Boston, MA -- (ReleaseWire) -- 04/15/2014 -- The Argentine economic environment casts a shadow over the IT market, with the depreciation of the peso and import restrictions affecting PC sales in recent years. Both imported and nationally manufactured PCs were affected, with the latter hit by weak consumer confidence and a reliance on imported components. However, this does not seem to be putting off potential investors, as companies seem willing to overlook the economic situation in favour of the sector's substantial potential. The scope for large increases in PC penetration, second device ownership, enterprise software penetration and cloud computing are examples of sectors that have growth opportunities.
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E-commerce company Mercado Libre and software development companies Epidata and Quadion have stated that the large Argentine IT market maintains its lustre despite the economic challenges. Providing these short-term economic challenges can be navigated, we believe the market will grow rapidly, with rising PC penetration, including new form factors such as tablets and hybrids, and increased enterprise spending as confidence improves. The market will also benefit from deferred purchases/investment.
Headline Expenditure Projections
Computer Hardware Sales: ARS14.5bn in 2013 to ARS17.1bn in 2014, +17.8% in local currency (but down 5 % in US dollar terms). Forecast revised downwards due to macroeconomic factors, including domestic inflation and currency depreciation, as well as local reports of a fall in PC unit sales.
Software Sales: ARS3.5bn in 2013 to ARS4.2bn in 2014, up 22% in local currency terms (down 1.5% 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 despite macroeconomic challenges.
IT Services Sales: ARS10.9bn in 2013 to ARS13.6bn in 2014, up 24.5% in local currency terms (0.4% increase in US dollar terms). IT services revenue is forecast to be the outperforming segment in the market, with drivers including growth of the outsourcing industry and cloud computing demand from the SME segment.
Risks/Rewards Rating: Argentina's score of 59.8 out of 100.0 in BMI's Risk/Reward Ratings, places it fifth in the Americas region. Its low Country Risk score influenced its ranking, while import restrictions also lowered the Industry Risks score, with both below the regional average.
BMI forecasts the IT market will expand by around 22.7% in 2013 in local currency, but decline by 2.9% in US dollar terms, as persistent high inflation (forecast at 25% in 2013) and slowing economic activity take their toll on business and consumer demand. We believe this trend will continue throughout the year due to economic uncertainty. Consumers and businesses will remain hesitant about making large IT purchases and significant import restrictions will limit sales.
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