from thermal heat generation by Nationwide projects to expand 2025.The first round of tenders was of 1.5 Bn in the capacity and increase the projects and was held in September 2016. The reach of the national electricity second round will be announced simultaneously grid are needed. with the first Round’s winners. Nuclear Argentina operates 3 nuclear Argentina is the first country in south America to energy plants that contribute to construct a nuclear energy plant. Currently 5% of the total energy building two additional plants. production.

Source: EIU, National Investment & Trade Promotion Agency.

Main Players

Company Origin Footprint in Argentina Capacity/ Market Share

Generates hydroelectric, Possess around the 15% of SADESA Argentina thermal and cogeneration the total electrical generation power. capacity in Argentina.

8% electrical capacity, owns Pampa Integrated value chain in Trasener (which operates Energia Argentina electrical generation from 100% of transmission, 67% S.A. natural gas. of Petrobras Argentina shares). 10 operating plants, with more that 3,590MW of AES Midstream in electrical Argentina capacity in 4 different Argentina generation. provinces (operates worldwide). Wholesale and transmission 100% market share in CAMMESA Argentina (with SADI). wholesale. Participates in the 75% of the market share in Edenor Argentina downstream activities of the distribution (owned by Pampa value chain. Energia) Holds around 9.5% of the Operates distribution and Endesa Spain country’s electrical generation transportation capacity.

Source: EIU, National Investment & Trade Promotion Agency.

Opportunity Background Argentina has the potential of producing electricity through hydro, wind and soy beans. The country counts on a law of renewable energies, law n° 27.191, requires that 20% of energy be sourced from renewable resources by 2025, meaning a 10 GW increase in renewable energy generation. The first round and second of tenders for Renovar (Renovar 1 and Renovar 1.5) were held, the results are as follows and sum to and estimate of USD 1.5 Bn. Future tenders will sum to an estimate of 13.5 Bn opportunity Results of Renovar 1 & 1.5 Tender (MW)

Wind 1365,4 Wind Energy

Solar 816,2 Biomass

Solar Biomass 80 Mini-Hydro

Hydroelectric 20

Industry Subsectors

Country Outlook Recent Activity Wind Argentina is one of the most fit countries in the Open tenders for world for wind energy production, approximately electrical renewables: 70% of its land exceeds the minimum efficiency 600MW for wind. standard. Positioning itself as the 3rd largest wind energy reserve in the world. Hydro Argentina has 4700 km of coast, offering excellent Open tenders for opportunities for hydro energy production. renewables: 20MW for hydro electro. Solar Argentina's northeast is considered one of the four Open tenders for places with largest potential of solar energy renewables: 300MW production in the world. Positioning Argentina as Solar energy. the 2nd largest solar reserve in the planet. Biofuel Increased consumption of biofuels for the Open tenders for transport sector. Soybeans are being used as renewables: 65MW for feedstock to produce biodiesel as a result of its Biomass and 15MW for position as the 3rd largest producer of soy. Biogas.

Source: EIU, National Investment & Trade Promotion Agency.

Main Players

Company Origin Footprint in Argentina Capacity/ Market Share

Abo Wind Denmark Leading wind energy Counts on 1000 MW of wind producer in Europe. energy in Argentina with more than 500 installations. Yacyreta Argentina National hydroelectric power 15% market share (highly Paraguay station and damn on the fragmented market). Parana river falls, between Paraguay and Argentina. Salto Argentina National hydroelectric power 15% market share. Grande Uruguay station and dam on the Uruguay river. 360 Argentina Fully integrated in the value Produces more than 80% of Energy chain for solar energy; from the total solar energy engineering, development, production in Argentina. construction and follow through. Emesa Argentina National company of the Three hydroelectric power province of Mendoza. plants, 6 solar energy parks and 1 wind power park. Enarsa Argentina National company dedicated Has a total of 152.1 MW of to energy production, from installed capacity, sourced oil and gas to renewables. from solar panels, hydroelectric power stations and wind mills around Argentina. Genneia Argentina Energy company focused on 77.4 MW of capacity installed renewable energy, specifically wind energy, as well as thermic energy and the commercialization of gas.

Source: EIU, National Investment & Trade Promotion Agency.

Opportunity Background Argentina is full of opportunities in mining. This sector has not been taken advantage of. 75% of high potential areas in mining in the country have not yet been exploited. Within the areas that are in concession, 44 projects, 90% of their areas are still in early stages of exploration. Opportunity Detail (#of projects per ore) 29 25 Lithium

12 Gold 7 6 3 3 3 2 1 1 Silver

Uranium

Copper

Industry Subsectors

Country Outlook Recent Activity

Argentina is the worlds third largest Lithium Americas, a Canadian miner producer of Lithium and it forms part of company, partnered with Ganfeng Lithium the lithium triangle with Bolivia and Chile. Lithium from China to build a 25,000 Argentina currently represents 15% of tonne per year processing plant to open total world production of 200,000 tonnes. by 2019.

National experts have released data Copper production is extremely stating that Argentina has the potential unexploited, with 200 thousand tons per Copper to produce 900 thousand tons of copper year. Argentina contributes 3.2% of the after the discovery of reserves of around global production of copper. 1,500 million acres.

Very little consumption of coal in Argentina. Sustained due to shortages in Strong environmental objections lead to Coal oil and gas for electricity production. very low expectations of growth in this Imports are around 95% of total line of energy production. consumption.

Argentina produces 55 tons of gold per The mining chamber of San Juan have year but it has the potential to produce up released data stating that there are gold Gold to 110 tons of gold per year, entering the mines containing more than 80 million top 10 of the global ranking of gold ounces of gold. production.

Source: EIU, National Investment & Trade Promotion Agency.

Main Players

Footprint in Capacity / Market Revenue Company Origin Argentina Share (USD) 17,500 tonnes of lithium Orocobre Australia Lithium extraction per year (expects to 22.31 M double it in 2018). A national union of mining companies in YMAD Argentina Argentina that take 3 ongoing projects 17.5 M on projects and mining together. Participates in various services within the country, Glencore China N/A 197.72 Bn including oil, ores, minerals, agro and biofuels. The worlds fourth largest producer of gold. Has a gold and Goldcorp Canada N/A 4.14 Bn silver mine in Cerro Negro, in Santa Cruz. 3 ongoing mining projects in 2.2 tonnes of minerals Pan Argetnina, with proven and 0.5 tonnes American Canada 751.9 M silver, gold, lead are probable under Silver and minor amounts ownership. of copper. Owns and extracts from the 164,265 oz of gold Gualcamayo mine, production in 2016. Yamana located in the San Mineral reserves at dec Canada 1.28 Bn Gold Juan province where 31st 2016: 754,000 oz there are 3 zones of proven & probable + 2.8 substantial gold million oz measured mineralization. Involved in the Owns 100% of the extraction of Centenario-Ratones lithium, through a deposit which is Eramet France 3.11 Bn new, efficient and expected to support an environmentally annual 200,000 tons of friendly process. production for decades.

Source: EIU, National Investment & Trade Promotion Agency.

Deal Volume of E&R in AR and % of total deals in the region 50 35% 30% 40 25% 30 20% 20 15% 10% 10 05% 0 00% 2010 2011 2012 2013 2014 2015 2016

E&R %of E&R deals of total deal volume in AR Acquirer’s Origin in E&R in Argentina in 2016-2017 (Volume)

North America Europe 12% 8%

Asia & Oceania 4%

Latin America 77%

Recent Deals

Target Deal Ticket Date Target Acquirer Acquirer Origin Origin USD mil

IFC Asset Orazul Energy Argentina USA, 3/01/2017 Management 100.00 Corp. & Chile Financial Services LLC.

Petrobras 5/3/2016 Argentina Pampa Energia Argentina 897.16 Argentina S.A.

Empresa Desarolladora 3/17/2017 Distribuidora de Argentina Argentina 220.00 Energetica S.A. Energia Atlantica

Source: Deloitte’s elaboration based on Mergermarket & Thompson Reuters information

© 2017 Deloitte & Co. S.A. All rights reserved. Marcelo Bastante Marcos G. Bazan Lead Partner Partner Financial Advisory Services Financial Advisory Services Argentina Argentina [email protected] [email protected]

Tomás Aquerreta Miguel Sarquiz Daiana Cardozo Sr. Associate Sr. Associate Sr. Associate Financial Advisory Services Financial Advisory Services Financial Advisory Services Argentina Argentina Argentina [email protected] [email protected] [email protected]

Lucrezia Rigano Associate Financial Advisory Services Argentina [email protected]

Deloitte refers to one or more of Deloitte ToucheTohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/de/UeberUns for a more detailed description of DTTL and its member firms.

Deloitte provides audit, tax, financial advisory and consulting services to public and private clients spanning multiple industries; legal advisory services in Germany are provided by Deloitte Legal. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte’s more than 225,000 professionals are committed to making an impact that matters.