One more example of the Government’s role in creating an appropriate stage for ICT development, while at the same time negatively affecting this much needed growth must be given.  On one hand, price stability and a reasonable level of economic predictability have created a climate favorable to capital flows into Argentina. Foreign investors do not need to register in Argentina nor obtain permission to invest in companies. Furthermore, the Argentine Government has allowed the complete foreign ownership of local companies, a rarity for Latin American countries, which regulate such ownership issues more conservatively.  Moreover, investment in shares on the local stock exchange requires no government approval, thus opening the doors to foreign investors and making certain that their financial endorsement can be acquired hastily.   Lastly, there are no restrictions on movements of capital or repatriation of funds.  Thus, one might assume that the Government understands how to remove barriers to economic growth, especially when it concerns foreign direct investment (FDI).  However, as is the saying: what goes around comes around.  And, the Government’s decision to peg the peso to the dollar years ago, after the debt crises of the 1980s, has created several problems in the economy today, which will now hurt the progress made by the growth of ICT.  The relationship between fiscal policy and ICT expansion is clear and in this case the policy prescriptions have been a detriment.

For over one decade, no matter how dire the state of the economy might have been at times, the Government would have never devalued its peso, which was pegged to the dollar.  Argentines became accustomed to the buying power of the peso, which was equal to one U.S. dollar.  However, on November 1, 2001, President Fernando de la Rúa asked Argentina's foreign and domestic creditors to accept lower interest rates and longer maturities on approximately US$95 billion in bonds, which projected the country into the uncertainty of market forces.  For many years, the Argentine Government had tried to enact enough fiscal asceticism so that it could continue to repay its foreign debt, but such practices only ushered in years of recession.  Today, devaluation might boost exports, but it would also have a vicious blow on households and banks, since 65% of private-sector debt is in dollars.  This debt includes mortgages and car loans. Argentines would suddenly have to pay off these loans with devalued pesos, which would create significant defaults.  Included in this group are business owners.  In short, Argentina’s Governmental policies provide both strengths and weaknesses to the IT landscape of the country.  Fiscal policy measures of the past will today harm the continued expansion of ICT throughout the country, causing years of progress to come to a sudden halt.  Therefore, although Argentina has a well-connected telecommunications infrastructure, well-trained human capital, brilliant scientists, a competitive landscape, and the ability to attract foreign direct investment, it also has barriers to continued growth, which start with Governmental policy measures that have caught up with the country – looming over from the debt crises days of the 1980s.  As previously mentioned, what goes around comes around.  And, Argentina has been building a magnificent castle of ICT growth on a pile of rubble, rather than on a solid foundation, which must start with sound fiscal policy.  Still, investors must have known of Argentina’s debt problems of the past as well as the looming concerns over its current debt and possibility that one-day it could default.  Therefore, investment poured in with these concerns still visible, putting such investment at risk from the very beginning.  One should question how sustainable this “tech boom” growth was from the start since it occurred amidst poorly structured fiscal policies, which always posed a significant risk to the investments pouring into the country.

Today, SMEs, which could have become the heart of the ICT industry in Argentina face the most significant risk due to the devaluation measures currently being taken.  Essentially, any company that is repaying a loan must now use devalued funds to do so, putting them at risk because they must generate greater sales revenues to meet the payment terms set before the devaluation occurred.  Therefore, many businesses could be at risk of going bankrupt, especially since they must raise this increased revenue from a slowing economy.  However, they could obtain Governmental support if payment terms for SMEs are structured so that they may extend the life of payments.  Moreover, interest rates on such loans could be lowered to help firms not default.  In short, the weakness of the Government in its policy setting capacities has now affected a market that was once booming.  It is difficult to build a castle on rubble.  A solid foundation must be there to ensure that there is stability.  Today, there is no stability in Argentina's economy.  And, this process began since the debt crises of the 1980s, when policies were enacted, which have come full circle today.

A major strength of the national IT landscape of Argentina is its foundation in education.  Argentina boasts one of the most educated populaces in all of Latin American and the Caribbean (please see software and labor sections of this report).  Therefore, its ability to attract companies to build products and services provides a vehicle for continued growth.  Even though it has been argued extensively in this report that Argentina should utilize its educational strengths as well as achieved learning curves in ICT development to build "home grown" products which they could export to other countries, especially throughout Latin America, perhaps during a time of economic crises and uncertainty it could render the same educational base to build products at a lesser costs for multinational firms seeking such services.  Therefore, leveraging this characteristic could prove to be its greatest strength today because of the potential financial reward connected with this ability.  In this regard, this is partially why firms like IBM, Microsoft, and Oracle have setup bases in Argentina.  For Microsoft, establishing a relationship with the Government to reduce piracy rates in exchange for joint cooperation on software development projects was a wise venture to promote.  However, they would never have agreed to this venture if they could not utilize educated professionals to develop local technology.

Another of Argentina's greatest strengths is the infrastructure which it has built along side multinational firms.  Also, the industries that have spurt around this telecommunications growth in other ICT sectors, such as software, hardware, and support and consultation services remain as a testament to the power of connecting people to others.  This connectivity unleashed the Internet in a country which showed some of the highest growth rates of any other country in Latin America.  And, this infrastructure is built and fully functional with services ranging from mobile wireless to high speed Internet access at one's home and everything else in between.  Therefore, the economic value of this system that is built and fully functional proves an appropriate stage to now attract businesses to settle within this region.  In short, the strength lies in the opportunity cost of not having to build from nothing.  Many other developing countries have the chore of achieving this goal and going through the countless hurdles, which include releasing governmental control as well as attracting investment.  For Argentina, these tasks were completed during a time when ICT was spreading throughout the world, with no perceived end in sight.

Argentina has the opportunity to utilize its technological base in Buenos Aires in the same function as that of a technology park (see INITEB case).  Also, it could benefit from adapting incubator programs, similar to those developed in countries such as Ireland (see INITEB case), the United States, and India.  This proximity which companies have to one another should be seen as a great strength since many advanced nations might have many dispersed cities with technological development capabilities.  In Argentina, most ICT companies are concentrated within the boundaries of Buenos Aires, which creates a rich and easily accessible information base.  This strength could be turned into ammunition if the Government decided to zone the area and provide richer incentives to firms that reside within its boundaries.  Such incentives could include setting up a buying program for employees of these firms in which discounts would be given (similar to U.S. military personnel buying goods at a base which are usually marked down and tax free), providing financial incentives for firms to purchase land and or property for operational uses, and even zoning housing areas for employees, which includes further discounts.  By making the city more attractive for multinational firms, Argentina could continue to attract foreign direct investment and turn economic hardship into a triumphant comeback.

Most ICT companies in Argentina are found in either Buenos Aires or in Greater Buenos Aires.  Therefore, most companies that promote ICT-related functions, such as building software, assembling hardware components, or providing consulting and or support services are all located within one sphere of influence to one another.  Therefore, as previously mentioned,  it could be argued that Buenos Aires is becoming one large technology park, since hundreds of firms reside scattered throughout its domain.  This proximity could yield power to firms seeking support and or inspiration from like companies - not to mention yielding greater competition and greater innovativeness.  Yet, on the other hand, although connecting one's company out to the Internet through high speed networks is not too complicated within the city limits, connectivity outside the city is difficult to achieve.  Therefore, such a characteristic could be seen as a weakness.  The Argentine Government realized this complication when it promised to connect all public schools in the country to the Internet, later realizing that some schools could not be connected because of technological constraints.  Therefore, a weakness of this infrastructure is that it is structured primarily in one central place: Buenos Aires.  The country therefore does not have a meaningful national network that connects all its cities through high speed access.  Instead, most of the building has occurred throughout its capital and in other cities which have significant populace.

To conclude, some policy recommendations for the Government include protecting SMEs from going bankrupt by providing a bailout plan so that the core of the ICT sector does not go under during the upcoming economic hardships.  In this regard, their Government could alleviate any existing barriers that prevent consumers from buying services, especially if such barriers pertain to telephone rates or any point of access between a consumer and the Internet.  If connection between services and consumers is alleviated, SMEs could work from a healthier potential client base.  Another policy measure could include alleviating any payments (fees, taxes) made between telecommunications providers and the Government.  Essentially, the Government must adopt principles which alleviate their financial claims to telecommunications activities and enable these providers to keep more of the profits.  Relaxing the Government's "take" could prove to be a valuable tactic during the worst national economic crises in Argentina's history.  Finally, any policy that acts to encourage private and public sector involvement (especially in education) would help to sustain economic activity in ICT - similar to programs in Germany in which companies recruit from the school systems to train students to fill their hiring needs.  Argentina could merge its public school systems with foreign firms who specialize in ICT development to deliver well priced workers that would reside in Argentina.  Such programs could be enacted but they would have to gain form and motivation at the national level.