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AD BOOM BUST ARGENTINA CAN'T SUSTAIN MAJOR GAINS

By Published on .

BUENOS AIRES-The government's three-year-old economic recovery program is paying dividends with record high ad spending levels, but the increase will be short-lived.

Ad spending was up 11.6% to $2.63 billion last year, according to research company Fuentes y Compania. The gains were powered by a drastic dip in inflation, tariff reductions, improved consumer confidence and an ensuing rise in consumption. Billings among Argentina's top 15 shops combined climbed 29.6%, well in excess of the 7.4% inflation rate.

"1993 was [the year] that industry could come back to the consumer and say, `Now you can come and buy it, and we can sell it,'*" said Dylan Williams, deputy regional director of Latin America for Bates Worldwide.

The improved economy was a magnet, attracting foreign investment as Argentina privatized. But as competition moved in, Argentinian companies were forced to cut back, causing higher unemployment and shaking the newly strengthened economy. Unemployment hit record levels in May 1994 at 12%, up from 9.3% in October '93, the last period measured by the Center for Public Opinion Studies.

As a result, consumer confidence is again ebbing and 1994 isn't expected to be a good year for advertising. While some gain is predicted by local agency executives, the increase won't come anywhere close to last year's.

"The next half of the year is going to be complicated," said Mr. Williams. "Everybody is watching their budgets cautiously."

The 1993 ad boom mainly focused on automobiles, food and small appliances due to the easing of import restrictions, the availability of new brand names and models and an ability to buy in installment payments.

Quilmes Cerveceria, Argentina's largest brewery, pumped up its ad spending 38% excluding inflation last year to $29 million to fight off a new rival from the U.S., Anheuser-Busch's Budweiser (handled by Graffiti/DMB&B) and Brazil, Brahma from importer CBA (Quintana Publicidade).

Small appliance retailer Garbarino Articulos' budget shot up 85%-excluding inflation-to $36.4 million in 1993, according to Fuentes, making it the country's third largest spender behind Unilever and the Argentine government. "Our market has become much more competitive. There are many products that have stopped being luxury items and have become easier to purchase," said Daniel Waltuch, Garbarino commercial director. Advertising is handled in-house.

The sell-off of state-run companies also had an impact on ad spending in 1993. The privatizations "had an effect because they were government companies and didn't advertise. Now the companies that sell natural gas or electricity or telephones are all advertising," said Elias Bensignor, VP of the Argentine Association of Advertising Agencies.

No agency realized this more than Ayer Vasquez, which saw its billings bloat 292.6% to $77.4 million in 1993. Its clients include four formerly state run corporations-National Mortgage Bank, Savings & Insurance Bank, Telecom Argentina and petroleum giant Yacimientos Petrelos & Fiscales, whose 1992 privatization was one of Latin America's largest. According to Fuentes, YPF increased its total ad spending 62% to $19.4 million last year while promoting its initial public offering.

Regional integration also had a hand in last year's billings increases and will again this year. Eveready Argentina, for example, reduced its number of plants to three, going from "a manufacturing company to a strategic marketing and distribution company in all Latin America," Mr. Williams said. It subsequently boosted its advertising budget threefold last year to $5 million; Cicero Dialogo/Bates is the agency.

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