Orlando J. Ferreres & Associates A R G E N T I N A Economic Situation and Perspectives Comité Mixto Empresarios Argentino-Japonés Buenos Aires, December 5 th 2014 1
CONTENTS World Economy Argentina: Scenarios for 2015 Long-term perspectives Agricultural and meat industry Minning Oil and Gas Asset value in Argentina Long-term Forecast and scenarios 2
World GDP and population 2004 2014 f Nominal GDP Participation Population Participation Per capita GDP US$ billions % Global GDP millions % population US$ World 42.748 76.776 100,0% 7.076 100,0% 10.851 Developed 33.563 47.121 61,4% 1.041 14,7% 45.285 United States 12.277 17.528 22,8% 319 4,5% 54.980 Euro Area (12) 9.772 13.416 17,5% 335 4,7% 40.068 Japan 4.656 4.846 6,3% 127 1,8% 38.142 Other developed* 8.145 11.330 14,8% 260 3,7% 43.606 Emerging Economies 9.185 29.655 38,6% 6.035 85,3% 4.914 Asia 3.466 14.482 18,9% 3.479 49,2% 4.163 China 1.932 10.028 13,1% 1.368 19,3% 7.333 India 722 1.996 2,6% 1.260 17,8% 1.584 Latin America 2.206 5.697 7,4% 599 8,5% 9.511 Brazil 664 2.216 2,9% 200 2,8% 11.080 Mexico 770 1.288 1,7% 120 1,7% 10.767 Argentina 152 477 0,6% 42 0,6% 11.376 Colombia 117 388 0,5% 48 0,7% 8.126 Venezuela 112 342 0,4% 30 0,4% 11.231 Chile 99 263 0,3% 18 0,3% 14.856 Eastern Europe 1.788 3.024 3,9% 179 2,5% 16.909 other 1.726 6.452 8,4% 1.779 25,1% 3.628 * UK, Canada, Australia y South Korea Source: Orlando Ferreres & Associates and IMF 2014 f 3
SCENARIOS FOR 2014-2015 External conditions improve (Optimistic) Soybeans price recovers to US$ 500 per tn FED Funds rate increases slowly to 0.50% GDP growth of 3% in Brazil Settlement with holdouts in January The government issues bonds for US$ 8,000 M Current Policy + External Financing (Base) Soybeans price recovers to US$ 400 per Tn FED Funds rate is increased to 1% 1,0% GDP growth in Brazil The government issues bonds for US$12,000 M Balance of Payments Crisis (Pessimistic) Soybeans price between US$ 330-370 FED Funds rate increases rapidly and is set over 1% by december. Stagnation in Brazil (no GDP growth) No settlement with Holdouts No access to external financing 4
ARGENTINA: THE TOOLS OF GOVERNMENT 2015 OBSTACLES Downward trend in commodity prices Adjustment program in Brazil Energy Imports Holdouts Control NO NO NO YES 5
PROJECTIONS 2014-2015 2014 f 2015 f Unit 2013 Current Pessimisti Weighted Base Optimistic Policy c Avg. Probability 90% 40% 50% 10% Economic Activity IGA- (General Activity Index) annual % chg 3,2% -2,3% -4,0% -0,5% 2,5% -1,6% Per Capita GDP US$ (official ER) 13.229 11.376 10.059 11.038 11.640 10.707 Prices, exchange rate, and interest rate Consumer Prices (dic) annual % chg 29,8% 41,4% 46,0% 39,0% 37,7% 42% Nominal wage annual % chg 25,8% 32,4% 32,2% 35,6% 35,6% 34% Real wage annual % chg 0,5% -6,4% -9,5% -2,4% -1,5% -5% Exchange rate dec. (offcial) AR$ / US$ 6,35 8,91 16,64 13,4 13,07 14,7 Short term interest rate to Private S. %TNA - dic 24,8% 37,9% 50,0% 36,0% 32,0% 41% Public Sector w/o dividends from Central Bank Primary Fiscal Balance Federal Govt. mill. AR$ -57.361-131.263-199.318-205.860-188.004-201.458 % of GDP -2,0% -3,3% -3,5% -3,7% -3,4% -3,6% Overall Fiscal Balance Federal Govt. mill. AR$ -99.359-188.851-280.778-277.072-257.298-276.577 % of GDP -3,4% -4,8% -4,9% -5,0% -4,6% -5,0% External Sector Trade Balance mill. US$ 9.024 6.885 3.044-2.962 7.887 525 % of GDP 1,7% 1,4% 0,7% -0,6% 1,6% 0,1% Foreign Currency Reserves (dec) mill. US$ 30.599 23.794 13.631 14.479 25.734 15.265 Reserves (dec) mill. US$ 30.599 28.785 15.895 16.743 25.734 17.303 6
ARGENTINA: AGRICULTURAL PRODUCTION Source: & Associates based upon Agricultural Ministry 7
GRAIN PRODUCTION OUTLOOK Scenarios Production (mill tn) 2012 109,5 2022 Base 136,0 2022 - Performance improvement 154,0 2022 With new varieties 175,4 Source: GPS, Papel y visión Argentina, Brasil, Paraguay y Uruguay, 2013 8
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014e CHINA: MEAT IMPORTS Miles 000 metric de toneladas tons 500 400 300 200 100 0 Fuente: Source: Departamento & Associates de based Agricultura upon USDA de EE.UU. 9
Aug-01 Dec-01 Apr-02 Aug-02 Dec-02 Apr-03 Aug-03 Dec-03 Apr-04 Aug-04 Dec-04 Apr-05 Aug-05 Dec-05 Apr-06 Aug-06 Dec-06 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Apr-13 Aug-13 Dec-13 Apr-14 Aug-14 ARGENTINA: MINING EXPORTS M de U$S US$ million anuales 12 -month promedio moving móvil average 12 meses 6.000 5.000 Gold, silver and p. stones 4.000 3.000 610% 610% enin 10 10 años years 2.000 copper 1.000 0 Fuente: Source y & Asociados Associatesen and base INDEC al INDEC 10
ARGENTINA: RELATIVE IMPORTANCE OF SHALE GAS AND SHALE OIL RESOURCES SHALE OIL billion barrels País Shale Oil 1 Rusia 75 2 EE.UU. 58 3 China 32 4 Argentina 27 5 Libia 26 6 Australia 18 7 Venezuela 13 8 México 13 9 Pakistán 9 10 Canadá Total Mundial 9 345 Fuente: US Energy Information Administration Source: US Energy Information Agency VACA MUERTA SHALE GAS trillion cubic feet Shale gas País 1 China 1115 2 Argentina 802 3 Algeria 707 4 EE.UU. 665 5 Canadá 573 6 México 545 7 Australia 437 8 Sud África 390 9 Rusia 285 10 Brasil Total Mundial 245 7299 Fuente: US Energy Information Administration billion barrels trillion cubic feet Shale oil Shale gas Estimated capacity 16 308 % country 59,3% 38,4% % world 4,6% 4,2% Source: Petrotecnia - Instituto Argentino del Petróleo y Gas 11
HOW MUCH IS A COMPANY WORTH? PRICE / EBITDA (times) 2012-2013 SOURCE: 12
oct-12 nov-12 dic-12 ene-13 feb-13 mar-13 abr-13 may-13 jun-13 jul-13 ago-13 sep-13 oct-13 nov-13 dic-13 ene-14 feb-14 mar-14 abr-14 may-14 jun-14 jul-14 ago-14 sep-14 oct-14 nov-14 ARGENTINA: MERVAL EVOLUCIÓN DEL ÍNDICE MERVAL US$ - implied exchange rate 1.000 900 800 700 600 500 400 300 Source: & Associates based on market data 13
SCENARIOS FOR SHORT AND MEDIUM TERM 2014-2015 2016-2018 External conditions improve 10% Gradual adjustment 60% Current policy + Financing 50% Balance of Payments Crisis 40% Shock adjustment 40% 14
PROJECTIONS 2014-2018 - Gradual Based on the most likely scenario 2013 unit 2014 2015 2016 2017 2018 Economic Activity IGA- y o y % chg 3,2% -2,3% -0,5% 0,5% 5,0% 5,1% Per Capita GDP US$ (official) 13.229 11.376 11.038 8.008 8.222 8.805 Prices, Exchange rate and Interest rate Consumer Prices (dic) y o y % chg 29,8% 41,4% 39,0% 23,8% 26,0% 19,1% Nominal wage y o y % chg 25,8% 32,4% 35,6% 24,6% 27,6% 21,2% Real wage y o y % chg -3,1% -6,4% -2,4% 0,6% 1,3% 1,8% Exchange rate (dec) $US$ 6,35 8,9 13,4 20,7 25,3 28,2 Nat. Gas Price avg US$/MBTU 3,2 3,4 3,5 5,5 6,0 7,0 Public Sector w/o dividends from Central Bank Primary Fiscal Balance mill. AR$ -57.361-131.263-205.860-208.690-161.580 27.807 % of GDP 3,7% -3,3% -3,7% -2,5% -2,0% 0,3% Overrall Fiscal Balance mill. AR$ -99.359-188.851-277.072-282.749-275.683-207.872 % of GDP -3,4% -4,8% -5,0% -4,2% -3,3% -2,2% External Sector Trade Balance mill. US$ 9.024 6.885-2.962 5.950 8.091 6.780 % of GDP 1,7% 1,4% -0,6% 1,2% 2,4% 1,9% Reserves without Swaps and others mill. US$ 30.599 23.794 14.479 16.759 22.039 28.129 Reserves (dec) mill. US$ 30.599 28.785 16.743 16.759 22.039 28.129 15
PROJECTIONS 2014-2018 - Shock Based on the most likely scenario 2013 unit 2014 2015 2016 2017 2018 Economic Activity IGA- y o y % chg 3,2% -2,3% -0,5% -1,8% 9,1% 7,2% Per Capita GDP US$ (official) 13.229 11.376 11.038 7.813 8.981 10.387 Prices, Exchange rate and Interest rate Consumer Prices (dic) y o y % chg 29,8% 41,4% 39,0% 62,0% 8,4% 5,9% Nominal wage y o y % chg 32,4% 32,4% 35,6% 60,6% 11,8% 8,9% Real wage y o y % chg -3,1% -6,4% -2,4% -0,9% 3,1% 2,8% Exchange rate (dec) $US$ 6,35 8,9 13,4 25,5 25,5 25,4 Nat. Gas Price avg US$/MBTU 3,2 3,4 3,5 7,0 7,5 7,5 Public Sector w/o dividends from Central Bank Primary Fiscal Balance mill. AR$ -57.361-131.263-205.860 192.549 254.350 297.906 % of GDP 3,7% -3,3% -3,7% 2,3% 2,5% 2,6% Overrall Fiscal Balance mill. AR$ -99.359-188.851-277.072 104.216 143.661 101.115 % of GDP -3,4% -4,8% -5,0% 1,2% 1,4% 0,9% External Sector Trade Balance mill. US$ 9.024 6.885-2.962 5.040 6.403 6.595 % of GDP 1,7% 1,4% -0,6% 1,5% 1,6% 1,4% Reserves without Swaps and others mill. US$ 30.599 23.794 14.479 14.572 21.092 34.531 Reserves (dec) mill. US$ 30.599 28.785 16.743 14.572 21.092 34.531 16
THANK YOU! 17
ARGENTINA: INVESTMENT FORECAST IN 20 YEARS USD million Energy Sector Sector Energético TOTAL Per Por year año TOTAL INVESTMENT INVERSIONES 387.453 19.373 OIL & GAS 187.453 9.373 Conventional Petróleo y gas oil convencional & gas 59.400 2.970 Wells Pozos 59.400 2.970 Shale Oil 58.600 2.930 Wells Pozos 51.056 2.553 Equipment Equipos de Perforación 3.080 154 Fracture Sets de Fractura sets 1.918 96 Surface Instal. de buildings superficie 2.546 127 Shale Gas 69.453 3.473 Pozos Wells 60.360 3.018 Equipos Equipment de Perforación 4.676 234 Sets Fracture de Fractura sets 2.904 145 Instal. Surface de buildings superficie 1.513 76 DOWNSTREAM 28.000 1.400 ELECTRIC ENERGÍA ELÉCTRICA ENERGY 72.000 3.600 Electricity GeneraciónGeneration 1200 MW / año year 48.000 2.400 Distribution Transporte y and Distribución Transport Nuevas New Investment Inversiones 24.000 1.200 MAINTANANCE MANTENIMIENTO (update (puesta + annual al día expenditure + anual) 100.000 5.000 Source: Fuente: NyS own en base estimates, a estimaciones Montamat & propias, Asoc., Jorge Montamat Ferioli y Asoc., Jorge Ferioli 18