BMI View: There is significant risk of a peso devaluation in 2013, which would have an impact on the affordability of IT products and services. Policies employed to keep the currency overvalued will grow less effective and we expect devaluation to occur by mid-2013. However, there will still be opportunities. As well as growing interest in cloud computing, the second largest IT market in the region has strong market fundamentals, including rising PC penetration and a high-tech national development plan. The government's computers for school programme will also continue to provide a boost in early 2013. However, government measures to support the domestic IT industry, such as the luxury goods tax on imported goods, have put IT hardware out of reach of lower income segments of the population, limiting the reach of IT hardware.
Headline Expenditure Projections
Computer hardware sales: ARS12.1bn in 2012 to ARS14.8bn in 2013, +22.1% in local currency (but only +0.1% in US dollar terms). Forecast in US dollar terms revised downwards due to macroeconomic factors, including domestic inflation and currency depreciation.
Software sales: ARS2.8bn in 2012 to ARS3.5bn in 2013, +26.4% in local currency terms (+3.6% in US dollar terms). Small- and medium-sized enterprise (SME) demand for software and strong potential in enterprise resource planning (ERP) applications should maintain growth.
IT services sales: ARS8.7bn in 2012 to ARS11.2bn in 2013, +28.9% in local currency terms (+5.7% in US dollar terms). IT services revenue is forecast to be the fastest growing segment in the market, with a particularly strong driver being cloud computing demand from the SME segment.
Risks/Rewards Rating: Argentina's score was 41.9 out of 100.0. Argentina ranks seventh in the Americas region in our latest RRR table. Argentina's low country risk score influenced its ranking as devaluation and inflation risks weighed on its score.
Key Trends And Developments
- Persistent high inflation and slowing economic activity are taking their toll on business and consumer demand. BMI forecasts private final consumption will only increase by 0.5% in real terms in 2013, limiting retail demand. Meanwhile, enterprise investment across IT segments will be held back by uncertainty about the economic situation. Furthermore significant import restrictions limit sales of hardware as the government looks to promote domestic IT hardware manufacturing.
- There was limited uptake of Windows 8, following its launch in October 2012. This was as expected, with little pent-up demand in Argentina. However, with the touch compatible interface of Microsoft's new OS and the existing relationship between vendors active in the Argentine market, we believe the period 2013-2014 should see new hardware form factors such as tablets and hybrids become available at more suitable prices for the local market compared to imported Apple iPads. Although Apple performed well globally, import tariffs limited its appeal in Argentina, whereas there is scope for Windows 8 and low-end Google Android tablets to be produced locally and be popular with consumers.
- New cloud computing offerings and increased competition in this segment should fuel further demand from end users to utilise this technology. Telefonica was among local market players to launch new cloud services for SMEs in 2012. In addition to cost savings, businesses will look to boost efficiency and increase flexibility of response to customer needs. There should be potential for ERP solutions in sectors such as energy and transport.