Argentina

Advantages of Investing Today

Dr. Beatriz Nofal President National Investment Development Agency Argentina National Investment Promotion Agency

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

President Néstor Kirchner Address to the Legislature 3/1/2006 National Investment Promotion Agency

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

Four years steady growth at an average rate around 9% Substantial accumulation of reserves with reasonable goals Steady growth of global economy and international trade Favorable trade terms based on high price of “

commodities”

and natural resources.

Twin Surpluses: fiscal and external Extraordinary international liquidity Growth of exports and imports with positive trade balance

SUSTAINABLE GROWTH IN ARGENTINA FAVORABLE INTERNATIONAL SCENARIO

Low global interest rates “Tight” monetary policy Global splitting of value chains Competitive and stable exchange rate Record profitability in prime companies Increasing demand for alternative energy sources New global consumption patterns (product differentiation) National Investment Promotion Agency

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

8,8 9 9,2 8,5

8,4 8,8 9 8,7

Average: 8.9% Average: 8.7%

Argentina Asia en desarrollo 2003 2004 2005 2006 6,2 6,3 5,2 3,9

Average:5.4%

4,9 3,6 2,3

Average:2.8%

0,5 2,4 2,1 1,3 0,8

Average:1.7%

Chile Brazil Source: ProsperAr based on IMF, WEO databases.

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

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

Fiscal and Current Account Surplus

(in millions of pesos)

International Reserves

(in billions of dollars) 30.000

25.000

20.000

15.000

10.000

5.000

0 -5.000

19 94 19 95 19 96 19 97 19 98 -10.000

19 99 20 00 20 01 20 02 20 03 20 04 20 9 m 05 on th s 20 06 -15.000

Source: ProsperAr based on Ministry of Economy and Production.

17,9 17,6 19,3 24,3 26,5 27,8 26,5 19,4 10,5

14,1 19,6 28,1

D ic -9 4 D ic -9 5 D ic -9 6 D ic -9 7 D ic -9 8 D ic -9 9 D ic -0 0 D ic -0 1 D ic -0 2 D ic -0 3 D ic -0 4 D ic -0 5 D ic -0 6

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

6467

GDP per capita in the main Latina American economies

Year 2006*, in US$ PPP 14838 12737 10580 8964 7898 Venezuela Colombia * Estimated Source: ProsperAr based on IMF World Economic Outlook.

Brasil Uruguay Chile Argentina National Investment Promotion Agency

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

Knowledge

Qualified Human Resources High level of education and training Prestigious Universities Highly competent Research Centers Highly competitive health indicators

Nature Culture

Abundance of land and natural resources A wide variety of mineral and energy resources Diversity of regions, topography and climate Public and private commitment to preserve nature and sustainable development Diverse cultural capital and outstanding productions in various fields Important international figures and works of art Rich Urban life with a wealth of cultural possibilities International destination chosen for its quality of life and tourism

Skills

Ability to learn, undertake endeavors and innovations Strong industrial tradition Modern infrastructure and technological availability World-class agricultural and industrial commodities ET with permanent and strategic outlook Competitive SME center National Investment Promotion Agency

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

MERCOSUR + partners in FTA’s (3) GDP*:

US$ 1.789 Billions

Population:

376 Millions of inhabitants

MERCOSUR (1) GDP*:

US$ 1.214 Billions

Population:

234 Millions of inhabitants

MERCOSUR + Venezuela (2) GDP*:

US$ 1.378 Billions

Population:

261 Millions of inhabitants (1) (2) MERCOSUR is a common market conformed in the beginning (1991) by Argentina, Brazil, Paraguay y Uruguay.

Venezuela was incorporated recently as a full member of the integration process in MERCOSUR, becoming the “Mercosur 5” (3) Bolivia, Chile, Peru, Colombia y Ecuador are associated members.

*Estimated 2006 Source: ProsperAr based on IMF World Economic Outlook.

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

IntraM ERCOSUR

Exports. In billions u$s 4,1 5,1 7,2 10 12 14,4 20,1 20,4 17 15,2 17,7 15,2 10,2 12,8 17,3 21,1 25,6 42,3 41 43

Extra Mercosur Exports

Billions u$s 44 50 56 58 61 60 58 66 71,2 77,4 93,4 164,3 142,4 118,2 Source: ProsperAr based on INDEC

Internal and External Mercosur’s Exports increases ( %)

1990 1990 1998 – 2006 – 1998 – 2006

Intra Mercosur Exports

521,6% 393,6% 25,9%

Extra Mercosur Exports

173,3% 42,1% 173,3% National Investment Promotion Agency

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

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

GDFI/GDP Ratio

At current prices. Expressed as Percentages 18,1% 19,4% 19,9% 18,0% 16,2% 14,2% 12,0% 15,1% 19,2% 21,5%

23,5%

21,5% 22,2%

24,8% 25%

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 I-2006 II-2006 III-2006 IV 2006 Source: ProsperAr based on DNCN, INDEC.

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

Relación IBIF/PBI por país

1st Quarter 2006, at current prices

25% 22,2% 21,9% 21,6% 20,1% 20% 19,3% 19,0% 18,5% 15% 12,9% 10% 5% 0% Brasil Argentina Colombia

* Figure corresponds to total for 2005.

Source: ProsperAr based on CEP.

Chile México Venezuela Perú* Uruguay*

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

Foreign Direct Investment in Argentina

In millions of US$

5500 5000 4500 4000 3500 3000 2500 2.166

2000 1500 2.149

1.652

1000 2001 2002 2003

Source: ProsperAr based on INDEC

4.274

2004 5.008

2005 4.809

2006 2006: Improvement in the composition of FDI

In 2006 Argentina's FDI levels was similar to those of 2005 (-3,9%), highlighting: - The share of investment in the productive sector increased by US$ 276M (+6%) - The main components of FDI are the investment in production capacity expansion of foreign companies with operations in Argentina; and the entrance of new TN companies; -The M&A activity represents a very small share of total FDI - Historical record in reinvestment of earnings. Reinvestment in 2006 ( u$s 2238 M) was 4 times that of 2005 ( u$s 655 M).

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

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However Argentina faces big challenges in terms of investment

Results

The highest Gross Domestic Fixed Investment (GDFI) as a percentage of the GDP Public investment accompanying investment of the private sector Investments more directed to tradeable sectors of the economy. Recovery of Foreign Direct Investment after 2004

Challenges

To increase and sustain high investment/PBI ratios, aligned with the requirements of sustainable growth. To improve the quality of investments To increase our participation in foreign and regional flows of Foreign Direct Investment To promote further value chain integration international companies in Argentina To support internationalization of local companies National Investment Promotion Agency

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

•

Full enforcement of civil and democratic rights.

Argentina is a country where freedom prevails in every area, as confirmed by the

Freedom in the World 2007

report. •

Democracy

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

Respect for Human Rights

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

Strategically Safe Country

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

Country of choice among multinational companies

Argentina ranks 18 th UNCTAD report.

out of 25 countries of choice among the largest 100 multinational corporations, according to the •

Good quality of life

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

International Living.

•

Preferred international tourism destination

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

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

Autonomy Stability

Economic-Financial Autarchy Legal status Involvement in the field of public and private law Ability to send correspondents to the interior of the country and abroad Board members hold a 4 year term of office The president’s rank is equivalent to that of a Secretary of State and the Directors rank to that of Undersecretary of State

Public-private coordination and collaboration Government Model:

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

Advisory Councils:

- Private and academic sector - International

Transparency

Yearly rendering of accounts Internal Audit Department in coordination with the National Audit Commission National Investment Promotion Agency

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

National Council on Development Investments

- Chief of Cabinet - Minister of Economy and Production - Minister of Foreign Relations, International Trade and Worship

Board of Directors* President (1)

Dr. Beatriz Nofal

Members (2)

Mr. Daniel Falcón Ms. Luciana Pagani Advisory Council: private sector Superior International Advisory Council Internal Audit Department

Investment Strategy and Environment Manager

Mr. Ricardo Rozemberg

Operations and Investment Services Manager

Ms. Marcela Reganzani

Public Relations, Marketing and Communications Manager

Ms. Mariana Blanco

Legal Department

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

Office of the Assistant Manager of Human Resources and Administration

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

Creating a differential image for Argentina Offer Services to Investors: Foreign Direct Investment/ Local Companies/Enterprising Development Boost investment environment Attract and generate investment Disclose to the world the new favorable situation in Argentina - sustainable growth and investment opportunities.

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

Personalized reply to investors inquires

Large, Medium and Small businesses working together for a more prosperous ecosystem Develop financial instruments to facilitate investment and innovation

Program to established closed relationships with investors

Create a federal network to better serve the Investors

General Investment Missions

Missions and actions focused on investment Investment and innovation proposals based on current opportunities in competitive entities and sectors National Investment Promotion Agency

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Basically, the agency aims to contribute so that

investment prosperity

become sinonymous. in Argentina and •

To Prosper,

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

•

To Prosper

means to leverage in our achievements to propel a more competitive and innovative Argentina with a higher level of income per capita and social equity.

• In order to

Prosper

the public and private sectors must submit a differential value proposition to attract domestic and foreign investment, a key factor for growth.

• To

Prosper,

we will work for a vigorous investment environment, communicating Argentina’s value proposition to the world, and contributing towards an active integration to investment flows and international trade. • In order to

Prosper

, our aim is to ensure

Prosperity

both to those companies that invest in our and to their employees.

• In order to prosper

, the National Investment Development Agency of Argentina, ProsperAr,

was created.

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Your partner to invest and prosper in Argentina

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Annex

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

Soy Productivity

Year 2005. Argentina = 100

Corn Productivity

Year 2005. Argentina = 100

Wheat Productivity

Year 2005. Argentina = 100 EE.UU

Argentina Canadá Brazil China Australia Rusia India 30 38 64 62 85 106 100 EE.UU

Canada 99 Argentina Australia China Rusia Brazil India 27 41 53 72 79 100 126 China 117 Canada EE.UU

India Argentina Brasil Australia Rusia 85 77 75 106 106 106 100 167 Source: ProsperAr based on FAO National Investment Promotion Agency

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Natural Resources and Agro-industry …being a leading producer and/or exporter in various agroindustrial segments.

The Argentine territory has almost

250,000 km2

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

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

•

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

•

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

•

The N ° 1 world exporter of Horse Meat.

•

The N ° 1 world exporter of Pears.

•

The 2 nd leading world exporter of Peanut Oil.

•

The 3 rd leading world producer of Beef.

•

The 3 rd leading world producer of Soy Beans.

•

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

•

The 5 th leading world producer of Wine.

Source: ProsperAr based on FAO.

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Industry A long industrial tradition has enabled us to reach an expansive and diverse manufacturing ecosystem A significant number of transnational companies have been present in the country for decades and progressively participated in the generation of value added activities.

A group of prime national companies strongly internationalized and world-class. A segment of flexible, innovative and dynamic SMEs As an example, the annual production capacity of local industry includes: • 7 million tons of vegetable oils and over 20 million in by-products, • • Over15 million hectoliters of wine, 400 thousand tons of tanned leather, • • 1.2 million tons of paper, • 200 thousand tons of PVC and over 1.5 million tons of derivatives such as propylene and polyethylene.

275 thousand tons of raw aluminum, • • 5 million tons of steel and • 4.15 million tons of seamless and non seamless pipes, 550 thousand automobiles.

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Socioeconomic Indicators

Argentina socioeconomic indicators are higher than the average for the region

Socioeconomic Indicators

Human Development Index (HDI) Life Expectancy at Birth (years) Infant Mortality Rate (0/000) Health Care Expenses (PPA in US$ per capita) Undernourished Population Population with sustainable access to improved water source Deliveries performed by specialized staff (%) Physicians/1000 inhabitants Illiteracy (% over 15 years old) Gross schooling rate Researches in R&D (for every million inhabitants 1990-2003)

Argentina 0.863

74.6

16 1067 <2.5

96 99 301 2.8

89 720 Brazil

0.792

70.8

32 597 8 90 97 115 11.4

86 344

Chile

0.859

78.1

8 707 4 95 100 109 4.3

81 444

Mexico

0.821

75.3

23 582 5 97 95 198 9 75 268

Region Average

0.795

71.7

26 … 10 91 87 … 10.8

81 306 Source: UNDP. 2006 Report on Human Development.

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

School Attendance Expectations

In years

Adult Literacy Rate (+15 years)

% Argentina Italy Israel Brazil Chile Am. Lat. y Caribe México Venezuela Colombia Indonesia China 13,4 13,1 12,5 11,7 11,5 11,5 11,2 16,4 15,7 15,6 14,6 Italy Argentina Israel Chile Venezuela Colombia Mexico China Indonesia Am. Lat. y Caribe Brazil 91 90,9 93 92,8 90,4 89,7 88,6 98,4 97,2 97,1 95,7 Source: ProsperAr based on GED 2006, UNESCO.

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Environment …within the context of a sustainable environment.

Environmental Sustainability Index

Year 2005 N. Zeland Australia Gabon Brazil Austria Argentina Guyana Switzerland Canada Iceland Sweden Uruguay Norway Finland 60,9 61 61,7 62,2 62,7 62,7 62,9 63,7 64,4 70,8 71,7 71,8 73,4 75,1 Environmental Sustainability Index elaborated by environmental experts from Yale and Columbia

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Argentina ranks 9 th among 146 countries in environmental sustainability National Investment Promotion Agency

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