BMI's Executive Summary

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Bolivia and Argentina signed a contract in March 2007 to build a US$1.5bn, 1,500km gas pipeline that will eventually quadruple the amount of natural gas Bolivia exports to its southern neighbour. The deal finalised the terms of an agreement the preceding October between Bolivian President Evo Morales and then Argentine president Néstor Kirchner. It brought the project first proposed by the two South American nations three years previously a step closer to reality. The Northeast Argentina Pipeline will be able to pump up to 20mn m3 of gas daily from Bolivia to Argentina by 2010, effectively quadrupling the 7.7mn m3 daily capacity of the existing pipeline built between the two countries in the 1970s, officials said. Gas is expected to begin to flow through the pipeline in late 2009 or early 2010, and supplies will gradually be ramped up until full capacity is reached by the end of 2011.

Meanwhile, in June Argentina entered its fourth-straight winter with cold-weather natural gas shortages. The Kirchner administration blames the shortages on private energy companies for not investing, while analysts say a five-year-old utility rate freeze for residential clients gives companies little incentive to do so. Gas distributors were forced to severely restrict gas supplies to industrial clients in July, threatening to undermine economic growth and leading some industry executives to rethink investment plans. BMI concludes that pipeline throughput growth will reach an annual average of 4.7% over the next five years, expressed in terms of million tonnes-km (mntkm). This will be faster than the country's economic growth rate over the same period.

Various factors support this prediction. Across our 2007-2011 forecast period, we now expect average annual GDP growth of 4.5%. Energy demand will expand more strongly, however. Despite the Bolivia deal, there are still some question marks about how fast new capacity will be built. We still envisage that pipeline throughput will only begin to pick up a little more towards the tail-end of our forecast period as the new pipeline comes on stream around 2010 (not 2008-2009 as currently predicted).

The outlook for the overall freight industry is moderately encouraging. Road haulage will continue to be the dominant freight transport mode. Growth will be somewhat constrained by capacity limits, with investment needed in both the highways network and truck fleets. Nevertheless, over the forecast period annual average growth in road freight carried will be 5.0%, down from the preceding five years, when growth was 6.1% per annum. BMI now forecasts 5.6% annual growth in rail freight over the next five years, with China-funded new investments helping to lift capacity. We are forecasting maritime traffic to grow by an annual average of 4.2%, with the growth concentrated in the early part of the forecast period because of the global shipping boom, which is now easing. We see airfreight registering satisfactory, but not spectacular, growth rates – partly because much of Argentina's international trade remains in the relatively higher bulk/low value pattern and is therefore not particularly suited for transport by air. However, we take LAN's entry to the Argentine market as a positive sign of some supply-side impetus and we are now forecasting average annual airfreight growth of 6.5% in the forecast period.

We have awarded Argentina a combined freight transport business environment ranking of 33.0 (out of a theoretical maximum of 70.0), which places it below the average score of 39.1 for the range of key Latin American markets that BMI monitors. The positives include the country's long-term economic risk and political risk and infrastructure growth.

The total value of transport and communications GDP will rise to US$34bn in nominal terms by 2011, representing 9.0% of Argentina's GDP. The transport and communications sector employed around 652,980 people, or 7.1% of the labour force, in 2006. We see the figure rising to 686,380 by 2011 although as a proportion of the labour force it will remain unchanged at 7.1%.

Contents

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Chapter 1 - Executive Summary

Chapter 2 - SWOT Analysis

Argentina Freight Industry SWOT

Argentina Political SWOT

Argentina Economic SWOT

Argentina Business Environment SWOT

Chapter 3 - Business Environment Overview

Latin America Business Environment Ranking

Business Environment Ranking

Economics – Long-Term Risk

Politics – Long-Term Risk

Freight Transport Growth

Transport Infrastructure Growth

Regulatory Environment

Competitive Environment

Transport Intensity Index

Political Risk Summary

Economic Risk Summary

Business Environment Risk Summary

Legal Code/Corruption

Red Tape

Labour Force

Chapter 4 - Industry Trends And Developments

Rail

Air

Sea

Pipelines

Chapter 5 - Industry Forecast Scenario

Macroeconomic Environment

Table: Economic Activity – Historical Data And Forecasts

Chapter 6 - Transport Outlook

Freight carried (domestic and international):

Table: Freight Transport Industry Forecast

Chapter 7 - Trade Environment

Overview

Trade Agreements

Tariffs

Table: Value of Imports By Category (US$mn)

Value Of Exports By Category (US$mn)

Table: Top Export Destinations

Table: Export Trade, % y-o-y

Table: Top Import Sources

Table: Import Trade, % y-o-y

Chapter 8 - Market Overview

Multimodal

Infrastructure

Competitive Landscape: Multimodal

Road

Competitive Landscape: Road

Rail

Competitive Landscape: Rail

Air

Competitive Landscape: Aviation

Company Profiles

Water

Competitive Landscape: Maritime

Pipelines

Competitive Landscape: Pipelines

Company Profiles

Chapter 9 - BMI Forecast Modelling

How We Generate Our Industry Forecasts

Transport Industry

Sources

Competitive Landscape for Latin America Freight Transport Reports: Sample of Companies Ranked

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Analysis of latest projects across the freight transport sector – road, rail, air, sea, logistics – including market overview which provides an outline of the key elements driving development. SWOT analysis of the state’s business environment, transport sector, politics and economics, which carefully evaluates the short- and medium-term issues facing the industry.

Network of Latin American Freight Transport Sources

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BMI's Latin American Freight Transport Reports are based on an extensive network of multilateral organisations, government departments, freight transport industry associations, chambers of commerce and company reports. Information sources include: