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Argentina's economy is getting stronger and foreign investors are increasingly viewing the country as an attractive place to invest.
While not all is rosy in the Casa Rosada presidential palace - the country has a big fiscal deficit and is vulnerable to external shock events - things are looking pretty good.
The government is laying the foundations for steady, broad-based economic growth and its efforts are starting to bear fruit.
Inflation has fallen and the general consensus is that while the central bank will not hit its 17% annual inflation target this year, it will not be far off. Investment restrictions have been eased, GDP is up and political risk, while always a lurking presence in Argentina, appears to be waning.
The improving macroeconomic situation is reason enough to forecast that an uptick in M&A is on the way. But when you also consider that banking and insurance penetration is low in Argentina, that loan growth is accelerating, that incomes should increase and so should demand for financial services products, that banks and insurers tend to be profitable and that the banking and insurance industries are fairly fragmented, there is even more reason to believe increased M&A is on the cards. In other words, it seems the stage is set, the scenery and the actors are in place.
Overall, M&A activity increased in Argentina last year. Ninety-three deals were struck, up 66% from 2015. Argentina accounted for 7% of M&A operations in Latin America, according to a report from professional services firm Deloitte. The bulk of Argentina's operations corresponded to the energy/natural resources (29%) and mass consumption (29%) sectors, while financial services accounted for 14%. In terms of investment made, overall operations involved US$7.88bn.
Of the total investment, 53% came from Argentina, followed by North America (15%) and the rest of Latin America (14%).
Argentina's financial system is not short of players. Almost 80 entities compete, with a group of six holding a large lead over the rest of the pack. Among the market participants are state-owned entities including behemoth and No. 1 lender Banco Nación and the local units of Spanish heavyweights Santander and BBVA.
This year there has been some movement locally. Argentina's Grupo Sancor, the country's biggest insurer by market share, purchased a controlling stake in small local lender Banco del Sol. And last month the Fiorito family was given the green light to purchase a controlling stake in another of Argentina's banking minnows, Finansur. And a question mark still hangs over what will become of Banco Patagonia, which large private lender Banco Macro was originally expected to acquire.
Aaron Freedman, associate managing director, Latin American banks at rating agency Moody's, told BNamericas this year: "We expect to see some activity in Argentina. We think there's a lot of opportunity there. There's a lot of concentration at the top. There's actually a very large number of smaller banks in that country. To really take advantage of the opportunities that we expect to see in that country, banks are going to need to get economies of scale to be able to compete more effectively against the larger players.
"There may be scattered opportunities in other parts of the region. I think [Argentina] that's where we're most likely to see activity. But even there I don't know if we're going to be talking about a gold rush."
The insurance industry is hardly short of players either. About 170 compete, with none accounting for more than 7.5% of the market. The sector is pretty profitable, too. For April-June, the country's insurers reported income of 22.1bn pesos (US$1.284bn), up 10.56% year-on-year.
The market is dominated by local players and nearly 80% of premiums corresponds to the car, worker compensation and life insurance segments. And that implies there is plenty of room for growth in the other lines offered by the country's insurers,
Lionel Moure, an analyst at the Argentine office of Deloitte, has observed growing interest in M&A opportunities in the financial services sector. In terms of insurance, the key reason is the general outlook for the country's economy, Moure told BNamericas. After all when the good times roll, most segments tend to benefit.
Moure added that achieving economies of scale is unlikely to be a driver, as insurers of all sizes in Argentina tend to have the same cost structures.