Country overview & investment opportunities - Argentina

Argentina
Country overview & investment
opportunities
May, 2017

Content
1. Argentina Overview
1.1. Country Overview
1.2. Political and macroeconomic environment
2. Investment Opportunities
2.1. Overview
2.2. Infrastructure & Public Works
2.3. Energy
2.4. Renewable Energy
2.5. Mining
2.6. Agribusiness
2.7. Oil & Gas
2.9, Industrial Goods & Services
2.9. Telecommunications & High Technology
2.10. Capital markets

Investment Opportunities in Argentina
Argentina
Overview

Country overview
3rd largest economy in Latam, with a GDP of + US$ 500 bn
2nd highest GDP per capita in PPP terms
+40 MM pop
8th largest country in the world, with 53% of arable land (13%
developed)
Large oil and gas (conventional and unconventional) and
mineral reserves
Huge variety of natural resources including land suitable for
livestock and crops, fisheries, oil, gas and minerals
1.8 million University Students
Strategic relationships and bilateral treaties; G20, Mercosur,
UNASUR
Member of the World Bank’s International Center for
Settlement of Investment disputes

► Lifting currency controls by floating the peso.
► Settlement with debt default holdouts.
► Return to international financial markets, both public and private
sectors.
► Reduction of capital cost (see EMBI evolution).
► Increase of Central Bank reserves.
► Gas and electricity tariff review, reducing subsidies.
► Regularization of the National Institute of Statistics (INDEC) and
removal of IMF censure.
► Reduction of export tariffs on agricultural and mining products.
Source: Reuters
Political and macroeconomic environment
Main achievements in 2016
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
E
2018
E
2019
E
2020
E
EMBI+ evolution (spread basic points)
Source: Econviews
► Execution of one of the largest tax amnesty programs worldwide. Around US$116.8 bn (+20% of GDP) were declared,
generating US$ 9.6 bn in penalties.
► Passing of Public-Private Partnership Bill to attract long-term infrastructure investments.
► Passing of Small-Medium Businesses Bill to facilitate and incentivize their activity.
► Launch of huge infrastructure program and renewable energy plan.
► Public-private-unions agreements to incentivize specific-sector investments.
► Active integration with the world (leadership position in Mercosur/European Union trade talks, fast track process to join
OCDE, host of the 2018 G20 Summit, agreements with numerous countries).
► GDP growth of 0.5% q/q in 4Q-16 starting recession exit,
In December 2015, President Mauricio Macri’s administration took over with the aim to lead a political and economic
transformation to reach long term and sustainable economic growth. Significant economic imbalances needed to be normalized as
first step. In this context, the following are the main highlights of the first-year of Macri’s administration:

Source: Reuters
Political and macroeconomic environment
Challenges for 2017 & beyond
► Congress mid-term elections. Can be viewed as a test of Macri’s administration support from population.
► Reduction of inflation rate. The Central Bank announced an inflation target of 12-17% for 2017 (vs 36.6% in 2016), 8-12% for 2018
and convergence with a medium-term target of 5% (with a tolerance range of 1.5 percentage points in either direction) in 2019.
► Reduction of fiscal deficit. Primary deficit targets of 4.2%, 3.2% and 2.2% of GDP are set for 2017, 2018 and 2019, respectively.
► GDP growth (see chart below).
► Investments flow and employment generation. Foreign and domestic investments have not yet materialized as planned by the
Government.
► Poverty reduction. Economic growth and employment generation is essential to reduce the 30% poverty rate.
► Tax reform. Government announced an integral tax reform Project to be sent to the Congress for discussion in 2018.
► Development of domestic capital markets. A new Capital Markets Law was sent to the Congress for discussion.
Real GDP annual variations (2005 prices)
8.9%
8.0%
9.0%
4.1%
-5.9%
10.1%
6.0%
-1.0%
2.4%
-2.5%
2.6%
-2.3%
3.2%
4.0%
3.5% 3.2%
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 E 2018 E 2019 E 2020 E
Expected
Source: Econviews
Some of the key challenges to consolidate the transformation process are listed below:

Note: investment timeframes may vary anywhere from 1 to 20 years, depending on the specific characteristics of the project and sector
Energy
US$ 35 Bn+
Infrastructure
& Public Works
US$ 142 Bn+
Mining
US$ 30 Bn+
Oil & Gas
US$ 25 Bn+
Agribusiness
US$ 26 Bn+
Industrial
Goods & Services
US$ 8 Bn+
Telecom &
High Tech
US$ 5 Bn+
More than US$ 265 bn
investments
opportunities across
multiple sectors
Investment Opportunities Overview
This material has been prepared based on information published by Argentina investment + trade promotion agency.

More than US$ 142 Billion of
investments are expected
Investment Opportunities in Infrastructure &
Public Works
Roads & Highways US$55 bn
Freight & Passengers Railways US$24,5 bn
Water & Sanitation US$22 bn
Education US$16 bn
Other Urban Mobility Projects US$12,5 bn
Real Estate & Housing US$5 bn
Current Status
Health US$4 bn
Airports & Ports US$3 bn
Ports
► Lack of investment in Waterways and access
channels (major trends to larger ships)
Water & Sanitation
► Waste water treatment penetration is
between 15 – 20%, compared to 70% in
Brazil and 96% in Chile
Railway Freight Lines
► Only 5% of freight is transported by rail
(increasing costs)
► Degraded facilities and equipment
► Low efficiency due to average speed of 12-
15 km/h
► Intra- and intermodal logistics
Roads & Highways
► High concentration of trucks
► High Costs (wages, diesel)
► Low intermodal connectivity
► Only 7% of motorways/highways
► < 35% of roads are paved, a much lower
percentage than some of its regional peers

Source: Reuters
Investment Opportunities in Infrastructure &
Public Works
Public Private Partnership Regime Overview
Main provisions and benefits of the PPP regime
► Transparent, flexible and competitive procurement
process which can be initiated either through a public
tender or by private initiative. In addition, the bill
provides a new tool – Competitive Dialogue Basis
In November, the National Congress passed, the so-called Public- Private Partnership bill (27,328). It is a high-level
framework that outlines the general guiding principles and certain mandatory terms that must be included in any PPP
contract related to infrastructure, services, production or innovation.
The bill is relatively short clarifying that more detailed regulations be included in subsequent legal acts, bidding terms
and conditions of the contract.
► Elimination of some powers of public authorities. In
addition, the government has a right to unilaterally
modify a contract only in regard to the scope of
projects and it if represents no more than 20% of the
total contract value; additionally, the contractor must
be adequately compensated.
► Ample choice of financing and security structures
► International arbitration may be available to resolve
disputes
► Mitigation of currency risks
► Prohibition of indexation is excluded
► Possibility of the remuneration to be paid in
foreign currency
► Adequate compensation for early termination
► Possibility of appointing independent technical auditors
who will control and monitor the execution of projects

5.40%
2.50%
51.10%
32.60%
1.80%
6.60%
2015
4.80%
5.60%
49.60%
23.70%
1.90% 14.40%
2025
Hydro Nuclear Natural Gas
Oil Carbon Renewable
100.000 Ktep80.000 Ktep
64% 43% Thermal
4% 10% Nuclear
30% 27% Hydro
2% 20% Renewable
More than US$ 35 bn expected investments
+ 8,000 MW
Argentina’s plan is to
increase its energy
production and transform
its energy matrix by
increasing its investment
in energy infrastructure.
Energy matrix transformation
Investment Opportunities in Energy
Renewables
Hydroelectric
Thermal
Power Grid
Nuclear
US$15 bn
US$10 bn
US$5 bn
US$5 bn
US$3 bn
+ 1,500 MW
+ 3,000 MW
+ 10,000 MW
3rd Largest Wind
Reserve in the
world
70% of the territory exceeds the
minimum efficiency standard
2nd Largest Solar
Reserve in the
world
With an average of
300 days/year of sun

Long Term Plan for 2025: 10,000 MW
► Renewable energy Generation
target of 20% for 2025.
► Creation of a new Fund Trust in
order to guarantee PPA’s and co-
financing.
► First tender for 1,000 MW has
been already submitted.
► Reaching 2,000 – 3,000 MW in
the next three years.
► Benefits include:
▬ Accelerated Depreciation
▬ Temporary exemption of
income tax.
▬ Early Refund of VAT
Inputs that exceeds VAT
outputs.
▬ Exemption of Import
Duties.
The first Renewing Plan tender
(RenovAr”) was submitted with
the objective of adding 1,000
megawatts of power within two
years to the country's energy
supply with an estimated US$
1,5 bn and US$ 2 bn of
investment.
Investment Opportunities in Renewable Energy
The Argentine government
awarded 1,281.5 megawatts
of power under Round 1.5.
A total of 30 projects were
selected under this additional
tender, including 10 wind
projects, representing 765
megawatts of capacity and 20
solar schemes, totalizing 516
megawatts.
According to Steve Sawyer, head of the
Global Wind Energy Council, "The fact that
Argentina has one of the best resources for
renewable energy in the world isn’t
something new for investors…". What is
new, however, is that the restrictive policies
are now being reversed through RenovAr.
Law 27.1911 Renovar 12 Renovar 1.53

13th 4th World’s Top Ten
World producer Latam producer
10th 5th World’s Top Five
World producer Latam producer
20th 5th 6th
World producer Latam producer World producer
3rd 2nd 3rd 2nd
World producer Latam producer World producer Latam producer
► Argentina has abundant mineral reserves and 75% of its mining surface remains unexplored and 90% of
concession areas are in early stages of exploration (44 projects). According to analysts, there is US$400 Bn
worth of untapped mining resources underground in Argentina.
► There are 750,000 km2 of high potential mining areas and 183,000 Km2 of granted mining rights.
► As of 2016, President Macri eliminated a 5% tax imposed by the previous administration on mining exports.
► In 2017, the government plans to send a mining bill to Congress that would permit open-pit mines to operate
throughout the country as part of an effort to jump-start investment in the sector.
► In Argentina, around US$ 30 Bn are needed to develop gold, silver, copper, lithium and potash, among others.
Investment Opportunities in Mining
Currently Potential
Gold
Silver
Copper
Lithium
Northwest Projects
 6 lithium
 4 copper
 3 gold
 2 silver
Cuyo Projects
 6 copper
 3 gold
 1 nickel
 1 potash
Patagonia Projects
 11 gold
 3 silver
 3 uranium
Source: Argentina investment + trade
promotion agency

+60% sowing and yield monitoring
Price controls eliminated
Restrictions to dividends repatriation removed
Argentina is one of the main suppliers of
food globally…
More than US$ 26 Bn opportunities
Investment Opportunities in Agribusiness
#1 exporter of soybean flour and oil
#1 producer and exporter of lemons
#3 exporter of soybeans
#4 exporter of corn and sunflower oil
and has excellent agriculture conditions…
Mild climate with abundant rainfall
High technology adoption
Exceptional human resources
+ 90% satellite guidance for spraying machines
+ 80% hire technical advisors
~ 45% have university degrees
Rich soils with low fertilizer needs
Agribusiness is considered to be a critical engine for the country and to ensure
the rebound of this sector, the Government have taken the following measures:
Export taxes either eliminated or reduced
Exchange rate at market values
Export quotas eliminated
Forestry: US$ 2,5 Bn
Processing an additional 8–10 Mn m3, halving
imports and doubling exports by 2020
Cattle raising: US$ 5 Bn
Cattle raising expansion of 10 M heads, 200 K
swine and 1,5 Bn poultry
Irrigation: US$ 18 Bn
Expected to triple the amount of irrigated land
from 2.1 to 6.2 Mn Ha
Aquaculture: US$ 1 Bn
The new law (27,231) encourages sustainable
development of the aquaculture sector with
fiscal benefits and financing options

Investment Opportunities in Oil & Gas
Largest shale oil & gas play
outside the US, with 4+ years of cumulative development
US$ 20 Bn
Expected investments per year
2nd
Largest shale gas reserves in the world
Neuquén Basis
Located in Argentina
Vaca Muerta
4th
Largest shale gas oil reserves in the world
2010
The field was discovered by Repsol - YPF
480 million barrels
Risked shale oil resources
27 billion barrels
Of shale oil may be technically recoverable
75
58
32
27
0
10
20
30
40
50
60
70
80
Russia USA China Argentina
1115
801
707
622
0
200
400
600
800
1000
1200
Russia USA China Argentina
Source: Energy Information Administration
Shale Oil Reserves (Bill. Barrels) Shale Gas Reserves (Trill. Cubic Feet)

1 million
Cars by 2023 doubling today's
manufacturing capacity
+30,000
Jobs will be created
35%
Of output is to be exported to
countries outside the
Mercosur trade bloc
US$ 5 bn
Expected investments over the
next two years
Investment Opportunities in Industrial Goods &
Services
Committed investments already announced for the industry sector have
reached USD 8.7 billion over an expected total of more that US$ 30 bn
2nd
Region exporter of
manufactured
products, after Brazil
30%
Contribution to GDP
Automotive Industry: One Million Vehicles
20%
of the country’s formal
workforce employed by
goods and services
industry
75%
Of industrial
production is destined
to domestic market
Food
20%
Chemical
17%
Metallurgical
15%
Automotive
11%
Base
metal
8%
Others
29.00%
Manufacturing Output by Sector (%)

Oscar Aguad, the Minister of Communications, has defined a program
for the sector centered around 5 priorities
Investment Opportunities in Telecommunications
& High Technology
Regulatory
framework
Build a modern high speed broadband infrastructure
Improve 3g and 4g mobile network quality
Demand
stimulation
Develop a modern framework for the digital era
Stimulate demand for advanced services
Eliminate the Argentina’s digital gap
The results of two decrees have been significant
 Decree 267/15: It broadened the maximum number of licences (now transferable as with any property) and defined
cable TV as “telecommunications” — i.e. as beyond the orbit of communication media. It also anticipated that
telecommunications companies could start offering paid TV in two or three years, according to an ENACOM resolution.
 Decree 1340/16: It stipulates that telecommunication companies will be able to offer paid TV (by cable, not satellite)
as from January, 2018 in cities with over 80,000 inhabitants.

The expansion of cell and broadband internet coverage in Argentina
represents an investment opportunity of US$ 5 Billion
Investment Opportunities in Telecommunications
& High Technology
Connection of
Homes to Fiber
Optic Network
Broadband Internet
Expansion
Cell Coverage
Expansion
Opportunity detail in US$ MM
3,000 – 5,000
307
The expansion of Argentina’s cell
coverage by installing 30 – 50K
towers presents a US$ 3 – 5 Bn
investment opportunity (US$
100K per site for 30-50K cell
sites).
Opportunity to expand
Argentina’s fiber optic network
to a further 1.2K localities
across the country over the next
2 years by deploying cable and
building access points.
Opportunity for local internet
provider to extend the ARSAT
fiber optic network connecting
homes.
700
Current Status
Mobile phone penetration is
high (141%) but coverage is
not uniform across the country
and is often poor due to
insufficient cell tower coverage
(15K active cell sites).
The current fiber optic network
covers more than 32,000 km
but only 30% of the fiber is “lit”
(active) and internet speed is
15% lower than those of
regional peers.
Source: Argentina investment + trade promotion agency

Capital markets
Least Developed Market in Latam
More than 30 IPOs of Argentine companies
have been announced, including:
First Argentine companies going public in
2016 since 2013
Source: Argentina investment + trade
promotion agency
79%
31% 29% 26% 24%
8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
CHL MEX COL BRA PER ARG
Market capitalization (% of GDP, 2015)
Argentina has the least developed market in the region. A new Capital Markets
Law was sent to the Congress for discussion. More tan 30 IPOs of Argentine
companies are expected in the local and foreign markets.

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© 2017 Pistrelli Henry Martin y Asociados SRL
All Rights Reserved
This material has been prepared for general informational purposes only and is
not intended to be relied upon as accounting, tax or other professional advice.
Please refer to your advisors for
specific advice.
www.ey.com/ar
Eduardo Coduri
Country Managing Partner
Office: +54 114318-1587
Mail: eduardo.coduri@ar.ey.com
Gustavo Capatti
Assurance Leader - Partner
Office: +54 114515-2633
Mail: gustavo.capatti@ar.ey.com
Fernando Coccaro
Assurance Leader Deputy -
Partner
Office: +54 114510-2366
Mail: fernando.coccaro@ar.ey.com
Carlos Casanovas
Tax Market Leader - Partner
Office: +54 114318-1737
Mail: carlos.casanovas@ar.ey.com
Contacts
Ignacio Hecquet
Transaction Advisory Services
Leader - Partner
Office: +54 114318-1549
Mail: ignacio.hecquet@ar.ey.com
Aldo Pelesson
Advisory Leader - Partner
Office: +54 114318-1713
Mail: aldo.pelesson@ar.ey.com
Pablo Moreno
Markets Leader Argentina- Partner
Office: +54 114510-2366
Mail: pablo.moreno@ar.ey.com

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