Rocking back: small business is turning Argentina's natural resources, talent and a weak currency into profits.

Argentine rock band Bersuit Vergarabat is at its hottest since forming in 1988. It sold out 10 nights at tuna Park, a major venue in Buenos Aires. Musical acts like La Renga and Los Piojos are filling even the 70,000-seat River Stadium, something only done before by the major foreign acts like the Rolling Stones and U2.

Bersuit's sound is like what the early 1990s grunge trend was in the United States, says media impresario Mario Pergolini. "[It's] not the music but the movement and the identification young people feel to the music," says Pergolini.

At the heart of this rock revolution, however, is money--people are spending again, even on entertainment. And so it goes across the economy. With foreign products scarce and pricey in peso terms after a threefold devaluation in 2002, "made in Argentina" means something again. Manufacturers have put idle capacity back to work and have stepped up exports to fetch stronger currencies. "It was like somebody pushed the reset button," says Dante Curia, an entrepreneur and packaging businessman.

After a 10.9% slump in 2002, the economy shot up 8.7% in 2003. The LATIN TRADE Consensus Forecast puts the country's growth at a blistering 7.4% in 2004, dropping back to 3.8% next year. Some of the most buoyant companies are smaller ones exporting in greater numbers. Of the nation's 13,700 exporters, 18% of them came into existence after the devaluation, many of them small, according to government data. The rank of small exporters increased 28% in the first half of 2004 to more than 8,000; small companies expect to account for 10% of this year's record US$33.50 billion in exports, according to the government.

Curia in 2002 launched Argentina's first domestic sports drink. So far, Lemon-tire has nabbed 5% of the $24 million market from PepsiCo's Gatorade brand, previously the only one available. Curia expects Lemon-Lite will control half the market in 10 years. That won't be easy. To quicken domestic growth and expand further abroad (he's selling only in Florida and Spain so far), he needs affordable, long-term credit.

Yet private investors remain hesitant; many were burned by the economic collapse of late 2001. The banking system, also hit hard, is struggling to rebuild deposits, so loans are expensive. Without credit, Curia must rely on retained earnings and money from family and friends. Such financing limits growth as it restricts him to word-of-mouth marketing to sell Lemon-Lite. An energy shortage and taxes on oil exports have dampened the investment climate and will slow economic growth next year. Plans to raise the minimum wage along with higher public pensions and welfare subsidies may spur consumption, but bosses are worried that lower profits could limit growth.

"There is little margin to take risks and innovate," says Juan Manuel Freddi, a partner in Tlanti, one of the country's biggest toy manufacturers. "We are limited to investments that promise a rapid recovery of our money. Otherwise we could lose our investment."

Maybe so for toys, but the Kirchner administration is taking steps to promote the budding software industry--including video games, a hot Christmas seller. In August 2004, it launched a plan to mimic India and Ireland, two of the world's biggest software exporters. Three ministries converged promotional programs for the industry. A state bank launched a line of up to $100,000 in low-interest loans for software designers.

Congress cut software developers' income taxes by 60% and allowed them to knock off 70% of labor costs from a 21% value-added tax. That's a huge savings. Some 80% of their total costs are payroll. With this, the government expects to double software employment to 50,000 in three years and double exports to $350 million.

Buenos Aires, too, is behind the push to build the software industry, now boasting 600 companies. One of these is Sabrasa Entertainment. It is spending up to $80,000 to develop Beyond the Eternal Eye, a game for Nintendo's pocket video console Game Boy Advance. The 15-employee

company plans to sell the game by 2005, collecting a royalty of up to 25%. In the meantime, it is surviving on subsidies and outsourcing, mostly by making games for overseas mobile phone companies, says CEO Javier Otaegui.

Santiago Siri approached 100 video game publishers before finally selling his computer soccer game Futbol Deluxe to Canada's Strategy First, the first Argentine game to make it abroad. Siri expects foreign publishers to start looking more keenly at Buenos Aires. "We have new ideas that can break stereotypes of Japan, England and the U.S.," by providing a fresh edge for greater sales, he says. It also has to do with margins. A video game developer makes $8,700 a year in Argentina, 10 times less than in the United States. Siri and Guillermo Girard, through their Evoluxion outfit, invested $27,000 over two years to create the game. At an average of $29 a copy, international sales are estimated to total $2.3 million.

The fashion industry is growing for similar reasons. Prior to 2002, when the peso was pegged to the dollar, Argentines bought Christian Dior, Gucci and other exalted foreign labels on trips abroad. Devaluation put these products out of reach, forcing consumers to buy Cora Groppo, Maria Cher and other local lines. Business rose rapidly, says designer Vero Ivaldi. Not only more affordable, garments here can be original and cut-to-fit. At the same time, designers found that the best textile factories, previously resistant to small orders, were keen to make their outfits during the slowdown.

The rise of the industry has attracted attention. Portia de Rossi, an actress on the U.S. sitcom Arrested Development, and U.S. pop star Jessica Simpson are fans of Argentine fashion. And buyers from department stores like London's Selfridges & Co. and Mexico City's Palacio de Hierro are coming to regular fashion shows in Buenos Aires. Not only are they looking at the low production costs but for flesh ideas as well. "They see that new things are coming out of here, out of Brazil and Argentina," says Ivaldi. Orders from these and other stores, particularly in Asia and Europe, are fueling a boom in clothing exports. They are on track to reach a record $54.2 million this year, up 15.8% from 2003, according to industry data.

To make it abroad and at home, small companies are boosting brand image. "We have been through so many crises that we are learning how to do it right," says Adriana Cortese, a packaging design expert. Cortese's firm, Tridimage, has seen a rise in orders from food makers and wineries that want to get their products noticed in European and U.S. restaurants and supermarkets.

Holiday. A growing number of companies are trying to capture a brisk inflow of money from foreign tourists looking for cheap holidays, even low-cost cancer treatment and plastic surgery. Argentina's tourism numbers have been rising sharply since the devaluation, reaching a record 3.3 million visitors last year. Tourists spent $2 billion in 2003, making it the fourth largest source of foreign currencies, after soybean, oil and food exports.

BA House, a temporary housing rental service in the capital, has expanded to 200 apartments from 20 in the 1990s, says owner Marcela Picca. Between 2003 and 2007, local and foreign companies should plow $800 million into new hotels and restaurants and refurbishment that create jobs, industry sources say. While crime may have risen since the devaluation, concerns seem minimal, says Picca. "I haven't heard any comments from tourists about being robbed," she says.

CHARLES NEWBERY * BUENOS AIRES