IT Landscape in Argentina

For the last ten years, Argentina has experienced an economic transformation, marked by fiscal and monetary discipline (although the analysis sections of this report will demonstrate the strengths and especially weaknesses of this discipline), an opening up of the economy, deregulation of economic activities and privatization of public services. Following those actions and the successful process of telecommunications market deregulation (which started in November 1999 and was completed by November 9, 2000), leading global telecommunications services companies began expanding their businesses in Argentina. One area of interest is to develop a "hot" interactive entertainment market. (1) This push is steering the way for software development to increase. In this regard, Argentina boasts a solid foundation from which software development will increase. Some facts are as follows:

	The Argentine IT market is approximately U.S. $4,860 million, strong and is experiencing the highest growth in the region at 15.2 %.
	During 2000, the B2C commerce market was U.S. $20 million and 2001 was expected to reach U.S. $65 million.
	The Argentine B2B market will increase 300% at the end of 2001, to approximately U.S. $450 million. (2)

Argentina has a solid foundation for the development of a solid software development program. The cultural landscape of the country permits there to be unanimity with most advanced / developed nations who have strong ties in software development. Moreover, Argentina has the best foundation of all: a strong educational system. Some of these characteristics include::

	3500 University students per 100,000 habitants; This estimate represents the most of any other Latin-American country; and
	Argentina boasts approximately 1.26 million University students overall, with advanced programs in the sciences including computer-related technologies (3)

The software and IT services sector in Argentina comprises of about 500 firms that employ nearly 25,000 people with total revenues of over US$ 2 billion in 2000. IT services (excluding computer maintenance, network installation and other services related to hardware) represent almost 50% of total revenues, while 35% are software products developed abroad and the remaining 15% are locally developed products. In this regard, it seems that consumers tend to favor foreign products - probably due to the enhanced awareness of such technologies because of the overall penetration of multinational firms in this lucrative marketplace. During the period between 1998-2000, software firms incremented their revenues by 40%, a very high figure in the context of the deep recession that affected most sectors in the Argentine economy. (4)

Argentine Market for Software (in millions of dollars)

	1999	2000	2001 (Proj.)	Projected Growth
Total market size	642	790	869	10%
Total local production	33	39	43	5%
Total exports	7	8	13	8%
Total imports	616	759	839	6%
Imports from U.S.	344	425	470	8%

(5) Above Table

The development of software is a skill-intensive activity and capital investments are not as high as in other IT industries. As a result, a developing country like Argentina, which is widely recognized for its well-educated and creative population (see figure below) has a potential advantage in this sector. However, it must obtain a nationally structured policy to increase this awareness globally. And, it must utilize its resources to build products which it can export, rather than becoming purely an assembly plant for other countries. (6)

Figure: University students per 100,000 population

(7) Above Table

Demand for software in Argentina has kept rising and was estimated to grow to $916 million by 2002. However, one must keep in mind that such estimates precluded the current economic slowdown as well as devaluation of the peso.

Argentines purchase more applications and development software, which account for the largest segments of this market. The major players in this market are U.S. firms, which include, Computer Associates, IBM, Microsoft, and Oracle. Because of the Government's "open door" policy to investors and multinational technology firms, US software products are considered to be the most advanced and desired. Since the demand for such products persists, Argentine firms have the opportunity to co-construct such technology with U.S. firms. With the educational component readily available, certain firms, such as IBM and Microsoft have signed agreements to develop software in Argentina - especially if the Government tightens its grip on piracy laws (8).

However, that is not to say that software is not protected at all in Argentina since the country does have copyright laws to strengthen policy. Still, with weak enforcement of such laws, high piracy rates have been found. For example, in 1998, 62 % of all software used in Argentina was pirated, resulting in losses to US companies of more than $123 million - which is why Microsoft provided bait to develop software in the country if the Government tightened its legal grip on the citizenry. Because of high piracy levels in Argentina, the country has been placed on the U.S. Trade Representative's Special 301 "Priority Watch List" of countries having inadequate intellectual property rights protections. (9)

To conclude, a better "snapshot" of the software sector in Argentina will be provided to show the rich diversity in this arena. As mentioned in several other sections of this report, Argentina’s telecommunications sector has always proven to boost other industrial sectors of the economy. One sector that has felt this expansion is software. In the last report on Argentina provided by the INITEB project a few years ago, it was noted that software development did not prove to have viable business opportunities in Argentina. However, one source today has shown a tremendous increase in such companies in a short period of time. Utilizing, Mercantil.com, a leading authority and web portal for B2B business opportunities for small and medium-sized businesses (SMEs) in Latin America, 24,128 companies were listed as working in Argentina under the sphere of technology and computers. The computer software category is then broken down in three other categories: home, Internet, and office. Under these three categories, hundreds of software-specific companies are listed as working in Argentina today. These quantities did not exist before deregulation began to open opportunities for businesses, most of which are SMEs. Two hundred and eight companies are listed under home software, which is split between computer software (171 companies) and home protection services (37). The Internet software category showed seven hundred and fifty eight companies in the following categories: Internet browser (22), Internet connection services (324), Internet portals (60), service suppliers (204), and web page design (148). The last category is entitled office, which lists two hundred and fifty one companies in the following categories: AutoCAD (10), computer software (171), computer software protections services (37), electronic mail (4), software development (28), and software for municipality use (1).

Although a significant amount of the companies listed in this database are utilizing software to support a business endeavor, rather than strictly building software to sell to the public, these figures show that Argentina does have the technical experiences to create software and potentially export it to other countries. This is a notion not widely understood since many analysts do not classify this sector as viably able to produce "home grown" software exports. However, Argentina’s SMEs are the key for the continued expansion of software development. This is true because of SME's ability to adapt to new technologies and find new routes for market success, even if it means changing their core business offerings. This is why many SMEs listed in the Mercantil database are involved with several other sub segments of software development. However, it should be made clear that many companies in this software database are listed only once. Therefore, although some companies might appear in multiple sub-categories in this database, it should be made clear that many companies appear only once. Hence, there are hundreds of individual companies with ties to software development currently working in Argentina. For specific information as to these companies including links to their main pages, please visit Mercantil.com directly at:

http://www.mercantil.com/rc/default.asp?browse=companies&accion=2&area_code=4

What is very interesting in examining these lists clearly is that most of the companies listed are found either in Buenos Aires or in the Federal Capital area, which surrounds the city. Therefore, to have these many companies in proximity to one another might suggest the beginning of a technology corridor or formation for the foundation of a “technopolis.” Since most business activity concerning information and communication technologies will take place in this geographic area, it could be argued that Buenos Aires is becoming a well-rounded technological innovator, with companies growing in multiple sectors including hardware and software manufacturing, technical services, and high-technology equipment and machinery, to name a few.

To conclude, It is important to note that Argentina, although impacted positively by the growth of information and communication technologies, is clearly linked to the ICT progress accomplished in other parts of the world, especially the telecommunications and Internet boom of the United States of the last decade. Today, however, Argentina no longer has access to the same level of foreign direct investment once available. Therefore, many of the companies mentioned in this section might cease to exist over the next few years, especially with Argentina currently in an economic crisis resulting from an overall global economic slowdown, a foreign debt dilemma, and poor governmental policy initiatives, such as pegging the peso to the dollar without needed variables such as sufficient reserves or sustainable economic activity to maintain the dollar’s fluctuation.

Researches of this portal must take into account that much of the information gathered in this section and others reflects current data available. With a looming national economic crisis at hand in Argentina, it is difficult to measure how these changes will impact the future growth of the software development sector in the country. Also, most of the projections mentioned did not take into account a global slowdown or the immediacy of the debt crises. Moreover, the tragedy of September 11^th, which has also had an impact on global financial systems, was obviously never calculated into the projections mentioned throughout this report. Therefore, researchers should carefully pick through this information before making serious assumptions.