Pestle Analysis of Argentina

Comprising almost the entire southern half of South America, Argentina is the world’s eighth largest country, covering an area of 2.8 million square km. Argentina possesses some of the world’s tallest mountains, expansive deserts, and impressive waterfalls, with the diversity of the land ranging from wild, remote areas in southern Patagonia to the bustling metropolis of Buenos Aires in the north.

Its six major regions are as follows:

Cuyo and the Andean northwest

Mesopotamia and the northeast

The Chaco

The pampas

Patagonia and the Lake District

Tierra del Fuego

Inhabitants: ~ 40.134.000

Area of Argentina: 2.776.890 km² (1.072.163 square miles)

Currency: $ – Peso Argentino (ARS)

Spoken languages: Spanish

Borders with: Bolivia, Brazil, Chile, Paraguay, Uruguay

Capital: Buenos Aires

Seat of the congress/parliament: Buenos Aires

Seat of the government: Buenos Aires

Head of State and Government Chief: Cristina Fernandez de Kirchner

Typical products: Red wine of Mendoza and San Juan, Argentine steaks

PESTLE ANALYSIS OF ARGENTINA

POLITICAL ENVIRONMENT:

Argentina has been treated as a pariah state by the global funds markets. Corruption and cronyism abound, as does harassment of businesses. In 2001, Colombia was practically a failed state till staging a comeback that saw its stock market surge a lot more than fifteen fold. In 1999, Brazil could not service its debt; Given that defaulting on a file $95 billion of its financial debt in 2001, nowadays it’s the region’s juggernaut economic system. Now Argentina is getting a second look by investors, who have bid up the Merval stock index by 163 percent given that its credit-crisis low in November 2008. (The index is off 7 percent in 2010.)

They are now trying to raise money and mend fences ahead from the 2011 presidential election.

Argentina is also bidding to re-enter the worldwide personal debt markets, a precondition to increase foreign direct and portfolio funding. Another plus: With the worldwide financial system recovering and both China and Brazil white-hot, the export outlook for the country’s cornucopia of agricultural goods is improved. Significantly of Argentina’s 1.07 million square miles are fertile and inside reach of ports on its long Atlantic seaboard. Meanwhile, the country’s publicly traded banks, attractively valued compared with lenders in neighbouring nations, are an investment opportunity.

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ECONOMIC ENVIRONMENT:

The economy of Argentina has been recently on rise after the recovery from a severe economic crisis of 2001/2002. Over the last 5 years, the country’s GDP growth has been quite high: 9.2% in 2005, 8.6% in 2007 and 6.6% in 2008 (slowed down by the international financial crises). Traditionally, the country’s economy was based on the production of agricultural goods, and now Argentina remains among the world’s leading exporters of such products as corn, wool, wheat, sunflower seeds, soybeans, fruit, meat, tobacco, food processing and other related products. Besides, the country has numerous natural reserves of important minerals, including coal, iron ore, copper, zinc and tin, as well as vast resources of natural gas and oil, which make the country self-sufficient in its needs for energy.

Economic environment of Argentina is one of the most attractive markets among the national economies of Latin American countries. A lot of financial and other investments were recently received from such developed countries as Japan, the U.S., Germany, Italy, Spain, Canada, the United Kingdom, France, China, and many others. It is estimated that currently, about 450 companies owned by the U.S. investors operate in Argentinean market, giving a job to more than 150,000 local employees. The most attractive and profitable industries for overseas investors include manufacturing, real estate, construction and transportation, telecommunication, mining and energy sectors.

Therefore, the present Argentinean market and economic environment should be considered favorable for starting a new business or investing funds. As to possible investments, such sectors as telecommunication, agriculture, hotel and tourism business, services, energy and petroleum are currently among the most attractive and lucrative economic sectors in Argentina. Finally, knowing the specifics of the local market and the needs of Argentinean business enterprises and companies, it is possible to suggest selling such products as industrial machinery, tools and equipment, scientific equipment and instruments, manufactured goods, chemicals and various organic materials, pharmaceuticals and medical equipment, and so on.

SOCIAL ORGANIZATION:

FAMILY TIES

Family ties are considerably stronger in Argentina than they are in North America or in many northern European nations. Moreover, in Argentina as in most Latin American countries, family ties are notably broader than in North America and northern Europe. The North American and northern European family usually consists of one’s spouse and children (and occasionally one’s parents). In Argentina, family ties remain very close for most kinship relationships. Thus, in Argentina, cousins, in-laws, uncles and aunts, nephews, nieces, and godparent relationships are customarily considered part of one’s immediate family.

Consequently, Argentine family ties furnish much stronger admission (than in North America or northern Europe) to business joint ventures, to amiable terms in negotiations, and to access to relatives in high positions. The result is that in some cases North American or north European business visitors to Argentina find themselves unable to contact those in authority because they may not realize the importance of such connections.

GENDER ROLES

The genders are more clearly differentiated in Argentina than in the United States. To a large extent, the United States attempts both through legislation and social norms to ignore gender differences in the work place, while such differences are considerably more emphasized in Latin America as a whole, including Argentina. This has not, however, meant that Argentine women have stayed out of the work force. Currently, 41.3 percent of all Argentine women work, while well over 50 percent of Argentine women between the ages of 20 and 50 work This shows a dramatic increase from just 1970, when less than one Argentine woman in four was economically active.

CLASS STRATIFICATION

Argentina has a comparatively egalitarian distribution of wealth, especially among Latin American nations. At $9,700 per capita GDP, Argentina has the highest per capita income distribution in Latin America. In this regard, Argentina has very little of the economic class stratification that so characterizes Mexico, Brazil, and other major Latin American trade powers. Instead, the vast majority of Argentines belong to the middle class, as is the case in North America, Japan, and Europe.

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EDUCATION

With 96.2 percent able to read, Argentina has one of the highest literacy rates in the world, and the second highest (after Uruguay) in the Spanish-speaking world. The country also has among the highest primary school enrolment rates in the world, with just under 100 percent. Argentina has the highest percentage of university graduates in Latin America, with a rate of over three times the number of university students per 100,000 of Brazil or Mexico.

RELIGION

Argentina is officially a Catholic country. By law, for example, the President of the nation must be a Roman Catholic. Nonetheless, Argentina has freedom of religion, and (due to its history of immigration) a wide variety of religions are practiced.

TECHNOLOGICAL ENVIRONMENT:

A marked dichotomy exists between the technological infrastructure available in the major urban centers (notably Buenos Aires, Rosario, and Còrdoba) and that available in the countryside. Argentina’s major urban areas tend to share with northern Europe, Canada, and the United States a view of technology as a controlling mechanism. The more one moves away from these urban areas, however, one arguably may notice a traditionally more ambivalent view toward the use of technology. At the very least, many rural areas are less likely to have state-of-the-art equipment and may prove somewhat resistant to technologically driven changes. Additionally, the road infrastructure in Argentina is inconsistent. While the road system between and within the major urban centers is well-developed, no major system of highways outside of the more developed urban regions. This makes it difficult to travel to many parts of the nation.

Considerable improvement too many aspects of the Argentine technological infrastructure has followed the privatization of state-run industries implemented throughout the 1990s. While these are evident in many areas, they may be most apparent in the telephone system, which has improved both in the overall quality of service and in the access to international calling. Nonetheless, Argentina has a considerably weaker telephone system than most nations of its economic importance. Many households have no phones at all, while even in Buenos Aires, the phone system frequently cuts off during inclement weather.

LEGAL ENVIRONMENT:

The Court System of Argentina consists of Federal and Provincial court systems.  Federal courts include the Supreme Court, 17 appellate courts, and district and territorial courts on the local levels. The Federal Court System hears cases concerning the National Government or any of its agencies, conflicts involving two or more provinces, matters involving foreign people or companies, and certain alleged violations of individual Constitutional rights.  There are certain district courts that have judges that handle administrative matters. Each province has its own judicial court system.  The provincial court system consists of supreme, appellate, and lower courts.  There are three main types of courts in the provincial system- civil, criminal, and labor courts. The Provincial Supreme Courts or Superior Tribunals of Justice consist of three to nine members, depending on the province.

ENVIRONMENTAL SCENARIO:

The principal environmental responsibilities are vested in the Ministry of Public Health and the Environment; the Sub secretariat of Environmental Planning in the Ministry of Transportation and Public Works; and the Sub secretariat of Renewable Natural Resources and Ecology within the Secretariat of State for Agriculture and Livestock. In 1977, the Metropolitan Area Ecological Belt State Enterprise was created to lay out a 150-km greenbelt around Buenos Aires, with controls on emission and effluents as well as on building density.

The major environmental issues in Argentina are pollution and the loss of agricultural lands. The soil is threatened by erosion, salinization, and deforestation. Air pollution is also a problem due to chemical agents from industrial sources. The water supply is threatened by uncontrolled dumping of pesticides, hydrocarbons, and heavy metals. Argentina has a renewable water supply of 276 cubic km. In 2002, some 97% of all city dwellers and over 70% of rural dwellers had access to improved water sources. In 2000, about 12.7% of the land area contained forest and woodland.

ANALYSIS OF ARGENTINA ON THE BASIS OF PORTER’S DIAMOND MODEL:

This model helps understand the competitive advantage of a nation in global competition.

The traditional economic model mentions the following factors for comparative advantage of the nations:

Land

Location

Natural resources

Labour

Local population area

But the factors for competitive advantage for countries in porter’s diamond model are:

Firm strategy, structure and rivalry- The world is dominated by dynamic conditions and it is direct competition that impels firms to work for increases in productivity and innovation.

Demand conditions- The more demanding the customers in an economy, the greater the pressure firms will be facing to constantly improve their competitiveness via innovative products, high quality etc.

Related and supporting industries- Spatial proximity of upstream and downstream industries facilitates the exchange of information and promotes innovation.

Factor conditions- Specialized factors of production are skilled labour, capital and infrastructure. They are more difficult to duplicate. This leads to a competitive advantage.

Government acts as a catalyst and challenger. It is to encourage or even push companies to raise their aspirations and move to higher levels of competitive performance.

Firm’s strategy, structure and rivalry- Argentina is very good in creating new innovations as the firms there are competing against each other. They are adopting new techniques and the presence of intense rivalry in the home base is also important, it creates pressure to innovate in order to upgrade competitiveness.

Demand conditions- In Argentina the demand from internal customers is much more as compared to any other African country. This thing continuously encourages the nation to innovate faster and to produce quality products to satisfy their customers.

Government- Government is also playing a very vital role in improving the condition of the country. It is following a very liberal policy regarding all important issues like the economy freely trades with other nations of the world.

Related and supporting industries- Industrial development calls for proper supply from the upstream and downstream industries which in case of this country are quite good. The country is engaged in the export of certain goods which by no means would be possible if the supporting industries donot properly coordinate.

Factor conditions- The country is highly endowed with natural resources and other metals and minerals which is the sole cause of the country’s richness.