If factories are operating at full capacity (quantity produced can't be increased without significant investments), shouldn't price reductions lead to both decreasing revenues (same quantity x lower prices) and lower profit margins? In that case, the proposed solution doesn't solve any of the objectives of the case, since we know that the Argentinian market is growing by 10%, right?

I think the argument makes sense as the maximum capacity has been reached. Reducing price will not cause increasing units sold due to the shortage of supply unless we open new manufacturing plants, which requires another amount of up-front cost.