Academic journal article Current Politics and Economics of South and Central America

2014 Investment Climate Statement: Argentina *

Academic journal article Current Politics and Economics of South and Central America

2014 Investment Climate Statement: Argentina *

Article excerpt

Bureau of Economic and Business Affairs

The GOA's all-encompassing import licensing system has made it burdensome to import the materials necessary for the day-to-day functioning of a business. Factories and distributors occasionally sit idle while the GOA delays granting approval to move inputs through customs, a process that can be unpredictable. Companies that export more from Argentina than they import generally receive preferential access, but even these firms have reported difficulties in securing certain goods. Price controls have also caused difficulties for businesses.

Argentina continues to owe debt to private bondholders. Ninety-two percent of the defaulted USD 82 billion of private debt has been swapped for a mix of new bonds with a substantial loss in net present value. Some bondholders, known as the "holdouts," have not participated in the swaps and continue to pressure Argentina via the U.S. courts to settle its outstanding debt for the actual amount they are owed plus interest.

Argentina's growth slowed in 2013 to 3 percent and unemployment remained steady at 6.4 percent, according to official figures. Central Bank reserves dipped to USD 27 billion down from their high of USD 52 billion in early 2011. This decline has been due to reserves having been used to service debt, maintain the exchange rate, and meet other balance of payment needs. The 2014 budget allowed the use of USD 9.8 billion in Central Bank reserves to make debt payments. Argentina ran current and financial account deficits in 2013 that also contributed to a decline in reserves.

After several years of publishing non-credible statistics, Argentina's official statistics agency (INDEC) released substantially revised inflation and GDP growth data that are closer in line with private estimates. The IMF had formally censured Argentina in February 2013 because of manipulation of inflation and GDP data, a breach of obligation to the Fund under the Articles of Agreement. As of publication of this report, the IMF had not yet released its conclusions regarding its review of Argentina's new data.

1.Openness to and Restrictions upon Foreign Investment

According to a Presidential decree governing foreign investment in Argentina, foreign companies may invest in Argentina without registration or prior government approval, and on the same terms as investors domiciled in Argentina. Investors are free to enter Argentina through merger, acquisition, green-field investments, or joint ventures. Foreign firms may also participate in publicly-financed research and development programs on a national treatment basis.

In December 2011, the Argentine Congress passed Law 26.737 (Regime for Protection of National Domain over Ownership, Possession or Tenure of Rural Land) limiting foreign ownership of rural land to a maximum of 15 percent of all national productive land. Individuals or companies from a same nation may not hold over 30 percent of that amount; and individually each foreign individual or company faces an ownership cap of 1,000 hectares (2,470 acres) in the most productive farming areas, or the equivalent in terms of productivity levels in other areas. As approved, the law is not retroactive. Section 11 of the Law establishes that "for the purposes of this Law and according to the Bilateral Investment Treaties (BITs) underwritten by the Republic of Argentina that are in force at the time this Law becomes valid, the acquisition of rural land shall not be considered an investment as it is a nonrenewable natural resource provided by the host country."

Foreign and Argentine firms generally face the same tax liabilities. In general, taxes are assessed on consumption, imports and exports, assets, financial transactions, and property and payroll (social security and related benefits).

The GOA has established a number of investment promotion programs. Those programs allow for Value-Added Tax (VAT) refunds and accelerated depreciation of capital goods for investors and offer tariff incentives for local production of capital goods. …

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