The pharmaceutical industry in South America is projected to increase in value over the next decade. Based on this and other factors, it would be prudent for pharmaceutical companies hoping to diversify in the international market to consider the South American market. This report intends to make a recommendation to the strategic management committee of our company so that any decisions on where to diversify are informed. In this regard, this report will consider Venezuela and Argentina as potential countries for expansion.
This report will consider different factors in order to provide a broad analysis. Some of the factors that the report will consider include the economy, geography, political climate, current events and the population demographics of the two countries. This report will use a direct approach in order to be unequivocal in the findings, thus making clear recommendations. As a result of the analysis of the outlined factors, the report will make a recommendation of which of the two countries is better for expansion.
Analysis of Argentina
In terms of land size, Argentina is second to Brazil with a total land area of 2.7 million square kilometers. The neighbouring countries include Brazil, Bolivia, Uruguay, Chile and Paraguay. The most significant landmarks include the Andes and Atlantic Ocean. The most significant environmental issues in Argentina include desertification, soil degradation, and water and air pollution. According to the World Fact book, the country has been recognized globally in setting voluntary targets for reducing the emission of greenhouse gases.
- Political climate
Argentina is a country that enjoys relative political stability. However, the decline in political instability in the 1930s that resulted from the seizure of power from civilian rule by the Junta military destabilized the country. Subsequent governments were not successful in restoring the stable political climate that the country enjoyed prior to this event. However, the country has gradually gained stability, and this is evidenced by the improving economy.
According to the World Fact book, Argentina has the third-largest economy in Latin America. The economy of the country benefits from an expanded industrial base, natural resources, an agricultural sector that is export-oriented and a population with high levels of literacy. The country had a gross domestic product of 448.2 billion dollars in 2013, with a global ranking of number twenty six. This was a growth of 4.3% from the previous years. The gross domestic product per capita of the country in the same year was 11,766 dollars, effectively ranking the country at fifty five globally. The inflation index of the country was 21.5%. As of 2012, 17.9 million of the population comprised the labor force, with the private sector employing 49% of this number. Unpaid family workers in the country amounted to 3% of the workforce. The main industries in Argentina include pharmaceuticals, food processing, steel and aluminum and chemicals. In terms of the ease-of-doing business, the country is ranked number 113.
- Population demographics
According to the census carried out in 2010, the country had a population of over 40 million people. It was the third most populous country in South America and thirty third globally. The population density in the country was lower than the global average of 50 people at 15 people per square kilometer. The population growth rate was 1.036%, with a birth rate of 17.75 births for every 1000 and a death rate of 7.39 deaths for every 1000 population. The average life expectancy in Argentina is 77.14 years; with the precise number for males being 73.9 years while that for females at 80.54 years. The fertility rates in the country are at 2.29 children for every woman, and an infant mortality rate of 10.52 deaths for every 1000 live births.
- Current events
The pharmaceutical industry in Argentina is experiencing exponential growth that is precipitated by increased quality in manufacturing, favorable regulations on clinical trials and many domestic players in the industry. As a result, there is an increase in value in the industry.
Analysis of Venezuela
Venezuela is situated in South America, bordered by Colombia, Brazil and Guyana. The total land area of Venezuela is slightly over 800,000 square kilometers. The most significant landforms in the country are Lake Maracaibo, the largest of its kind in Latin America.
- Political climate
For a long period of time, the political climate in Venezuela has been polarized due to government policies and pressure from non-governmental agencies. For instance, there has been a long standing tension between the previous government and the church in the country. This is because of the view that the previous government accumulated power. More precisely, law making arm of the government has on previous occasions voted to enable the president to rule by decree. The political climate is also affected by issues regarding human rights.
The most important pillars of the economy in Venezuela are manufacturing and the petroleum sector. The country’s export business is also reliant on petroleum, a sector that also contributes more than half of the country’s gross domestic product. The manufacturing sector imports steel, cement, aluminum, automobiles and electronics. As of 2012, the country’s gross domestic product 338 billion dollars. This represented a growth of 1.1%. The gross domestic product per capita in the same year was 13,200 dollars. The number of people living below the global poverty line amounts to 27.3% of the entire population. The inflation rates in the country are very high, at 62.1%. Venezuela is ranked 181 globally in terms of the ease-of-doing business index.
- Population demographics
According to the World Fact book, it is estimated that Venezuela has a total population of over 27,000,000 people, with a population growth rate of 1.5%. The total life expectancy in Venezuela is estimated at 73.7 years, with the precise number for males being 70.8 and that of females being 76.8. The infant mortality rate in the country is estimated at 17 deaths for every 1000 live births.
- Current events
The most significant events in Venezuela at the moment are the escalation of civil unrest marked by political protests and demonstrations. These events are said to be rooted in the increasing violence, high levels of inflation and an inadequate supply of basic goods in the market. These events have an effect on the economy and businesses in the country.
The Choice of Argentina over Venezuela
Every country experiences political events from time to time that affect the economy and businesses. However, from the analysis above, Argentina has for a long time experienced more political stability than Venezuela. This implies that businesses in Venezuela carry more political risk compared to those in Argentina. In the same regard, to could cost more to share the political risk in Venezuela compared to Argentina (Akongdot, 2013). This could be a precipitating factor in the ranking of the two countries in the ease-to-do business index. Argentina is ranked significantly higher than Venezuela, meaning that there is relative ease to do business in Argentina. This has an implication on the operating costs and other bottom lines for businesses electing to expand in either of these countries.
The economy of Argentina is more diversified compare to that of Venezuela. The effect of a diversified economy can be illustrated by the slump in the oil prices in the 1980s. The effects of these changes in global oil prices were more profound for Venezuela, a country where 95% of the export business is reliant on petroleum products, a sector that also contributes half of the country’s gross domestic product. The result of this was a sharp increase in the inflation index in the country (Mejia, 2011). High inflation rates affect businesses by reducing surplus income because if expanded expenditures in consumer goods.
Argentina is also more appropriate for international expansion because of the enabling environment for the pharmaceutical industry. Given that the industry is established, it means that there are more pharmaceutical companies in Argentina compared to Venezuela. However, the enabling environment enables companies to compete favorably, hence better chances for expansion. Additionally, the regulatory mechanisms in the pharmaceutical industry in Argentina favor companies that want to develop new pharmaceutical products. This is especially so given the enabling conditions for clinical trials (U.S. International Trade Commission, 1992).
Conclusion and Recommendations
It is recommended to expand the pharmaceutical business in Argentina over Venezuela because of the following reasons:
- The relative political stability in Argentina compared to the civil unrest currently being experienced in Venezuela.
- The diversified economy of Argentina compared to the economy of Venezuela that is prone to shocks due to over-reliance in the petroleum sector.
- The enabling regulatory mechanisms for the pharmaceutical industry in Argentina.
Akongdot, O. (2013). Impact of Political Stability on Economic Development: Case of South Sudan. Bloomington. AuthorHouse.
Mejia, J. F. (2011). Export Diversification and Economic Growth: An Analysis of Colombia's Export Competitiveness in the European Union's Market. Heidelberg: Springer-Verlag Berlin Heidelberg.
This book focuses in the influence of export diversification on economic growth. The information presented by the author is very important because the concepts outlines reflect on the economic pillars of Venezuela. The fact that the author uses a case study approach also adds credibility to the information because it enables to reader to relate to things that are practical.
The World Fact book, (2014). Argentina. Available at> https://www.cia.gov/library /publications/the-world-factbook/geos/print/country/countrypdf_ar.pdf
The World Fact Book is a collection of relevant information regarding a country by a governmental agency in the United States of America. Given that the source is important to the national security of the country, the information given is very credible. This is also because the collection of the information is done in conjunction with relevant departments in Argentina.
The World Fact Book. (2014). Venezuela. Available at> https://www.cia.gov/library /publications/the-world-factbook/geos/print/country/countrypdf_ve.pdf
The World Fact Book is a collection of relevant information regarding a country by a governmental agency in the United States of America. Given that the source is important to the national security of the country, the information given is very credible. This is also because the collection of the information is done in conjunction with relevant departments in Venezuela.
U.S. International Trade Commission, (1992). U.S. market access in Latin America: recent liberalization measures and remaining barriers, with a special case study on Chile : [report to the Committee on Finance of the United States Senate on investigation no.332- 318 under section 332 of the Tariff Act of 1930]. Available at> http://books.google.co.ke/books?id=DLW2AAAAIAAJ&dq=pharmaceutical+industry+i n+argentina&source=gbs_navlinks_s
This report is very important to this presentation because it outlines the dynamics of the pharmaceutical industry in Argentina, with a special focus on the environment in which pharmaceutical industries operate. The report also highlights the impact of this on the competitiveness of industry players, a premise that the presentation explores.