Time to tune in

Latin American companies turn up the volume on global growth

  • Share

Country Insights: Argentina highlights

EY - Ernesto San Gil

Ernesto San Gil
Managing Partner 
EY Argentina

Even as most of Latin America’s larger economies appear to be headed for tremendous sustained growth, the situation for Argentina appears riskier, largely because of economic policies that are not attracting new significant investments.

Yet the business arena also spotlights many dynamic companies in one of the wealthiest and most sophisticated countries in Latin America. With the second-highest income per capita in the region after Chile (US$17,554 in purchasing power parity) and the fastest growth of any Latin American economy between 2002 and 2012 — 7% compounded annual growth each year over that 10-year stretch — Argentina has plenty of advantages.

Although Oxford Economics expects that interventionist policies will continue to crimp economic growth in Argentina for some time, the country seems likely to continue to profit from its neighbors’ successes. Argentines live in an up-and-coming neighborhood today. Brazil to the north is Argentina’s biggest trading partner and the largest economy in Latin America. Chile to the west is the most mature and dynamic of Latin America’s markets.

Since Argentina and Brazil are both members of the Mercosur common market, many entrepreneurial Argentine companies are profiting both directly and indirectly from that proximity.

Strict capital controls put in place by the Argentine Government in 2012 limit the degree to which Argentine companies can build on that advantage. They can expand trade abroad but have limited flexibility to invest in foreign operations.

Domestically, too, the difficulties of planning in an inflationary environment and general anxiety about Argentina’s economic future have created uncertainty. However, we also believe that this obstacle will spur some Argentine companies toward more creative and less capital-intensive cross-border strategies.

Fast facts: Argentina

  • Argentina’s GDP grew steadily at 7% a year from 2002 to 2012, the fastest growth of any major Latin American economy. (World Bank)
  • Although inflation is officially pegged at 10%, some private economists estimate that it may be closer to 24% a year. (IMF)
  • Over the past two years, capital controls to keep Argentines and foreign investors from pulling their money out of the country have grown increasingly strict.
  • Argentine firms are much more internationally focused than most Latin American companies: 92% of the Argentine respondents to our survey say they export to international markets within Latin America, compared with 80% of the overall Latin America sample.
  • Argentina has the second-highest per capita income (in purchasing power parity terms) in Latin America: US$17,554. (World Bank)

For more information

EY - Argentina Download the Argentina highlights report here.