It is no longer surprising to hear that the Argentine companies seek to “escape” from the local macroeconomy and set foot in neighboring countries, such as Uruguay. we have seen it with agricultural producers who “cross the pond” to produce without export duties, or other activities that generally seek greater legal certainty and less tax pressure. But what was not being so clear is that the knowledge economy also sought to migrate. And this was shown by the last survey of Argencon, with data from 2022 where it is evident that Uruguay climbed more than 50% in its sales abroad of knowledge services.
Argentina grows as an exporter of “knowledge economy”
And here Luis GaleazziExecutive Director of Argencon, was categorical in explaining that it is about “resources that are shipped in Uruguay but are Argentineis a flight of Argentine talent to Uruguay”. “practically today Uruguay exports 30% of what Argentina exportswith a strong growth jump on imported resources, in which Argentina is the largest supplier,” he said.
What’s going on? que Much of the knowledge economy generated by Argentina escapes to Uruguay.
The big question is, what to do to reverse this situation.
Among other things, Galeazzi pointed to three fundamental points for the situation to be channeled: macroeconomics, Knowledge Economy Law and education.
“In 2022, the exchange gap fluctuated between 85% and 125%, with which an Argentine exporter sold a dollar that -depending on the time of the year- could be worth 45% of the real value. This is one way and after another. In addition, it impacts the cost of our operation because the salary of a professional in dollars can be worth 30% more or less depending on when it is measured. This is an unfeasible (macroeconomic) condition,” he estimated.
On the other hand, he explained that also specific topics. “The Knowledge Economy Law could once again give stability to the sector if it were a consensus law”, And as a third point, he referred to the need to “continue working on the adaptation and modernization of education, in addition to deepening knowledge of the language English”.
A good 2022 for Argentina, but it could be much better
Among other things, Argencon presented data on local knowledge economy exports. “In 2022 the country exported 7,834 million dollars, a number that is record in the series but it is necessary to see if it is by volume or price”, estimated Galeazzi.
“The cost of operating in Argentina in increased dollars. Our growth was by a nominal phenomenon if you will, and not by volume of activity. More is produced yes, but it escaped. Argentina does not retain the value it produces“The executive lamented.
When I asked him how Uruguay is doing, he was direct and eliminated all suspicion in his analysis.
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“Uruguay has formalized programs to attract companies of knowledge economy for them to operate in the country, it even has a free zone and for more than 10 years it has had a strategy to convene companies from abroad”; sure.
And he added: “The main bet is clearly Argentina. It offers them directly to companies that settle in the countries. The Uruguayan offer is very frontal and they are doing very well,” said the executive director of Argencon.
Now, how is the operation? According to Galeazzi, “An Argentine businessman opens an agency of his local company in Uruguay and grows in work from there. It is a response to a strategy of a country that has seen a growth factor in this sector, while in our country it has not yet been has finished detecting. This is serious because Argentina has a generation of talent, which is probably the best in the entire region,” he explained.
Some global trends and what happens in the country
Global trends. 2022 presented significant changes. The growth of world exports was 5.4%, it was good but far from 2021, which grew more than 15%. In other words, the global crisis somehow slowed down the growth of world trade, also in the knowledge economy. War effect in Ukraine, impact on commodities, interest rate rise, etc etc.
That behavior is not common. There are countries with different growth: and here nearshoring and freidshoring become important. The flow of trade is concentrated and more selective. There is not only a change due to the slowdown but also due to a new flow of selectivity.
Within this growth, Latin America grew 19.3% of that 5.4%. It is the segment of the world that most creates. It maintains a rise well above the world average. More in detail, Uruguay grew 53%. The Caribbean grew 19%.
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In Western Europe it was hit hard and only grew by 2%, although its participation in the global business is very important (more than 40%).
Asia continues to have strong growth with China and India. Middle East (not only Israel) but the Gulf countries with strong growth.
Latin America. Although they all grew solidly, Uruguay grew by more than 50% year-on-year. They are resources that are shipped in Uruguay but they are Argentine. Flight of Argentine talent to Uruguay. Practically today Uruguay exports 30% of what Argentina exports. It is the growth over imported resources and Argentina is the largest supplier.
Much of the knowledge economy generated by Argentina flees to Uruguay
Argentine In 2022 it exported 7,034 million dollars. It is to record in the series but it is necessary to see if it is by volume or price. Strong exchange rate delay. Salaries grew more than 120% in almost all areas. The cost of operating in Argentina in increased dollars. Our growth was due to a nominal phenomenon if you will, and not due to volume of activity. More is produced yes, but it escaped.
Argentina does not retain the value it produces.
There were 22,000 new jobs and we exceeded 480,000 jobs, close to 7% of registered personnel in Argentina.
In the presentation Sebastián Mocorrea -President of Argencon-, Luis Galeazzi -Executive Director of Argencon- and some CEOs invited from Argencon partner companies such as Sofia Vago (CEO of Accenture), Martin Castelli (President of Blue Star Group) and Martin Sturmer ( CEO of PWC Corporate Center).
Finally, and as happens with other activities in the country, it seems that Argentina is halfway. And here it is useful to add the look of Sebastián Mocorrea, president of Argencon, who expressed this morning; “Argentina continues to be a strong player as an exporter of knowledge economy services, although far from what we can be”
We are one of the few countries where exports exceed imports
Almost 60% of what is exported are professional services
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