Page 1 of 17 Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas Economic overview of the province of Buenos Aires October, 2013 General aspects The province of Buenos Aires is without doubt, the main district of Argentina. With 11% of the national territory it is the largest province in the country, accounting for 39% of the population, and contributing with 37% of the Gross Domestic Product (GDP). It is also the most important industrial region of the country, producing more than half of the goods made in Argentina, (56%), thus positioning it as the district with the highest share of national exports, contributing with nearly a third of them. From 2003 up to the present, the province of Buenos Aires has led the phenomenal growth cycle experienced by Argentina's economy, becoming the country's growth engine. In this sense, the Province grew at an average annual rate of 8.2% during 2003-2012, exceeding the national performance (the average annual rate of growth in Argentina during the same period was 7.1%). Graph 1 National and provincial product evolution 10.8% 12.8% 10.6% 8.9% 10.3% 6.2% -3.3% 13.7% 10.0% 3.3% -6% -3% 0% 3% 6% 9% 12% 15% 18% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Annual growth rate GDP - Argentina (constant prices 1993) GDP - Buenos Aires (constant prices 1993) Source: Dirección Provincial de Estadística and Ministerio de Economía y Finanzas Públicas de la Nación. Main productive sectors The Province has a well diversified productive structure. The most important sector is the industrial one, with a share of the Province Gross Domestic Product (GDP) of 27.9%, but transport services (17.8%), real estate services (12.6%), commerce (12.2%), and the construction activity (5.6%) are also relevant. Another significant activity is tourism, which has gained an increasing importance in the Province (7.8%). Buenos Aires is characterized for having the most fertile land in the country, giving it a vast tradition in agriculture and livestock. While the agriculture sector accounts for only 4.4% of the Province GDP, its relevance in economic activity lies in the productive linkages with other sectors (it is a major user of chemicals and agricultural machinery and provides critical raw materials to the industry) and the importance that it has both for provincial and national exports.
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Page 1 of 17
Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Economic overview of the province of Buenos Aires October, 2013
General aspects
The province of Buenos Aires is without doubt, the main district of Argentina. With 11% of the national territory it is the largest province in the country, accounting for 39% of the population, and contributing with 37% of the Gross Domestic Product (GDP).
It is also the most important industrial region of the country, producing more than half of the goods made in Argentina, (56%), thus positioning it as the district with the highest share of national exports, contributing with nearly a third of them.
From 2003 up to the present, the province of Buenos Aires has led the phenomenal growth cycle experienced by Argentina's economy, becoming the country's growth engine. In this sense, the Province grew at an average
annual rate of 8.2% during 2003-2012, exceeding the national performance (the average annual rate of growth in Argentina during the same period was 7.1%).
Graph 1 National and provincial product evolution
10.8%
12.8%
10.6%8.9%
10.3%
6.2%
-3.3%
13.7%
10.0%
3.3%
-6%
-3%
0%
3%
6%
9%
12%
15%
18%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Annu
al g
row
th ra
teGDP - Argentina (constant prices 1993)GDP - Buenos Aires (constant prices 1993)
Source: Dirección Provincial de Estadística and Ministerio de
Economía y Finanzas Públicas de la Nación.
Main productive sectors
The Province has a well diversified productive structure. The most important sector is the industrial one, with a share of the Province Gross Domestic Product (GDP) of 27.9%, but transport services (17.8%), real estate services (12.6%), commerce (12.2%), and the construction activity (5.6%) are also relevant. Another significant activity is tourism, which has gained an increasing importance in the Province (7.8%).
Buenos Aires is characterized for having the most fertile land in the country, giving it a vast tradition in agriculture and livestock. While the agriculture sector accounts for only 4.4% of the Province GDP, its relevance in economic activity lies in the productive linkages with other sectors (it is a major user of chemicals and agricultural machinery and provides critical raw materials to the industry) and the importance that it has both for provincial and national exports.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Graph 2 Province of Buenos Aires GDP structure (2012)
Agriculture4.4%
Industry27.9%
Construction5.6%
Transport17.8%
Commerce12.2%
Real Estate Ss.12.6% Pulic Adm.
3.0%
Education2.7%
Communitary Ss.
3.7%
Others10.0%
Source: Dirección Provincial de Estadística.
Despite its low share in the provincial product, the agriculture and livestock sector is among the most dynamic in the Province. Together with industry, construction and tourism, it is one of the segments that has shown the highest growth in the last years. A brief description of the composition and recent evolution of these segments is presented below.
Agriculture has been growing spectacularly since 2003. The introduction of cutting edge technology, together with a favorable international context marked by a sharp rise in prices (especially soy), favored a major expansion of agricultural activity which led to the planted area growth of 41.3% between 2003 and 2012. Specifically, the area devoted to agriculture in the Province rose from 9.1
million hectares during the 2003/04 crop year to 12.9 million hectares during the 2012/13 crop year.
Agriculture
As regards the agricultural area, nearly 80% is used for the plantation of four crops: wheat, corn, soybean and sunflower. Nevertheless, the agrarian structure is increasingly concentrating around soybean, as it is at the national level. Although this has been a long term phenomenon (Box 1), it tended to intensify during the last decade. Specifically, the soybean area increased from 3.2 million hectares in 2003 to 6.7 million in 2012, equivalent to a growth of 110%. For the next season (2013/14), it is estimated that soybean area will be similar to previous crop year, which, if confirmed, would represent approximately about 47% of the arable land in the Province.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
The growth of soybean led to a reduction in the area for other traditional crops of the Province such as wheat and sunflower. Thus, despite the expansion of the provincial agricultural frontier, the wheat sown area shrank 60.7% between 2003 and 2012 while the sunflower area declined in 28.6%. Currently, wheat and sunflower account for 9.6% and 5.4% of the arable land of the
Province respectively, figures which in turn account for 39.4% of national wheat planting and 41.8% of sunflower area.
In contrast, corn planting showed a favorable trend, growing from 795 thousand hectares in 2003 to 1.6 million in 2012 (102%), about 12.4% of the cultivable land of the Province, representing in turn 26.2% of the national total.
Graph 3 Planted area evolution (hectares)
2003/04 crop year 2012/13 crop year
Sunflower970,14310.6%
Wheat795,530
8.7%
Soy3,205,523
35.0%
Corn3,165,997
34.6%Others
1,018,71811.1%
Sunflower692,881
5.4%Wheat
1,606,58312.4%
Soy6,734,155
52.1%
Corn1,245,804
9.6%
Others2,654,636
20.5%
Source: Ministerio de Agricultura, Ganadería y Pesca de la Nación.
Additionally, the introduction of new technologies led to an even higher sector growth in terms of production. The total volume of grain increased from 24.9 million tons in the 2003/04 crop year to more than 38.7 million tons in the 2012/13 crop year, representing a 55.3% growth. This increase
was led by the production of soybeans, which more than doubled during the 2003-2012 period, reaching a 17.8 million tons volume in 2012/13 crop year. These figures position the province of Buenos Aires among the world's leading producers of this crop, placing it behind countries like the U.S. and Brazil.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Graph 3 Production evolution (tons)
Crop year 2003/04 Crop year 2012/13
Sunflower1,646,429
6.6%
Wheat4,998,610
20.0%
Soy7,852,000
31.4%
Corn9,033,010
36.2%
Others1,438,379
5.8%
Sunflower1,548,130
4.0%
Wheat9,790,376
25.3%
Soy17,812,808
46.0%
Corn3,837,707
9.9%
Others5,775,753
14.9%
Source: Ministerio de Agricultura, Ganadería y Pesca de la Nación.
As mentioned, manufacturing is the most important productive sector in the province of Buenos Aires. It is formed by many companies from various categories and is one of the sectors that has experienced the largest growth over the last years.
Manufacturing industry
Despite being a highly diversified industry, there are certain manufacturing branches
that stand out from the rest due to their magnitude and/or dynamism. Among the most important ones are the chemical manufacturing, food and beverages, oil processing, car production and primary iron and crude steel, the latter two being the most dynamic sectors of the Province.
The evolution of the segments that experienced the highest growth during the period 2003-2012 is shown below.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Box 1 – Soybean production evolution in the province of Buenos Aires Although soybean production has experienced a spectacular growth over the last decade, driven by growing demand from countries like China and India, it was initially planted on a large scale in the province of Buenos Aires in the early '80s, occupying the most productive areas of the region (north of the Province). However, only in the 90´s soybean planting began to show considerable growth, due to the technological advances that came with the direct planting and the use of transgenic seeds which gave the crop resistance to agrochemicals, increasing performance and decreasing the cost of plantation. Thus, soy stopped concentrating in the north of the Province to spill over into the rest of Buenos Aires territory, causing a remarkable growth in the planted area of this crop. In recent years, the high international price of the crop further accelerated the process of soybean production concentration, especially in central and northern areas of the Province, displacing other crops and regional productions such as wheat, sunflower, cattle and milk production. Currently, the soybean planted area keeps growing and it occupies more than 50% of the total planted area in the Province.
Source: Own elaboration based on data from Ministerio de Agricultura, Ganadería y Pesca de la Nación.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Annual growth rate (left axis)Cookies and biscuits (right axis)
Source: Dirección Provincial de Estadística.
Car production increased 347.4% during the period mainly as a result of an increased domestic demand. However, in the last years exports have played an increasingly important role, especially those bound for Brazil, which account for about 80% of exports.
In turn, in the metallurgical sector crude steel production increased 4.4% between 2003
and 2012. This performance was caused by the maintenance shutdowns carried out in some plants in mid-2012, a fact that signifi-cantly affected production during last year. Thus, between 2003 and 2011, crude steel production increased 24.5%, reaching a new record high in 2011.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Finally, other outstanding items belonging to the food industry were poultry slaughter and processing of cookies and biscuits. The former accumulated a growth of 212.5% over the period 2003-2012, driven by a higher domestic demand resulting from the low price of chicken in relation to other meats. Regarding the elaboration of cookies and biscuits, it accumulated a 181.1% growth over the period 2003-2012. This is one of most important categories of consumer goods in the local market and is part of the confectionery and snack industry, which experienced strong growth in recent years supported by a higher domestic demand and increasing exports.
Construction was one of the key sectors in the economic expansion witnessed in the last decade. The rise of the domestic activity after the 2002 crisis and foreign exchange earnings associated with the growth of exports strongly boosted the activity of the segment, resulting in an increase in housing (both private and public), commercial constructions and infrastructure investments.
Construction
This was reflected in a strong growth in construction materials sales. In this context, brick sales and cement dispatches, two indicators that show the construction activity evolution, accumulated growths of 100% and 143.2% respectively between 2003 and 2012.
Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
The great diversity of tourist attractions spread throughout the provincial territory makes the province of Buenos Aires a major destination for domestic tourism. According to figures from Secretaría de Turismo de la Nación, the combination of plains, hills, beaches and cities attract around 12 million tourists to the region anually.
Tourism
The main tourist destination in the Province is without doubt the Atlantic Coast, where there are more than 1,200 kilometers of beach and both small towns and major cities can be found. The city of Mar del Plata, head of the municipality of General Pueyrredón, is its main tourist center, followed by Pinamar, Villa Gesell and Partido de la Costa. This region receives the largest number of tourists in the period between December and the Easter holiday, determining the strong seasonal component of the provincial tourism.
Tourism is not a productive activity itself, but it covers a range of activities spread over various branches of the product, contributing directly on production and investment and boosting demand for other goods and related services. Although there is no single methodology to measure the importance of tourism in the Province product, a recent study has estimated that it accounts for 7.8% of the Province GDP and 9.4% of its employment.1
1 “El sector turismo en la Provincia de Buenos Aires”. Dirección Provincial de Estudios y Proyecciones Económicas. Mimeo.
These results show not only the importance of tourism in the provincial product, but also identifies tourism as a relatively labor intensive sector, emerging as a sector with high capacity to create jobs.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Production destination
Nearly 80% of the Province production goes to the domestic market, which has played an important role in the economic recovery after the 2002 crisis. In turn, it has been strengthened over the years as a result of continuous high rate growth and public policies aimed to rebuild the income levels of the population. This resulted in strong growth in the demand for goods, both durable and nondurable.
In the case of durable goods, there was an outstanding performance of the real estate, cars and electric appliances sectors. Thus,
between 2003 and 2012 real estate transactions grew 315.6% expressed in dollars and 30.3% expressed in number of transactions. In this regard, should be noted that the restrictions imposed on the currency, which explains the year on year losses in 2012, of 14.3% and 12.4%, respectively.
As for automobile, although in 2012 both used cars sales and car registration fell 5.2% and 0.8%, respectively, since 2003 they accrued increases of 244.8% and 866.2%, respectively..
Source: Colegio de Escribanos de la Provincia de Buenos Aires.
In the case of nondurable goods, the rise in demand was reflected in the significant increases recorded in supermarket and shopping center sales between 2003 and 2012. The former accumulated a 98.1% growth over the entire period, driven by textile and foods and beverages items, while
the latter increased 476.9% between 2003 and 2012, clearly showing the consumption boom experienced in the Province. In the case of shopping centers, sales were led by the clothing, electronics and household appliances segments.
Source: Instituto Nacional de Estadística y Censos.
Despite the domestic market leading role, the province of Buenos Aires also sends much of its production to foreign markets (approximately 20%). In fact, exports has been one of the most dynamic sectors in recent years. In this context, the Province
exports have grown markedly since 2003 at an average annual rate of 11.4%.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Graph 9 Province of Buenos Aires exports evolution
Currently, over 70% of the Province exports consists of industrialized products, mostly
industrial manufactures (52.1%) but also agricultural manufactures (20.4%), followed by primary products (22.5%) and fuel and energy (5%).
The main destination of Buenos Aires exports is Brazil, which accounts for more than a third of foreign sales and is the most important foreign customer for the automotive industry. China, meanwhile, acquired a growing participation during the last decade, ranking as the second most important customer and the most important oil and oilseed buyers.
Graph 10 Exports by major items and destination (values, year 2012)
Major items Main destinations
Primary Products
22.5%
Agricultural Manufactures
20.4%
Industrial Manufactures
52.1%
Fuel and Energy5.0%
Brazil37.0%
China5.0%
Chile6.2%
Uruguay3.6%
Germany2.6%
USA3.5%
Others42.1%
Source: Dirección Provincial de Estadística.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
The main Province exported product is land transport equipment, which participates in 24.2% of total foreign sales and turns the automotive industry into one of the most dynamic segments of the industry of Buenos Aires. Chemicals products, metals, plastics, and machinery and electric materials exports complete the list of the most important products within industrial manufactures.
Oils and fats, meat and food industry residue and waste exports, which together account for 11.4% of Buenos Aires total exports, stand out among agricultural manufactures.
Finally, cereals and seeds and oilseeds, which together accumulate 20.9% of Buenos Aires exports, stand out among primary products.
Chart 1 Main exported products (2012)
Description Share (values) Land transport equipment 24.2% Cereals 16.1% Chemical products 10.1% Seeds and oilseeds 4.8% Metals 5.9% Oils and fats 4.3% Plastics 4.2% Machinery and electric materials 3.5% Meat 3.6% Food industry residue and waste 3.6% Others 19.7%
Source: Dirección Provincial de Estadística.
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Ministerio de Economía | Dirección Provincial de Estudios y Proyecciones Económicas
Statistical annex
Province of Buenos Aires GDP by sector (million pesos. constant 1993 prices)