EPA Japan - MERCOSURAdvantages and Operation

Daniel Herrero

Vice-President of the Argentina-Japan Business Co-operation Committee

President of Toyota Argentina S.A.

JETRO office in Argentina.

EPA = Economic Partnership Agreement

Treaty that promotes trade and investmentsbetween specific countries or regions by:

Eliminating/reducing import duties

Eliminating/reducing service regulations

Improving investment environments

Enhancing protection of intellectual property rights

Facilitation of Human Exchange

Starting Point: Some basic facts…

Country Entry into force

Asia

Singapore Nov. 2002／Revised in Sep. 2007

Malaysia Jul. 2006

Thailand Nov. 2007

Indonesia Jul. 2008

Brunei Jul. 2008

ASEAN(*) Dec. 2008

Philippines Dec. 2008

Viet Nam Oct. 2009

India Aug. 2011

Pacific Australia Jan. 2015

Central and South America

Mexico Apr. 2005／Revised in Apr. 2012

Chile Sep. 2007

Peru Mar. 2012

Europe Switzerland Sep. 2009

EPAs in Force signed by Japan

JETRO office in Argentina.

EPAs under negotiation by Japan

CountryAsia Korea (Negotiation Suspended)

FTA among China, Japan and Korea

RCEP (Regional Comprehensive Economic Partnership) (10 Asean Countries)

Middle East GCC (Saudi Arabia, Kuwait, United Arab Emirates, Bahrain, Qatar, Oman countries) (Negotiation Postponed)

Turkey

Europe EU

North America Canada

Central and South America

Colombia

Asia-Pacific region TPP (Trans-Pacific Partnership) (Singapore, New Zealand, Chile, Brunei, the United States, Australia, Peru, Viet Nam, Malaysia,

Mexico, Canada, Japan)

Currently MERCOSUR has FTAs with only 9% of total world product (2.6% of world imports)

What about MERCOSUR?

EU

EFTA

Mexico

South Korea

India

Canada

2.4

31.9

2.2

2.5

2.5

2.2

% of world imports

% of worldproduct

1.4

22.8

1.5

2.0

1.9

3.0

However, ongoing negotiations represent 32.5% of the world product and 43.7% of world imports:

Source: Abeceb

MERCOSUR exports to Japan are very small whencompared with other Developed Nations.

However, complementarity index is higher than with othertrade partners.

Current Bilateral Trade

Exports to Japan, EU and NAFTA.As % of local GDP

Uruguay

Paraguay

Brazil

Argentina

JapanEU-28 NAFTA

1,3% 0,9% 0,1%

1,9% 1,7% 0,3%

1,7% 1,6% 0,0%5,3% 1,2% 0,4%

30,4 31,234,4

51,5

EU LatAmUSA EmergingAsia

Japan

43,8

Complementary IndexAs % of local GDP

Source: Abeceb

For Japan, exports to MERCOSUR are also underexploited:

4,354

8,158

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Expo Japón a MSC Impo de Japón desde MCS

Japanese Exports to MERCOSUR & Japanese Imports from MERCOSUR(In million USD)

0,6% of total JP

exports

1,2% of Total JP

Imports

JP Exports to MCS

JP Imports from MCS

Current Bilateral Trade (cont.)

Source: Abeceb

FishAluminumMinerals

Chemicals Manufactures Rubber

MineralsMeatCereals

VehiclesEquipmentChemicals

737 M

725 M

3.395 M

7.171 M

63 M

50 M

86 M

59M

88%

8%

No relevant trade partners

Current Bilateral Trade (cont.)

Source: Abeceb

Japanese Investments in MERCOSURFDI Flows to MERCOSUR. (In Billion USD)

Mill. USD% TOTAL

FDI% of JP FDI to

Mercosur

Argentina 23,6 0,4% 1,7%

Brasil 1.412 2,6 99%

Uruguay -23,9 3,0 0%

Paraguay 7 2,4 0%

Japanese FDI, by country

75.05

64.4369.64 70.38

59.78

2.6

7.6

1.4

2.6

4.1

2.7

1.4

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

2010 2011 2012 2013 2014 2015 2016

Flujos IED Total Flujos IED Japonesa

5º Place for Brazil in 2016

24º Place for Argentina

2% of regional FDI (2016)

Total FDI Japanese FDI

Source: Abeceb

-0.71

-1.46

1.66

2.94

3.37

3.24

3.25

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

2015 2016 2017 2018 2019 2020 2021 2022 2024 2025

Main economies are on the growth path againPro-market political cyclesSustainability of growth as Governments priority

Improved Investment Opportunities

Latin AmericaReal GDP Variation (%)

2000s 2011/16 2017/25

Argentina +3,27 +0,96 +2,99

Brasil +3,77 +0,40 +2,09

Paraguay +3,0 +4,8 +4,01

Uruguay +2,5 +3,0 +3,00

GDP Selected countries(YOY Variation %)

2022/25: 3,3%

Source: Abeceb

Improved Investment Opportunities (Cont.)

Fiscal Result. As % of GDP

Current Account. % of GDPInflation YOY Var. %

2010-2017 2018 2019 2020-25

LATAM 9,0 6,7 5,6 4,4

Argentina 28,6 22,7 15,4 10,0

Brasil 6,3 3,5 4,1 4,1

Chile 3,0 2,4 3,0 3,0

Perú 3,0 1,5 1,9 2,0

Colombia 3,8 3,5 3,4 3,0

2010-2017 2018 2019 2020-25

LATAM -2,7 -2,3 -2,6 -2,7

Argentina -2,0 -4,9 -5,5 -5,9

Brasil -2,7 -1,6 -1,8 -1,8

Chile -1,9 -1,8 -1,9 -1,9

Perú -3,1 -0,7 -1,1 -1,5

Colombia -4,0 -2,6 -2,6 -2,5

2010-2017 2018 2019 2020-25

LATAM -2,96 -4,15 -3,67 -2,97

Argentina -4,16 -5,5 -4,87 -4,00

Brasil -5,39 -8,33 -8,29 -7,83

Chile -0,95 -0,93 -0,57 -0,38

Perú -0,35 -3,32 -2,75 -1,78

Colombia -2,16 -2,69 -1,9 -0,86Source: Abeceb

Future perspectives for LatAm

Avg. 2012-16

3,0%

Avg.2017-25

4,4%

Middle class worldwide willdouble up to 2030Increase demand of higherprotein value and processedfoods

Corn

10,1%Rice

9,1%Wheat

7,0%

Milk Powder

16,2% Cheese

11,5%

Pork

7,4%

Beef

7,8%

Soy15,1%

Increase of World Imports from LatAm

World Consumption (Avg. var. 2017 – 2025)Source: Abeceb

Future perspectives for LatAm (Cont.)

Activities with good medium-term prospects:Agricultural-livestock production (international pricesevolution)Mining production (vehicles electrification Lithium)Exploration in non-ferrous metalsInvestments in renewable energies

Price Variation 2025/2017Accumulated Avg.

+28%+24%

+14% +6%

Shale Gas Reserves. As % of world total.

Tight Oil Rerserves. As % of world Total.

23.0%

18.9% 18.6% 18.1%

12.0%

5.7%

3.8%

0%

5%

10%

15%

20%

25%

23.9%22.2%

14.3%13.5% 13.0%

9.4%

3.7%

0%

5%

10%

15%

20%

25%

30%

Wide availability of unconventional oil and gas reserves

Future perspectives for LatAm (Cont.)

Source: Abeceb

Wrap Up Comments

New approach of MERCOSUR’s external relation

+Unexplored bilateral trade and investment opportunities

+Growth perspectives for MERCOSUR and Latin America

=

Ideal moment to start EPA negotiations

Thank you