Country Profile: ArgentinaBy Siddharth S

1221335Marketing LMN

Political and Legal:

Argentina’s political structure is based on a traditional republican division of powers:

executive, legislative and judicial. The executive branch is led by the President, elected

for a term of four years with the option of re-election for one additional term. Both the

President and Vice President, who also serves as the President of the Senate, are elected

by direct vote.

The National Congress, made up of the Senate and the Chamber of Deputies, represents

the legislative branch. The 257 members of the Chamber of Deputies are elected for a

four-year period. The Senate represents the 23 provinces and the City of Buenos Aires.

Every two years, half of the Chamber of Deputies is reelected and the Senate is renewed

by one third.

The judicial branch is comprised of the Supreme Court of Justice, the National Council of

the Magistracy and the lower courts. The judges are appointed by the President with

approval of the Senate and the judges enjoy freedom of action and stability and may only

be removed if found guilty of a serious misdemeanor by a jury made up of national

legislators, magistrates and lawyers.

Each of the 23 provinces has its own republican and representative constitution, which

organizes its own powers (executive, legislative and judicial) and regulates the regime of

municipal autonomy. The executive branch is lead by a governor elected by the people of

each province. The provinces may pass laws on non-national issues, although the

principle common laws (civil, trade, criminal, labor, social security and mining) are the

part of the National Congress.

The City of Buenos Aires also has its own constitution establishing the division of power.

The head of the government of the City of Buenos Aires represents the executive power.

The Legal system of Argentina is a Civil law legal system the two pillars of the civil

system are the Constitution of Argentina (1853) and the Civil Code of Argentina (1871)

Both federal and provincial courts administer Justice. The Federal courts deal with cases

that are on a national scale or those to which different provinces or inhabitants of

different provinces are parties. The Supreme Court, which supervises and regulates all

other federal courts, is composed of nine members nominated by the president and

confirmed by the Senate. Other federal courts include nine appellate courts, with three

judges for each; single judge district courts, at least one for each province; and one-judge

territorial courts. The federal courts may not decide political questions. The president

appoints judges of the lower courts.

Provincial courts include supreme courts, appellate courts, courts of first instance, and

minor courts of justices of the peace and of the market judges. The provincial governors

appoint members of provincial courts. Trial by jury was authorized by the 1853

constitution for criminal cases, but its establishment was left to the discretion of congress,

resulting in sporadic use.

In 1992, a system of oral public trials was instituted in order to speed up the judicial

process while improving the protection of procedural rights of criminal defendants.

In practice, there is not a truly independent judiciary and the courts lack power to enforce

orders against the executive. In 1989, President Menem, in a court-packing maneuver,

expanded the number of Supreme Court justices from five to nine. In 2003, shortly after

taking office, President Néstor Kirchner signaled his intention to remove some of

Menem’s appointees and to strengthen the judiciary by undoing some of Menem’s moves

that turned the Supreme Court into a political ally of the president rather than an

autonomous power of the state. Formal and informal constitutional accusation against

Menem-appointed Supreme Court justices between 2003 and 2005 allowed Kirchner to

appoint new justices and by doing so he issued a degree limiting the powers of the

president of the republic to appoint judges to the Supreme Court.

The constitution prohibits arbitrary interference with privacy, family, home or

correspondence. The government respects these provisions. The constitution prohibits

torture; however, police brutality and exploitation of power remains a serious problem.

The judicial system is also subject to delays, resulting in lengthy pretrial detention.

In regard to the political scenario, Argentina’s political upheaval in late 2001 that led to

the resignation of President Fernando de la Rua must be viewed as a historical event in its

political history. Before 1930, Argentina enjoyed around 70 years of political stability

that facilitated rapid economic development and made Argentina one of the world’s

wealthiest countries. It ranked seventh in the world in per capita income in the 1920s but

from 1930 until 1983, Argentina experienced significant political instability,

characterized by numerous military coups, 25 presidents, 22 years of military rule, and 13

years of “Peronism” a form of Corporate Nationalism

When the military intervened in 1943, the regime came to be dominated by a colonel

serving as Secretary of Labor, Juan Peron, who went on to build a formidable political

base through support from the rapidly growing union movement. Peron’s mobilization of

the working class had an enduring effect on Argentina’s political system over the next

four decades. Even when Peron was ousted by the military in 1955, Peronism as a

political movement survived despite attempts by the military and anti-Peronist sectors to

defeat it. After his ouster, a series of civilian and military governments ruled until 1973

when Peron was reelected to office after 18 years of exile. Just a year later, however,

Peron died and was succeeded by his second wife Isabel, who had little political

experience. Economic and political chaos ensued, with political violence surging and

Argentina experiencing its first bout of hyperinflation. As a result, the military intervened

once again in 1976, but this time ruled directly until 1983, when it fell into disrepute in

the aftermath of its failure in the Falkland Islands war with Great Britain in 1982. It was

during this period that the military conducted the so-called “Dirty War” against leftists,

guerrillas, and their sympathizers, and thousands of Argentines “disappeared.”

In 1983, Argentina returned to civilian democratic rule with the election of Raul Alfonsin

of the moderate Radical Civic Union (UCR). Alfonsin was widely credited with restoring

democratic institutions, but economic conditions during his tenure were chaotic, with

hyperinflation and considerable labor problems. The winner of the 1989 election, Carlos

Menem of the Justicialist Party took office early and Alfonsin left six months before the

end of his term

Menem transformed Argentina from a state-dominated protectionist economy to one

committed to free market principles and open to trade. Most state enterprises were

privatized; hyperinflation was eliminated; and the economy was opened up to foreign

trade and investment. In 1991, the government pegged the Argentine peso to the U.S.

dollar and limited the printing of pesos to the extent that they were backed by U.S.

dollars, a policy that helped keep inflation in check, but became a major factor in

Argentina’s recent financial turmoil. (The dollar peg led to an overvaluation of the peso,

and continued overspending led to large increases in external debt.) Menem broke with

the traditional Peronist protectionist policies favorable to the working-class and labor but

still yet steady increase in corruption and high unemployment at the end of his second

term were factors that led to the defeat of his party in the October 1999 elections.

Fernando de la Rua won the October 1999 presidential race. Although there was initial

optimism when de la Rua took office in December 1999, that optimism had faded by the

end of 2000 because of doubts about the government’s ability to bring about economic

recovery and because of corruption in the administration. The government though it

negotiated several financial arrangements with the IMF in 2000 and 2001, it was unable

to fulfill condition imposed by the IMF relating to spending cuts. The IMF ultimately

declined further financial support in December 2001, because Argentina could not

produce a balanced budget. Argentines began rapidly withdrawing dollars from banks

until the government limited withdrawals to $1,000 per month. The denial of access to

bank funds, combined with already high poverty and unemployment rates after four years

of recession, sparked widespread opposition to the government.

As confidence in the government was shaken, widespread demonstrations erupted around

the country, with thousands calling for the President’s resignation. Protests turned violent

with rioters battling police with stones and bottles. As a result of the violent protests,

President de la Rua fled the presidential palace and resigned on December 20, 2001,

paving the way for a series of interim presidents from the Peronist party. Peronist Senator

Eduardo Duhalde ultimately became president on January 1, 2002, with a mandate from

Congress to serve out the remainder of de la Rua’s term. Duhalde, who had been Vice

President under Menem from 1989-1991, Governor of the Buenos Aires province, and

the PJ’s 1999 presidential candidate, was one of the most well-known and powerful

Peronist leaders.

President Duhalde faced daunting political and economic challenges when he assumed

office, most significantly the ability to quell social unrest associated with the country’s

financial instability. Protests against banks and politicians continued in the first half of

2002, but the widespread social violence of December 2001 was not repeated, and the

Duhalde government survived. Duhalde initially promised such populist measures as

increasing the state’s role in the economy and protecting local industries, but he did not

pursue a protectionist economic model. In the end, the Argentine economy stabilized

under the Duhalde government. As part of his economic plan, Duhalde abandoned the

Argentine currency’s one-to-one peg to the U.S. dollar that had been in place since 1991

and ultimately adopted a unified floating exchange rate in February 2002. While the

Duhalde government was unable to secure IMF financing in 2002 because of lack of

progress on key fiscal and other structural reforms, it did secure a seven-month IMF

arrangement in January 2003, valued at almost $3 billion. The Duhalde government was

also able to clear Argentina’s arrears with the World Bank and the Inter-American

Development Bank, which allowed new loans in early 2003 to finance social safety net

programs in order to reduce the impact of the economic crisis on the poor.

President Kirchner whose bold policy moves in the areas of human rights, institutional

reform, followed by him and economic policy have helped restore Argentines’ faith in

government.

Upon taking office, President Kirchner purged the military’s top officers and vowed to

prosecute current and retired military officials responsible for human rights violations

conducted during the last era of military rule.

In the economic arena, the Kirchner government has overseen a strong revival of the

Argentine economy, with economic growth rates of 8.8% in 2003, 9% in 2004, 9.2% in

2005, and an estimated growth rate of 7.8% in 2006. Unemployment decreased from a

high of about 24% in 2002 to about 11% in early 2006. In June 2005, the Kirchner

government was successful in restructuring more than $100 billion in defaulted bond debt

saving the country more than $67 billion in the largest debt-reduction ever achieved by a

developing country. Although Argentina’s macroeconomic recovery has been impressive,

many poor and middle-class Argentines have yet to see major improvements in living

standards. Although poverty rates have declined over the past three years, about 34% of

the population was still estimated to be in poverty in 2005, with almost 12% of the

population living in extreme poverty. The Kirchner government also faces the challenges

of curbing inflation, which is forecast to average 11% in 2006, while at the same time

maintaining strong economic growth.

Argentina’s relations with the IMF under the Kirchner government have been contentious

at times. In September 2003, after months of tough negotiations, Argentina reached a

three-year stand-by agreement that provided a credit line of about $12.5 billion. Although

IMF accords are not normally politically popular, the accord was widely praised in

Argentina as an agreement with realistic fiscal targets that would enable Argentina to

deal with such issues as employment and social equity. Argentina suspended its IMF loan

program in August 2004 because of IMF pressure on completion of debt negotiations

with bondholders and on Argentine progress in implementing key economic reforms. In

January 2006, Argentina ultimately chose to repay its $9.5 million debt owed to the IMF

in order to give the government autonomy on economic policy. Although the move was

politically popular in Argentina, some critics argue that it would have been wiser to pay

down other more expensive debt or to use the money on infrastructure or social spending.

Geography and Infrastructure:

Argentina is the second largest country in Latin America geographically. Indeed, at

slightly over 1 million square miles (2.8 million square kilometers), Argentina is the

eighth largest country in the world. Argentina's geography, however, is rather unique.

Cone-shaped, Argentina is about two and one half times longer north-south (2070

miles/3330 kilometers) than it is east-west (a mere 860 miles/1384 kilometers at its

widest on the nation's northern border, and the country is considerably narrower for most

of its length). Most of its north-south border is shared with Chile, its neighbor to the west,

from which it is geographically cut off by the largely impassable barrier of the Andes.

This has led Argentina to develop somewhat independently from the rest of Latin

America, with a decidedly European influence to its culture. Even the European influence

however, has historically been moderated by Argentina's position in the extreme southern

part of the globe.

For all its great size, Argentina is sparsely populated. Argentina has a population of just

over 40 million people. While this makes the country the fourth most populous nation in

Latin America (after Brazil, Mexico, and Colombia), Argentina is about on par in

population with Europe's mid-size states (Spain, for example).

Added, Argentina's population is not evenly distributed. Buenos Aires is the fifteenth

largest metropolitan area in the world. With a population of 11.2 million people, greater

Buenos Aires is home to just under one of every three Argentines. When one combines

greater Buenos Aires with the large number of Argentines in such other major cities as

Córdoba, Rosario, and Tucumán, fully 87 percent of Argentines live in urban areas. This

leaves large expanses of the Pampas and Patagonia very sparsely populated. In turn, the

population distribution has led to a marked dichotomy in Argentina between the city and

the country.

The country's provinces are divided in 7 zones regarding climate and terrain. From North

to South, West to East:

Argentine Northwest: Jujuy, Salta, Tucumán, Catamarca, La Rioja

Gran Chaco: Formosa, Chaco, Santiago del Estero

Mesopotamia: Misiones, Corrientes

Central: Córdoba, Entre Ríos

Cuyo: San Juan, Mendoza, San Luis

The Pampas: Santa Fe, La Pampa, Buenos Aires

Patagonia: Rio Negro, Neuquén, Chubut, Santa Cruz, Tierra del Fuego

The Argentine Andes contain some of the tallest mountains in South America, including

Cerro Bonete 6,872, Ojos del Salado 6,893 m, Cerro Mercedario 6,768 m, and Cerro

Aconcagua, which at 6,960 m is the tallest peak on the continent and in the entire

Western Hemisphere. Both of these peaks are located near the Chile border southwest of

San Juan. The Andes region is also home to arid basins, lush foothills covered with grape

vineyards, glacial mountains, and half of the Los Lagos Region (Lake District) (the other

half is in Chile). The Lake District, named for the many glacial lakes carved out of the

mountains and subsequently filled by melt-water and rain, is located in the southern

Andes and boasts a diverse natural landscape of glaciers, native old growth forests, lakes,

rivers, fjords, volcanoes, and sentinel mountains. Throughout the Andes that separate

Chile and Argentina there are more than 1,800 volcanoes, 28 of which are considered to

be active. These account for approximately one-fifth of the Earth's active volcanoes.

Patagonia, the southern region of Argentina, is a combination of pastoral steppes and

glacial regions. Located in this region near the Chilean border is Parc Nacional Los

Glaciares (Glacier National Park ), where some 300 glaciers make up part of the

Patagonian Ice Cap (21,760 km2). The ice cap, flowing into the Pacific oceans from the

Andes, is the largest in the Southern Hemisphere outside of Antarctica. Thirteen of the

glaciers feed lakes in the region. The Upsala glacier, at 60 km long and 10 km wide, is

the largest in South America and can only be reached by boat, since it floats in Lago

Argentino. The next largest is the 4.8 km wide Perito Moreno, which stretches about 35

km to Lago Argentino, where it forms a natural dam in the lake. Jagged mountain peaks

formed from granite include Cerro Fitz Roy 3,405 m, Cerro Torre 3,102 m, and Cerro

Pináculo 2,160 m.

Smaller mountain ranges also exist in central South America. These ranges cut across the

center of the country and serve as the divider between the southern Patagonia region and

the northeastern Pampas. From west to east these ranges are the Sierra Lihuel-Calel, the

Sierra de la Ventana, and the Sierra del Tandil.

Plateaus

The Somuncurá Plateau is a basalt plateau with alternating hills and depressions. It

stretches across the Río Negro and Chubut provinces, or the area from the Chubut River

north to the Río Negro. The region undergoes severe climate changes between the winter

and summer months. The area has lava formations and contains many fruit and alfalfa

plantations. Cattle ranchers find this area to be ideal for raising their livestock. A smaller

plateau, the Atacama Plateau, occupies the region just east of the Andes Mountains in

northern Argentina and extends east to the city of San Miguel de Tucumán.

In Argentina, the fluvial net is integrated by many systems of different economic

relevance, which could be measured by their amount of flow and navigability. Water

flow relevance is based on its potential to be used for irrigation and as a source of energy.

On the other hand, lakes and lagoons are permanent accumulations of water over

impervious depressions. Their difference is mainly based on their extension and depth.

They are very important for stream regulation, as a source of energy, touristic attraction.

Argentina has a good infrastructure system in comparison with other Latin American

nations, but many areas need significant improvement. The nation has 215,434 kilometers

(133,870 miles) of roads, including 734 kilometers (456 miles) of expressways or

highways, but only 63,553 kilometers (39,492 miles) of the country's roads are paved.

Argentina has been the recipient of a number of aid packages to improve infrastructure.

For instance, the United States has provided US$7 million and the World Bank provided

US$450 million for highway construction. There is an extensive rail system that

transports both freight and passengers around Argentina, with a total of 38,326 kilometers

(23,816 miles) of track.

Argentina has 10,950 kilometers (6,804 miles) of navigable waterways. However, most

of the country's major ports are located on the Atlantic coast, and little freight is

transported along the inland waterways. The nation's main ports include Bahia Blanca,

Buenos Aires, Comodoro Rivadavia, La Plata, and Mar La Plata (all located on the

Atlantic Coast). Inland river ports include Rosario and Santa Fe, while the port of

Ushuaia is located in the extreme southern tip of the nation near Cape Horn where the

Atlantic and Pacific Oceans meet. Argentina has a small merchant marine of 26 ships

with more than 1,000 tons of gross weight. This includes 11 petroleum tankers. In order

to provide fuels to inland areas and ship resources to ports for export, there is a broad

pipeline system. There are 4,090 kilometers (2,542 miles) of crude oil pipelines, 2,900

kilometers (1,802 miles) for other petroleum products, and 9,918 kilometers (6,163

miles) of natural gas pipelines.

Buenos Aires has an extensive system of public transportation but most smaller cities and

towns in Argentina have limited transportation resources. Buenos Aires additionally has

an underground; the only one in the country, and Greater Buenos Aires is serviced by a

system of suburban trains.

There are 1,359 airports in Argentina, although only 142 have paved runways. Buenos

Aires has 2 major airports. The first, Ezeiza International Airport, is the main point of

arrival and departure for most international flights. Most domestic or regional flights,

including those to Brazil, Uruguay, and Paraguay originate from the second major airport

in Buenos Aires, Aeroparque Jorge Newbery. Most major international air carriers offer

service to Buenos Aires. Argentina's national airline is Aerolineas Argentinas. The

government is involved in a program to privatize airports. Thus far, 33 major airports

have been turned over to private companies to operate.

Transport in Argentina is mainly based on a complex network of routes, crossed by

relatively inexpensive long-distance buses and by cargo trucks. Fluvial transport is

mostly used for cargo.

Expressways have been recently doubled in length (to nearly) and now link most (though

not all) important cities. The most important of these is probably the Panamerican

National Route 9 Buenos Aires–Rosario–Córdoba freeway. The longest continuous

highways are National Route 40, a 5000-km stretch along the Andes range and the 3000-

km seaside trunk road National Route 3, running from Buenos Aires to Ushuaia.

Argentine long distance buses are fast, affordable and comfortable; they have become the

primary means of long-distance travel since railway privatizations in the early 1990s

greatly downsized Argentina's formerly ubiquitous passenger rail service.

Argentina's infrastructure sector presents very high-untapped potential for potential

investors and sponsors of infrastructure projects. In order to unlock this potential, the

government should embark on a change in policy in order to attract capital into the sector

- the only viable way to significantly revive infrastructure activity. However, there will

be robust economic activity, which will make moderate sector growth. In January 2011

the Argentinean government announced it would spend US$241mn on several small

infrastructure projects - a move which, is believed, is aimed at winning provincial votes

and quelling social instability amid rising inflation and cash shortages.

On July 13 2010, China pledged US$10bn for Argentina's railway infrastructure projects,

and expressed a willingness to build new nuclear power generation facilities in the

country.

US$400mn has been allocated for the Great North road project, which will pave many of

the routes in the country's northern provinces and reduce transportation costs. A total of

US$200mn will be used for a water and sanitation project to improve water access and

potable water coverage for 1mn people living in poverty in the northern provinces.

Investment in real estate as a hedge against rising inflation. Property holds better value

than bonds or cash during times of high inflation so this could stimulate buying activity

and hence underlying construction activity over the next few years.

Argentina's infrastructure sector remains dependent to some extent on a US$10bn credit

agreement from China. Meanwhile, the sector continues to benefit from robust economic

activity.

Argentina has inaugurated its third nuclear power plant. The Atucha II plant was opened

by Argentine President Christine Kirchner, who said the plant was a step towards

diversifying the country's power production. The 700MW plant is expected to be fully

operational by Q312, raising the proportion of Argentina's power production from

nuclear to 10%.

The Inter-American Development Bank (IDB) offered US$400mn in financial assistance

to Argentina to develop infrastructure for 70 poor urban settlements (December 2011).

The loan, secured by the Ministry of Federal Planning, Public Investment and Services,

will be directed towards the provision of basic services, such as electricity, infrastructure

and gas distribution for the urban settlements. The loan will as well be used to build

storm drains, access roads, pedestrian networks, green spaces, and water and sewage

networks. The project has been designed to benefit 280,000 low-income residents.

The US$10bn Chinese credit agreement for Argentine railways is the major factor which

will be driving increase in Argentina's infrastructure sector in the coming years. While

such projects and robust economic activity should allow the sector to comfortably

maintain average yearly increase of 5%.

Structure of Distribution

Developing a profitable go-to-market strategy in Latin America is not an easy task given

the multitude of consumer sales channels at work. In urban areas, the arrival of modern

retailers in the form of global supermarket, hypermarket and club stores has shaken up

traditional channels made up of owner-operated independent retailers built upon

inefficient layers of intermediaries. B2C e-commerce has certainly changed the way Latin

Americans buy travel services and read newspapers; however, it would be mistake to

abandon independent and informal channels of retail that still represent more than three-

quarters of Latin American retail for fast moving consumer goods.

Latin American retail markets are developing rapidly, driving changes in distribution

channels which will shape logistics in the region for years to come.

Modern retailers have been migrating to urban areas, shaking up traditional

channels. But much of the region will still be served by the owner-operated,

independent retailer whose business is based on layers of intermediaries.

Non-store consumer sales are on the rise, but electronic commerce is still lagging

most other channels, accounting for only 1% of retail sales.

Formal Latin American retail sales are expected to reach US$1 trillion in 2010.

Understanding how channel structure will look three years from now warrants

study of what is driving the growth or decline of each channel.

Independent (non-chain) retailers account for 60% of all instore retail but are

gradually losing market share to modern retailers in the area of fast moving

consumer goods.

Modern retail comprises roughly 40% of in-store retail sales, mainly through

hypermarkets and supermarkets. Middle-to-upper- income consumers generally

prefer modern retailers. Mass consumer segments continue to prefer shopping

through independent retailers and informal channels (street vendors, markets) but

will gravitate to modern retail as wages, car ownership and credit card penetration

grows.

The direct (or multi-level) sales format has proven to be very effective in Latin

America, accounting for roughly 75% of nonstore retail sales. The channel is

particularly effective for selling cosmetics and health products.

E-commerce constitutes 15% of non-store sales but less than 1% of total retail.

Online sales are growing faster than any other channel. However, challenges in

delivering physical products limit the viability of e-commerce to digital products

(travel, music, software) as well as hard-to-find IT hardware.

Independent retailers bore the Argentine crisis better than any other category and reaped

the benefits of recovery by increasing sales 130% from 2002 to 2006. Customers became

extremely price-conscious and avoided modern retailers because of perceived higher

prices. Modern retailers were severely constrained by a protective law passed during the

crisis that limited the construction of new retail outlets based on size. Domestic chains

like Coto halted expansion to focus on debt restructuring. French-owned Auchan finally

pulled out in 2004 from complications arising from the crisis. Its stores were sold to

Spain's San Jose and most recently were acquired by Wal-Mart.

Modern supermarkets offer consumers an alternative shopping experience marked by

unprecedented brand selection, bulk pricing and a well-lit, climate-controlled shopping

experience. Most importantly, consumers can save time by purchasing a wide range of

goods under the same roof. Hypermarkets take the concept further by combining grocery

and department store shopping. Discounters (club stores) were the last to arrive and have

consequently grown swiftly in popularity with CAGRs of, nearly 18% in Argentina .

Argentina is shifting back to modern retail, which currently accounts for 39% of

consumer goods sales. Major players include Cencosud of Chile, Carrefour, the local

conglomerate Coto, and Wal-Mart. Hypermarkets, supermarkets, and discount stores

have extremely high penetration among the upper and middle classes, and they are trying

to broaden their customer base.

Non-Store Retail

Non-store retail methods, such as home shopping (largely composed of infomercial and

catalogue sales), direct sales and online retailers are also benefiting from rising

disposable incomes in Latin America. The middle class in Latin America is growing in

real and relative terms for the first time in 30 years and they represent the target market

for direct sellers, the leading category within the non-store retail channel.

Home Shopping

Home shopping was never a strong channel in Argentina due to obstacles such as fraud,

lack of credit and unreliable postal systems but in Argentina, they are regaining ground

with recovered cable usage after the 2001 crisis. Internet retail has already surpassed

home shopping in Chile and Brazil, and is expected to do so in Argentina and Mexico in

2007 or 2008.

Direct (Multi-level) Sales

Direct sellers in Latin America secured 28% of cosmetics/toiletry retail sales for 2006.

This sales method is well-established in most countries.Direct sales representatives in

Latin America totaled 5.6 million individuals, of which 80% are women. Representatives

can earn or supplement their income from home with flexible hours. They have access to

rural and lower income consumers out of reach of modern retailers. Direct sales face less

competition from internet sales than home shopping because of the loyal customer base

and personal touch, not to mention the lack of internet penetration.

In Argentina, direct sales companies had to rebuild their representative and customer

bases after economic hardship forced many of them to seek alternative employment.

Direct sales are forecast to grow proportionally with disposable income.

Internet Retail

B2C ecommerce is gradually emerging as a viable channel thanks to increased internet

penetration.Argentina had invested in internet infrastructure before the economic crisis in

2001 so internet usage grew rapidly during recovery; however, over half of current

internet users are concentrated in Buenos Aires.

Online sales have been concentrated in the areas of travel, electronics and downloadable

media, much like the US internet retail market in the 1990s. Products that are digitally

transferred (air plane tickets, music, software) do not face the delivery challenges of

physical goods. Stores keep very low stock on IT products, so their consumers often

purchase them online. Recently, categories like government services and education have

seen increased online transactions. Consumers have greater confidence in the security of

online transactions because of measures taken by the government, financial institutions

and electronic payment systems

Porters Diamond Of National Advantage:

Porters Diamond Of National Advantage: Argentina

Factor Condition:

Argentina is rich in natural Resources Eg: mineral, natural Gas reserves). Also substantial

progress is being made in improving infrastructure and communication. The banking

regulations have improved significantly.

But certain challenges are still in place such as uneven infrastructure development,

education system facing budget cuts thus reducing the quality of the education.

Demand Conditions:

There is a significant demand from the upper segment market and the demand for quality

products have increased. There are also regulatory standards present, which are on par

with the international standards.

There is a significant gap in the distribution of income. Added consumers often prefer

imported goods to domestic due to perceived poor quality. Even though there are

significant regulations in place, they are not enforced in a stringent manner.

Related and Supporting Industries:

Due to FDI there is an increase in the quantity of suppliers have increased. Added these

suppliers have increase the quality of their supplies as companies have the option to

import. Also regional industrial Special development programs are phased out, thus

relocating suppliers closer to the market.

But the quality of suppliers is still low compared to international standards. Added, small

and medium sized suppliers are facing financial and competitive challenges.

Firm Strategy and Rivalry:

Inward FDI has lead to modernization of various industries. As a result of foreign

completion modern management and production techniques have been implemented.

There is a significant internationalization of Argentine firms and also outward foreign

investment.

But challenges are there is not much local rivalry present in the some sectors of the

industry. There were significant barriers to entry but now have reduced, but still these are

not enough to lure foreign investors. There is an outdated law and regulations of

Intellectual Property rights present in the country.

Government:

Argentina’s economic growth and prosperity can be greatly enhanced by a healthy

regional economy by having Large, accessible markets for exports and foreign

investment thus making Argentina a far more attractive as a place to invest

Argentina will inevitably suffer if it is isolated or an island amid countries that are not

prospering Argentina’s productivity can be greatly enhanced by regional coordination.

Chance:

The national competitive advantage of Argentina might be dealt with a significant set

back, if there is another military coup and the fall of democracy.

Porters Diamond Of National Advantage: India

Factor Condition:

India is still high with natural resources and making significant investments in improving

infrastructure. There is high spending on improving health care and education but with

high population it seems to be a difficult task but India is at an advantage as there is

significant English speaking population when compared to Argentina. Also there is a

comparatively young work force available.

Demand Conditions:

There is a large gap between the rich and the poor in India similar to the Argentine

Problem of distribution of income. The Upper segment market is demanding high quality

products. Added, there are new several regulations in place to align India to the global

rules. There is high domestic consumption as what is produced in India is consumed in

India. Added a presence of a a booming software industry In India and many Technology

based start ups are providing services for domestic clients also.

Related and Supporting Industries:

India opened up to FDI in retail recently thus opening the markets for international

companies to set up chains in India. They have a large SME sector to back them up, so

localization of the suppliers with a due time is very much possible.

The SME’s have high quality and are on Global standards when compared to Argentina.

Various incentives are handed out to SME’s to conduct business thus fostering growth

and sustainability. The E commerce boom in India has further fueled online portals for

procurement and selling of Raw material as well as selling finished products.

There are special economic zones in various parts of the country and industrialization is

spread through out the country as when compared to Argentina, which is focused only on

the Capital City.

Firm Strategy and Rivalry:

There is intense rivalry among the industries with a significant focus on cost cutting and

handing down the benefit to the customer. There are Numerous SME’s spread all across

India, with high competition and quality cost and completion time being a few primary

differentiation factors.

The barriers to Entry have been significantly reduced since 1991 and thus enabling major

MNC’s to set up and operate in India, bringing in high capital and also technology into

the Country. There is an efficient and updated cyber laws and Intellectual property law in

place, but the labour laws are still archaic and need to be updated.

Government:

India has not had a single military coup in its history post liberation from the British

Empire and has been a democratic country since 1947. The government in India has been

relatively stable with most of them completing their elected terms. India is a stable

political environment to invest in but an investor must be careful of the ideologies

followed by the various political parties.

The downside is the significant level of bureaucracy present in the tiers of the

government, which may lead to delays in decision making.

Chance:

India will be a vibrant economy and have a prosperous future, if the corruption in the

system is removed and a transparent and less rigid governance is implemented.

Conclusion:

Argentina with its new Government is a growing substantially. There are significant

investments in infrastructure and reduction of entry barriers. The country is rich in natural

resources and the SME’s in Argentina are meeting global quality requirements. The

country’s legal system is transparent but still not completely government independent,

but future amendments are in suite to ensure a free, independent judiciary. The risk of

another military coup is significantly low as majority of the Argentine population is

happy with current government in place.

The network of road interconnecting Argentina and also inland navigable waterways,

which can be used to move cargo, add to the benefit of transporting good and raw

materials quickly and economically. Argentina has high expertise in the field of science

and technology with successful nuclear energy programs that can meet the country’s

current and also future energy requirements. The communication sector is being opened

up thus allowing private companies to increase quality, cut down rates and increase

penetration.

Argentina is highly urbanized and the influenced by European origin. It is has good

cultural backgrounds and has good presence in art, media, music, sports primarily

football thus offering a very diverse customer base.

Thus I conclude, that Argentina is good market to enter and achieve sustained growth in

any industry such as manufacturing, services, health care, communication agriculture etc.

Sources:

https://en.wikipedia.org/wiki/Argentina

http://c030.wtuc.edu.tw/ezcatfiles/c030/img/img/743/518120139.pdf

http://en.wikipedia.org/wiki/Diamond_model

http://en.wikipedia.org/wiki/Cristina_Fern%C3%A1ndez_de_Kirchner

https://en.wikipedia.org/wiki/Peronism

http://www.latinamerican-markets.com/market-research-by-category/research-on-

distribution-channels

http://www.cbpp.uaa.alaska.edu/afef/Navigating%20Latin%20American%20Distribution

%20Channels.doc

http://globserver.cn/en/argentina/infrastructure-report

http://analysis.businessmonitor.com/intelligence/latin-america/argentina/infrastructure-

industry

http://www.reuters.com/article/2011/07/01/idUS187496+01-Jul-2011+BW20110701