How badly have its construction markets been affected by the credit crunch?
Not much. Argentina’s banking system is not really internationalised due to the fallout from a previous banking crisis in the country in 2001, which dramatically shrank the system, so ironically the region has been protected from the knock on effects of the bank collapses in the US and Europe. Furthermore, as a result of the same crisis there is a trend for individuals and developers to finance most projects through cash, eliminating the reliance on third party funders.
The country’s residential market has been further protected by the absence of a second home market - a market particularly badly affected elsewhere - and a rule that banks will only fund up to 60% of any mortgages that they do lend on, usually to first time buyers, therefore reducing the risk associated with this group.
What markets are set for a boom?
Residential is the major opportunity in the country, with officials claiming a shortage of 300,000 homes in the most popular areas. Officials also hope for a growth in retirement housing and associated infrastructure, as pensioners in countries more affected by the credit crunch seek a cheap and sunny refuge in Argentina, which is already home to a large community of Europeans who migrated before 1940. The transport and hotel sectors are set to benefit from the growth in tourism which now sees more than 4m international tourists a year. The class A office market also looks promising, with virtually no premium office space in Buenos Aires currently up for rental.
What about corruption?
Argentina’s officials acknowledge that the country, like many of its south American neighbours, has a problem with transparency, but say the situation is improving. Marcelo Elizondo, executive director of trade promotion agency Fundacion ExportAr, says: “I would say Argentina is in the middle. Chile is better, but countries like Brazil and Mexico are worse.” He says that a new generation of politicians, particularly at provincial level, is improving the situation.
What reception can UK firms expect?
The country prides itself on its “open economy” – 70% of the top 500-rated companies operating in Argentina are foreign.
What are the locals saying?
“Our market isn’t sick as a result of the international crisis. There is a lot of local and foreign investment, and quite frankly we need more hotels – there’s a constant influx of foreigners.” Eduardo Gutierrez, engineer, Grupo Farallon.
Building’s market potential rating: 7/10
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