Doing Business In Argentina

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Return to table of contents Chapter 6: Investment Climate 3/4/2008 Openness to Foreign Investment Conversion and Transfer Policies Expropriation and Compensation Dispute Settlement Performance Requirements and Incentives Right to Private Ownership and Establishment Protection of Property Rights Transparency of Regulatory System Efficient Capital Markets and Portfolio Investment Political Violence Corruption Bilateral Investment Agreements OPIC and Other Investment Insurance Programs Labor Foreign-Trade Zones/Free Ports Foreign Direct Investment Statistics Web Resources Openness to Foreign Investment Return to top Argentina remains open to foreign investment, hosting approximately 450 U.S. companies that currently employ about 155,000 people. Five consecutive years of real GDP growth over 8 percent have attracted considerable U.S. and other international investor interest in exploring new opportunities in the Argentine market. The government of Argentina, in turn, has signaled its desire to see foreign direct investment (FDI) expand significantly to enhance the nation’s productive capacity and sustain high levels of real GDP growth. However, the attractiveness of some sectors for foreign investors is affected by uncertainties concerning creditor and contract rights, as well as a perception of unpredictable regulatory changes. In 1991, the government of Argentina (GOA) pegged the Argentine peso to the U.S. dollar at a 1:1 exchange rate (“convertibility”) with the aim of breaking the back of hyperinflation and adopted far-reaching market-based policies, including dismantling a web of protectionist trade and business regulations, and reversing a half century of statism by implementing an ambitious privatization program. Argentina subsequently received significant increases in investment, with FDI inflows among the highest in Latin America through most of the 1990s. While convertibility defeated inflation, over time the rigidity that it imposed on exchange rate policy, combined with lack of fiscal discipline and poor governance, undermined Argentina's export competitiveness and created chronic deficits in the current account of the balance of payments, which were financed by massive borrowing. The contagion effect of the Asian financial crisis of 1998 precipitated an outflow of capital that contributed to a four-year recession that culminated in a financial panic in November 2001.
In January 2002, the government ended convertibility and defaulted on roughly $82 billion in privately held debt and over $6 billion in debt to official government creditors (including approximately $360 million owed to the U.S. government). In February 2005, private investors holding 76 percent of Argentina's defaulted debt accepted an Argentine government offer of approximately 30 cents on the dollar of old debt. Some remaining "holdout" private bondholders are still actively seeking redress but, as of this writing, the GOA has declined to engage with private bondholders who chose not to participate in the 2005 restructuring. Of the over $6 billion owed to official government creditors, over $4 billion consists of arrears and past-due interest. The GOA has indicated interest in normalizing its relationship with official government creditors. Argentina posted real GDP growth of 8.8 percent in 2003, 9.0 percent in 2004, 9.2 percent in 2005, 8.4 percent in 2006, and an estimated 8.5 percent in 2007. This impressive economic recovery, which has also led to improvements in key socioeconomic indicators, can be attributed to a number of factors. These include Argentina’s post-crisis move to a flexible exchange rate regime, sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal and income distribution policies, favorable international commodity prices, and interest rate trends. New taxes, better collecting efforts, and the recovery's strong impact on revenues have allowed the government to record primary fiscal surpluses in recent years. The 2006 federal primary surplus amounted to 3.5 percent of GDP, and is estimated at 3.3 - 3.48 percent of GDP in 2007. The government projects a primary fiscal surplus of about 3.5 percent in 2008. Argentina should continue to perform well, with the Central Bank of Argentina’s consensus survey forecasting 6.6 percent real GDP growth for 2008. Economic experts have identified potential challenges to sustaining high levels of growth in the future, including: capacity constraints; the need for new investment in infrastructure; potential energy shortages in the face of high growth and domestic price controls; an increasingly tight labor market as the economy moves closer to full employment; and inflation, including the public debate over its level and policies to address it, as well as the resulting pressure on domestic wages. Potential investors with an interest in these issues are encouraged to review the international and Argentine financial press, which cover them extensively. The industrial sector has performed well, growing from 16 percent of GDP in 2001 to 22.3 percent in 2006. Illustrative of this industrial expansion, the domestic car industry had its best year in history in 2007, with production reaching 544,647 units, up 26% from 2006. Automotive exports reached 316,410 units in 2007, also an all-time record, and comprising about 58% of total production. In 2007, the automotive industry accounted for almost 20% of Argentina's manufacturing output and 36% of all manufacturing exports, measured by value. Argentina’s economic expansion continues to create jobs, and unemployment continues to decline, down from a 21.5 percent peak in 2002 to 8.8 percent during the third quarter of 2007 according to official government statistics. Investment in real terms, according to consensus forecasts published by the Central Bank, was estimated to have increased 13.8 percent in 2007. Meanwhile, the move from convertibility to a managed float exchange rate regime and high global commodity prices have lifted the value of exports to record levels. A substantial foreign exchange reserve cushion ($46 billion as of 3/4/2008
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Doing Business in Argentina: 2008 C
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3/4/2008 Argentina’s banking syst
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3/4/2008 The zero percent import du
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Policy Short-term Short/Medium Term
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meetings. The service includes at l
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approximately 87 percent of the tot
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more limited and delivery is a grow
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Goods: Preference will be given to
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material, input, or material needed
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terminals at international airports
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As in many countries, personal rela
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"Clarin", "La Nacion", and "Ambito
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Av. de Mayo 605, Piso 3 C1084AAB Bu
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Business Facilitation Service: CS A
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organizations, both Argentine or U.
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available in Chapter 9: Contacts, M
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Agricultural Machinery, Equipment a
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Electric Power Systems Overview Ret
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Food Processing and Packaging Equip
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Information Technology Overview Ret
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Other market conditions will foster
Page 45 and 46: market. The market has been growing
Page 47 and 48: Mining Sector Specialist at the U.S
Page 49 and 50: significantly smaller than in the U
Page 51 and 52: A gradual recovery has taken place
Page 53 and 54: Best sales prospects for U.S. elect
Page 55 and 56: Travel and Tourism Services Overvie
Page 57 and 58: Telecommunications Equipment and Se
Page 59 and 60: Agricultural Sectors Return to top
Page 61 and 62: Food Ingredients Overview Return to
Page 63 and 64: Pioneer Argentina: www.pioneer.com/
Page 65 and 66: Average Tariff Rates by Type of Pro
Page 67 and 68: In 2006, there was a significant in
Page 69 and 70: 3/4/2008 Certain imported goods for
Page 71 and 72: Please note that VAT and Profits Ta
Page 73 and 74: 3/4/2008 Goods covered by Decree 73
Page 75 and 76: A fax of the commercial invoice may
Page 77 and 78: you through this process. You may a
Page 79 and 80: violate export control laws is foun
Page 81 and 82: Initial period: 1 year Extension: 1
Page 83 and 84: Article 6: - Importers, manufacture
Page 85 and 86: emanufactured) and certified by a "
Page 87 and 88: 3/4/2008 Normalizacion) --composed
Page 89 and 90: 3/4/2008 continuing shortage of ind
Page 91 and 92: 3/4/2008 Record No. S01:0116093/200
Page 93 and 94: 3/4/2008 Internet: www.anmat.gov.ar
Page 95: subject to the orders, guidelines o
Page 99 and 100: The GOA has established a number of
Page 101 and 102: legality of this pesification decre
Page 103 and 104: deterrent penalties such as prison
Page 105 and 106: Law 17811 of 1968 regulates public
Page 107 and 108: A recent ACO investigation of GOA p
Page 109 and 110: Foreign-Trade Zones/Free Ports Retu
Page 111 and 112: Argentine Parliament (www.diputados
Page 113 and 114: Registry of Foreign Investments. Fo
Page 115 and 116: Local bankers report that the major
Page 117 and 118: The International Bank for Reconstr
Page 119 and 120: total project costs for new venture
Page 121 and 122: Return to table of contents Chapter
Page 123 and 124: C1104AC) Buenos Aires, Argentina Ph
Page 125 and 126: Buenos Aires has a large number of
Page 127 and 128: Travelers should note that since Ar
Page 129 and 130: Internet: www.buyusa.gov/argentina/
Page 131 and 132: U.S. Department of Commerce Trade I
Page 133 and 134: (Argentine Chamber of Importers) Mr
Page 135 and 136: (Ministry of Federal Planning, Publ
Page 137 and 138: C1020AC Buenos Aires Switchboard: (
Page 139 and 140: 25 de Mayo 487, primer piso C1002AB
Page 141 and 142: C1036AAJ Buenos Aires Phone: (54-11
Page 143 and 144: Fax: (54-11) 4312-7184 E-mail: mdem
Page 145 and 146: E-mail: fargosi@fibertel.com.ar BAS
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Bolivar 332, Piso 6 C1088AAH Buenos
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Mr. Klaus Bertram, President 25 de
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EXOLGAN TERMINAL PORTUARIA S.A. Mr.
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C1006ACI Buenos Aires Phone: (54-11
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Fax: (54-11) 4131-3900 E-mail: info
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www.starwoodhotels.com/sheraton/pro
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