Argentina’s Consumption and Macro-Environments

Executive Summary 

Argentina’s is the largest exporter of the products that are soy-derived in the world as well as the third large in the production of such products. It is encompassed with great potential in the production of raw materials. Other sectors like industries have expanded vastly in the recent years having a representation of about 27% of the GDP and one-fourth of the total citizens being employed in the same. Political, economic, social, technological, and legal factors form part of the macro-environment in Argentina. It got to adopt the automated wealth manager technique in the majority of its investments. Alternative 1 (Argentina 10 Year Gov Bond - 10 year US Treasury) is the best method to calculate the risk premium of Argentina. The risk premium is calculated mostly based on the US dollar bond and the figures in the treasury. The key concept for the future prosperity of the financial institution is its swift to adopt digital solutions that comply with the cultural practices in Argentina. The increased data privacy on a global scope has ensured a fair trade-off for the convenience of all clients who have adopted the digital strategies of managing their wealth. My People’s United Bank’s strategic service is automated wealth management because most were never taught the proper methodology of building their wealth. Earning, positioning, saving (EPS) provides an automated financial servicing to these generations that they have not used in the past. 

Argentina’s Consumption and Macro-Environments 

Consumption 

Argentina continues to contribute to making an important role in the economy globally despite the recently experienced struggles in the sector of the economy. The main sector is classified to rely on the agricultural production. Notably, the sector of agriculture has a representation of 7.6% of the GDP of the country and activities emanating from farming, livestock, and cultivation of cereal pushing towards the achievement. It has great potential in the production of raw materials ( Arboit, Diblasi, Llano & De Rosa, 2018) . Other sectors like industries have expanded vastly in the recent years having a representation of about 27% of the GDP and one-fourth of the total citizens being employed in the same. With such representation of the main economic major thrives in the country, it is important to understand the consumption habits and trends. 

The Argentinian consumers tend to be rational and conservative with the money they hold. With that, it brings on board the perspective of buying the only things that are necessary, with the prioritization of price, rather than not wasting, walking rather than driving, having new brands when the process is low as with no luring of other people. They consumers are known not to be loyal with an average rate of visits of 5.6 when in search for the best-quoted prices. Argentinians are as well wary of the supermarkets, with a consideration of the profit margins being in excess as per the 2017 BAC anal study. When required, the citizens can be diplomatic which is warm and straightforward. They are passionate about the activities of sports, education, and culture as workforces ( Arboit et al., 2018) . In an Argentinian life, a family is centralized with the inclusion of extended family. With the hit from the economic crisis, the consumers have developed to be warier, encompassed with the increased selection, and more reticent as per the regard of new products. Consequently, the Argentinian has faced inflation by a double-digit and rise in the prices, forcing to lower spending by the household. 

Macro-Environments 

After a notable contraction of -2.2% in the year 2016, there was rebounding of the economy with an estimation of about 2.7% in the year that followed, 2017 ( Zurawicki & Braidot, 2015) . The expectation by the IMF is the GDP to grow again in 2018 by a rate of 2.5%. Inflation forms a major concern in Argentina, which amounted to approximately 26.9% in 2017. The percentage is far from the objective of the government which was set to lay between 12 and 17%. This figure is however still expected to go down progressively and to eventually reach 17.8% as per the estimates of IMF ( Arboit et al., 2018) . The nation possesses a potential that is significantly outlined regarding the available raw materials, lithium; but after the collapse of prices of commodities in 2013, the legislation has been seeking stability of finance and economy continuously. The elected launched broad reforms for the improvement of her economy and finance state. There was a target to bold a monetary adjustment for the attraction of investors through the facilitation of a conducive business environment. 

Political Factors 

Politically, there has been an announcement by Mauricio Macri to seek for another term as he seeks to improve the financial and fiscal stabilities through the key pillars in the forming of a good state of the economy. In 2015, the country elected a new president and settled a debt that the country had; the nation seems to turn a new chapter of being blocked from the markets internationally. The social situation of the country is featured with the constant tensions that are underlying in the link between trade unions and the Government over the reforms that have been announced. There is a notable spilled between the authorities from the central and the decentralized over the management and distribution of revenues from the federal. The networks of infrastructure need more investment for the distribution of social amenities in the rural areas ( Arboit et al., 2018) . 

Economic Factors 

The economic outlook of the country needs to be protected. Argentina has an economic system that is mixed that is inclusive of the variety of freedom in private, with a combination of economic planning and the regulation of the government. It is a member of Common Market of the South (Mercosur). With a GDP of approximately 600 billion dollars, the country is one of the biggest economies in the United States ( Bustos, 2017) . Currently, it is undergoing a transformation of the economy with the promotion of an economic development that is sustainable with the inclusion of the social activities and the global economic integration. The nation prioritizes the spending of the social activities in the reduction of poverty and the boost of the prosperity that is shared. Other programs have been initiated like Universal Child Allowance, which has an approximate 3.7 million under-aged people and the adolescents ranging at around 9.3% of the total number of people. Furthermore, there was suppression of some barriers to facilitate the tax exemptions for the major exports especially the agricultural products. 

Social Factors 

Socially, family ties, gender roles, class stratification, education, and religion are the strong pillars of the social life of the Argentinas. Family ties are stronger pillars in the nation as it involves one’s spouse and the children. They remain very close to appreciate the kinship relationships. The families venture in businesses to thrive together to achieve a higher position. Notably, Argentina has faced difficulties in the fight of high levels of poverty and the rate of unemployment that is wanting. The informal sector is believed to employ about almost half of the workforce in the nation. Under such context, the legislation seeks to perform implementation of country’s agenda, having the main agendas as the establishment of stability of fiscal and finance states, the strength to the job market, and implementation of reforms institutionally. Investment is a core factor for the growth of her economy as the other country’s economies observed to contribute a growth of GDP that is expected to be of 2.5% ( Arboit et al., 2018) . A challenge is fostered to relate to the implementation of reforms that are well-balanced at the recommended pace. Consistently, the external factors need to be protected from jeopardizing the financial stability. 

Technological Factors 

Technological market leverages the IT services and forecasts project with a faster growth within the segment. The lithium and agricultural products’ revenues make the country stronger and wealthier because her per capita income has increased over the last two decades thereby making the ownership and use of IT cheaper. Therefore, this impressive technology has given the country an advantage in the growth of the main sectors that contribute to the main economic pillars. The use of technology has thrived severally as a world aspect where each country is challenged to go as the technology thrive. Most of the core activities in a country need a significant budget that will ensure progress in most of her sectors like healthcare, financial services, educational facilities, and communications. Even though Argentina has made a remarkable improvement in such services, there is a need to utilize the available resources technologically and assert great impacts ( Bustos, 2017) . For example, through good utilization of the resources using technology, there has been increased nanotechnology whereby the country makes huge quantities of higher quality products at averagely lower costs. 

Environmental Factors 

Argentina’s economic growth, levels of education and immigration greatly influence the condition of the current labor market and ultimately her employment patterns. For instance, the country has had the less inadequate skilled personnel needed to drive the economic growth; with that, it has exported a surprisingly huge number of products especially from the agriculture sector and lithium. In this point, there is that great expectation that emanates from the situation of exporting significant goods ( Arboit et al., 2018) . Resultantly, the overall labor market has been on a thrive owing to the increased demand for labor, the need for best skills and incentives. A greater percentage of the workforce, nearly one-fourth of the total personnel in Argentina work in the private sector and approximately a lesser number of the investors being non-Argentina. 

Legal Factors 

Primarily, the legal factors of a state ensure that the laws offer to the welfare and safety of everyone since none is expected not to abide by the passed laws. There is a law for the issuing of the licenses and procedures that are needed to start-up a business, Therefore, with the aspects in place, Argentina stands out to be one of the countries that supports investment, and there can be economical thriving at the end of the process. Thriving in the agriculture sector, the country is faced with pollution which is a major factor in the production of the same as chemical agents facilitate it from the sources of industry. The law is on the fight to reduce the pollution. Also, there has been an increased loss of lands for agriculture as the wealth is faced by erosion, deforestation, and salinization. The problem is on the verge of the solution as the government has fastened its belt in the fight against the threats and it is as well educating the citizens. Similarly, the judicial systems have gone to the extent of being well-established, and citizens need to abide by the regulations as they continue in their daily businesses. With that on board, the lives of the individuals and their properties are always maintained to be safe and secure through the legal factors that have been in the discussion herein ( Bustos, 2017) . 

Opportunities and Threats 

Argentina houses some natural resources that can be advanced to businesses. Also, there is freedom of expression that leads to the polishing of the economic sector, and protection of legal status of human rights through the legislature. The internet effect by technology has led to the utilization of the available natural resources that are housed in Argentina ( Arboit et al., 2018) . However, there is slow growth of the new venture creation in the nation and can be attributed by the difficulties in the owning of capital financing and the licenses and procedures that are needed to start-up a business. Corruption, lack of the protection against copyright, and challenges in the hiring of the employees are the threats to the nation. 

Hofstede’s Model 

A clear exploration of Argentina’s culture via the Hofstede’s model, or the 6-D model, a good overview can be obtained of the deep drivers of her culture relative to the other cultures in the world. The core drivers are power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence ( Arboit et al., 2018) . The insights offer a solution to the intercultural and organizational culture difficulties through the utilization of the framework injected. 

Argentina’s Risk Premium 

10 Year US Treasury = 3.094% 

US Volatility Of Stock Returns = 25% 

Argentina 10 Year Gov Bond = 17.863% 

Argentina Equity Returns = 11.42% 

Argentina Bond Returns = 6.22% 

Argentina Volatility Of Stock Returns = 87% 

r m = 6.3% 

Β (Peoples Bank) = .93 

Alternative 1 

Argentina 10 Year Gov Bond - 10 year US Treasury 

17.863%-3.094%=14.769% 

Alternative 2 

(Country X 10 Year Gov Bond - 10 Year US Treasury Rate) * Country X Equity Returns / Country X Bond Returns 

(17.863%-3.094%)*11.42%/6.22%=27.116% 

Alternative 3 

R m * (Country X Volatility Of Stock Returns / US Volatility Of Stock Returns ) * β 

6.3*(87%/25%)*0.93=20.389 

Average= (14.769+27.116+20.389)/3= 20.758 

Alternative 1 is the best method to calculate the risk premium of Argentina as it is known that, the risk premium is calculated mostly based on the US dollar bond and the figures in the treasury. From the above-calculated figures of the risk premium, I would recommend an adjustment. The interest rates have a fundamental effect on the bonds that are long-term of Argentina. When the calculated risk premium of a country depicts to be favorable, the derivatives market allow investors and or the borrowers to makes changes in the outlining of activities. After the calculations, the figures indicate the state of stability of the country, and it comprehends on the measures to be undertaken to improve the consumption behavior and the macro environments ( Bustos, 2017) . The key features in the above protocols are considered when the risk premium is underlined. However, Argentina has been recording a definite index of the equity returns over the last few years. With that, it is an implication that with improved equity it will increase the risk premiums that will account for the volatility of the Argentina equities. 

The Fit Between Argentina’s Consumer/Macro-Environments and People United Bank’s Strategic Profile 

The key concept for the future prosperity of the financial institution is its swift to adopt digital solutions that comply with the cultural practices in Argentina. The increased data privacy on a global scope has ensured a fair trade-off for the convenience of all clients who have adopted the digital strategies of managing their wealth. The People’s United Bank strives to avail automated solutions to its clients to maximize its earnings on idle cash by use of the Automated Investment Sweep ( Bustos, 2017) . Additionally, the Bank reduces possible interest expenses through the use of Loan Management Sweep. 

Furthermore, the two products combined with the Zero Balance Concentration Sweep enables the Bank to manage its cash as it saves valuable time efficiently. Therefore, the bank’s strategies conform to Argentina’s consumer market as evidenced by the macro-environmental analysis discussed in the previous paragraphs ( Bustos, 2017) . Ideally, Argentina’s technological adoption ensures that their money works for them through the use of automated investment sweep. 

Similarly, the Bank benefits from the Automated Investment Sweep since its profits will accumulate automatically; thus, investing in surplus funds available in idle accounts. Resultantly, the People’ United Bank makes profits with no additional time and effort. However, the Bank takes into account, the scrutiny of your deposited funds and determines your available balance at the end of the day. This facilitates the transfer of excess funds that exceed the predetermined balance; hence, the swept money will earn specific amounts of interests in investment accounts by the market rates ( Zurawicki & Braidot, 2015) . Conversely, in case the available balance is way below the expected amount, then the Bank automatically withdraws funds from the investment account and transfers it to the main checking account for the maintenance of the target balance. 

The strategic fit is important in maintaining liquidity to make the invested funds available for the following day’s operational purposes. With that, it maintains the target balance without any related service charges only to maximize profits for the Argentina investors. The zero balance accounting is a strategic factor that ensures that the Bank effectively exploits the available funds from a centralized account with the help of loan management strategies, which automatically pays or draws down investor’s line of credit ( Bustos, 2017) . The adoption of technology in their market segment conforms to the People’s United Bank’s profile as regards the highest levels of automated originated platforms. 

The bank is mostly interested in advising the clients and promoting innovative practices to aid in correcting possible imbalances. The People’s United Bank has the federal charter to operate as a stock savings financial institution that gives it an advantage in offering commercial banking, retail, business banking, and wealth management. Its industrial and commercial lending services are fit for the strategic market within, and the bank’s real estate lending would further promote the expansion of rental facilities to accommodate the foreign employees. The digitalization of services will further encourage the clients to concentrate on commercial cash deposits in return for cash management services ( Arboit et al., 2018) . Additionally, the macro-environment of Argentina fits the People’s United Bank because of the available corporate trust, brokerage, and life insurance that caters to the well-being of the individuals and their respective businesses. 

The Fit between Argentina’s Consumer/Macro-Environments and the Service’s Ability to Compete Effectively in that Country 

My People’s United Bank’s strategic service is automated wealth management because most were never taught the proper methodology of building their wealth. Earning, positioning, saving (EPS) provides an automated financial servicing to these generations that they have not used in the past . The high-net-worth individuals (HNWIs) have highly taken up technology by leveraging their digital literacy. The extensive use of multiple digital devices and general receptiveness is evidenced in all individuals of the upper class and the younger wealthy; thus, they make digital wealth management competent in the region. The HNWIs believe that digital is an important component of financial management; therefore, they employ digital technology in managing their monetary needs ( Bustos, 2017) . The increased data privacy on a global scope has ensured a fair trade-off for the convenience of all clients who have adopted the digital strategies of managing their wealth. Both security and privacy are crucial aspects of the digital wealth management and the digital technology in general. Therefore, because digital wealth management provides the clients with the opportunity to trade off data privacy, they are more than interested in adopting digital technology in managing their financial obligations. 

The existence of digital financial advisor promotes a very sustainable engagement model. With that, the aspect enhances the serving of a larger volume of the customer base. Therefore, with the People’s United Bank’s embracing the digital solutions, the financial institution will overcome possible constraints related to technological legacy. This depicts that the Bank has the capability of attracting tech-savvy talents that are crucial in the implementation of digital solutions and make them accessible to diverse, interconnected platforms ( Zurawicki & Braidot, 2015) . Therefore, the bank has a perfect fit for Argentina’s consumer market because it will be able to service its customers and diversify the market segment as it also retains better client relationships. The key concept for the future prosperity of the financial institution is its swift to adopt digital solutions that comply with the cultural practices in Argentina. Therefore, People’s United Bank’s adoption of digital wealth management will grow and thrive in the market environment. 

References 

Arboit, M., Diblasi, A., Llano, J. F., & De Rosa, C. (2018). Assessing the solar potential of low-density urban environments in Andean cities with desert climates: The case of the city of Mendoza, in Argentina.  Renewable Energy ,  33 (8), 1733-1748. 

Bustos, P. (2017).  The impact of trade on technology and skill upgrading: evidence from Argentina . Universitat Pompeu Fabra. 

Katz, J., & Bercovich, N. (2013). National systems of innovation supporting technical advance in industry: the case of Argentina.  National Innovation Systems: A Comparative Analysis , 451-475. 

Rock, D. (2015).  Argentina in the twentieth century . D. Rock (Ed.). London: Duckworth. 

Zurawicki, L., & Braidot, N. (2015). Consumers during crisis: responses from the middle class in Argentina.  Journal of Business Research ,  58 (8), 1100-1109.