Located along the Atlantic coast of southern South America, Argentina is a large, geographically diverse country. Roughly a third of Argentina's 45 million residents live in the Buenos Aires metropolitan area. Over 97.2 percent of the population are of European descent. The country shares a long, mountainous border with Chile to its west and is separated from Brazil and Uruguay by the Iguazu and Uruguay Rivers. It has a strategic location relative to Cape Horn at the tip of South America, with access to both the southern Atlantic and Pacific Oceans. As the ninth largest country by area in the world, Argentina spans a variety of strikingly diverse climates between the tropical north and sub-Antarctic south. Although Argentina's population growth has been declining in the last few decades, the population of youth ages 15-24 is the largest in Argentina's history and should provide a well-educated labor force that can boost the economy and support the current working-age population.⁸⁷

The Argentinean government operates as a presidential republic. The legislative branch includes a Senate, whose members serve six-year terms, and a Chamber of Deputies, whose members serve four-year terms. Presidential elections occur every four years. Argentina's political history is marked by a series of military coups and large economic booms and busts. In 2018, GDP shrank by only 1 percent, while unemployment reached 8 percent. The service sector constitutes over 60 percent of Argentina's US$626 billion GDP.⁸⁸

Inflation remains the biggest economic challenge for Argentina. Citizens often are saddled with high prices that rise faster than wages, suppressing economic growth. By early 2019, inflation had reached nearly 50 percent, interest rates had spiked to 60 percent, and the peso had lost nearly 50 percent of its value against the U.S. dollar. In September 2018, Argentina was forced to accept a US$57 billion loan from the International Monetary Fund in an attempt to stabilize its finances. As a part of the deal, the country was forced to commit to balancing its budget, which resulted in cuts to energy and transportation subsidies.^89,90

Argentina faces a long path to economic recovery, but, if the country is able to stabilize the peso, strong future growth is possible. The country has a well-educated workforce and good relations with many developed countries, and it could be an attractive destination for foreign investment.

You Be the International Management Consultant

In April 2017, budget airline Norwegian Air announced that it would aim to establish a presence in Argentina. The company planned for a fleet of up to 10 Boeing 737 jets, with the goal of eventually serving both international and domestic destinations. Despite the ongoing economic issues plaguing the country, in October 2018, the airline began flying its first routes from Buenos Aires. The company is betting that its low-price tickets, which will start at just US$18 between Buenos Aires and Cordoba, will give it an upper hand in the cash-strapped Argentine market. Norwegian Air CEO Ole Christian Melhus ceremoniously captained the first flight, specifically thanking President Macri for his support of the project.⁹¹

Questions

1.

If you were helping Norwegian Air negotiate for investment incentives from the Argentinean government, what would you recommend it ask for?

2.

Does Argentina's trouble with the peso help or hurt Norwegian's domestic operations?

3.

What are your primary concerns for Norwegian Air's future in Argentina and South America?

4.

In your opinion, what are the most promising aspects of Argentina's economy?

Answer rating: 100% (QA)

Norwegian Air in Argentina Negotiation Strategies and Future Concerns Heres an analysis of Norwegian Airs situation in Argentina and potential recomme... View the full answer