2011 Investment Climate Statement - Argentina

2011 Investment Climate Statement
Bureau of Economic, Energy and Business Affairs
March 2011

Openness to, and Restrictions upon, Foreign Investment

Argentina remains open to foreign investment, currently hosting over 500 U.S. companies that employ more than 155,000 Argentines. Five consecutive years of real GDP growth over 8.5 percent between 2003 and 2007 attracted considerable U.S. and other international investor interest in exploring opportunities in the Argentine market. Even in the wake of the international economic crisis, growth in 2008 remained high at 6.8% and, according to official estimates, 2009 GDP grew slightly at 0.9%, although most private analysts assert that Argentina suffered a mild recession. With strong economic growth reported in 2010, Argentine Government estimates put it close to 9% for the year. The Government of Argentina has signaled its desire to see continued foreign direct investment (FDI) flows to enhance the nation’s productive capacity and GDP growth potential. Longstanding concerns regarding contractual rights and the regulatory environment, as well as current concern over the high rate of inflation, may, however, diminish the attractiveness of prospective investments in some sectors.

Following a December 2001 financial crisis, the government ended a currency board regime (“convertibility”) that had pegged the Argentine peso to the U.S. dollar and devalued the currency. In January 2002, the government 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). By December 2010, Argentina's defaulted debt to official ”Paris Club” creditors had grown to an estimated $7.9 billion, including arrears and past due interest.

In February 2005, private investors holding 76 percent of Argentina’s defaulted debt accepted an Argentine government offer of approximately 34 cents on the dollar of old debt. In November 2009, the Argentine Congress authorized a reopening of the debt swap aimed at investors who had opted not to participate in 2005. This measure was necessary for the Argentine Government to legally make an offer to holdout creditors. These holdouts had claims on $20 billion of principal in defaulted debt. The Argentine Government filed a prospectus with the U.S. Securities and Exchange Commission in December 2009 which was cleared in March 2010, and the debt restructuring was formally opened on April 29. By the time it closed (after one postponement) on June 22, 66% of outstanding eligible defaulted bondholders accepted the terms of the offer. Creditors holding 12.1 billion USD of 18.3 billion in defaulted debt tendered their securities in the restructuring. Combined with the adherents to the 2005 restructuring, a total of nearly 93 percent of defaulted debt has been swapped for a mix of new bonds with a substantial loss in present value. On November 15, 2010, the Government announced preliminary discussions with Paris Club creditors to clear Argentine arrears and normalize relations.

Argentina posted real GDP growth rates averaging over 8% from 2003 through 2008 (according to Argentine national statistics agency INDEC). While Argentina experienced a broad deceleration of economic activity in 2009 as a result of ongoing global financial turmoil and the resulting slowdown in world economic output, INDEC estimates reported GDP growth at +0.9% in 2009. Other observers estimated that GDP fell up to 3.9% in calendar year 2009. A return to robust growth followed in 2010 with official estimated cumulative GDP growth of 9% between January and September 2010 compared to the same period in 2009.

High growth from 2003 to 2008 led to improvements in key socio-economic indicators, including a reduction in unemployment from a 21.5% peak in 2002 to 7.3% during the fourth quarter of 2008, according to official statistics. 2009, however, saw some increase in unemployment, which grew to 9.1% in the third quarter, as growth slowed with the global economic crisis. By the third quarter of 2010, however, unemployment had dropped for four consecutive quarters to 7.5%, the lowest since the end of 2008.

Argentina's move to a more flexible exchange rate regime in 2002, along with sustained global and regional growth, a boost in domestic aggregate demand via monetary, fiscal, and income policies, and favorable international commodity prices and interest rate trends, were catalytic factors in supporting renewed growth between 2003 and 2008, and its resumption in 2010 after global financial turmoil. The economic resurgence also enabled the Argentine Central Bank to accumulate substantial official reserves to insulate the economy from external shocks. In January 2006, the Argentine Government used Central Bank reserves to cancel Argentina's $9.5 billion debt to the IMF. In December 2009, the Government announced that it would transfer $6.57 billion in Central Bank reserves to a fund created to guarantee debt payments in 2010. Central Bank reserves are estimated to be $52.2 billion as of mid December 2010. A higher tax burden, improved tax collection efforts, and the recovery’s strong impact on increased tax revenues supported the government's successful efforts to maintain primary fiscal surpluses starting in 2003. Although the slowdown of the economy and lower commodity prices led to lower tax collection than projected in the 2009 budget, tax receipts were still up 13.2% over 2008. Since 2008, the Argentine Government has implemented countercyclical policies of high expenditures, leading to the deterioration of the fiscal accounts. Tax receipts also declined in 2009 due, in part, to a severe drought which negatively impacted the Argentine agricultural sector. The primary fiscal surplus was, consequently, only 1.5% of GDP in 2009, compared to 3.1% in 2008.

Some observers believe that Argentina’s Central Bank has managed monetary and currency policies in support of the economic expansion by maintaining an undervalued or “competitive” exchange rate and negative real interest rates. There has been public debate in the media over the relative importance of this policy in causing the dramatic rise in the level of inflation in recent years. Others point to fiscal, wage, or income policies as more important contributing factors to inflation. Whatever the root causes, inflation is an ongoing point of concern for Argentina’s macroeconomic prospects. This acceleration of inflation coupled with a relatively stable nominal exchange rate, has caused a real appreciation of the peso, and consequently, many productive sectors are pressing for a substantial nominal devaluation of the local currency.

The industrial sector performed well in the aftermath of the 2001/2 economic crisis, growing from 17% of GDP in 2001 to over 22 % in 2008. Investment in real terms, according to government statistics, increased 12% in 2008, but then fell 10.1% in 2009. Despite strong GDP recovery, as of mid-2010 the investment to GDP ratio was 21%, about equal to 2009 and lower than the 23% of 2007 and 2008.

According to the 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.

A Bilateral Investment Treaty (BIT) between Argentina and the United States entered into force in October 1994. The BIT provides protections against capital movement restrictions, expropriations, and performance requirements; it also establishes the means for the settlement of investment disputes. The BIT lists a few sectors in which Argentina maintains exceptions to national treatment for U.S. investors: real estate in border areas, air transportation, shipbuilding, nuclear energy, uranium mining, and fishing. U.S. investors must obtain permission from the Ministry of Defense’s Superintendency for Frontiers to invest in non-mining activities in border areas.

Foreign and Argentine firms 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 VAT refunds and accelerated depreciation of capital goods for investors and offer tariff incentives for local production of capital goods. They also include sectoral programs, free trade zones, and a Special Customs Area (SCA) in Tierra del Fuego, among other benefits. A complete description of the scope and scale of Argentina’s investment promotion programs and regimes can be found at http://www.industria.gov.ar and http://www.prosperar.gov.ar. Information about programs that specifically apply to small and medium businesses may be found at http://www.sepyme.gov.ar.

Selected Indicators:


World Bank Ease of Doing Business 2011 115/183
TI Corruption Perceptions 2010 105/178
Heritage Economic Freedom 2010 135/179

Conversion and Transfer Policies

Since 2001, the Argentine Ministry of Economy and Central Bank have issued various new or revised foreign exchange transaction regulations in an attempt to normalize the foreign exchange market and to limit the peso’s appreciation against the dollar. In June 2003, Argentina imposed a registration requirement for inflows and outflows of capital. In 2004, the Central Bank issued several specific, narrowly applied new controls on capital flows. Argentine residents are restricted to net currency purchases of USD 2 million per month. Institutional investors are restricted to total currency transactions of USD 2 million per month although transactions by institutions acting as intermediaries for others do not count against this limit. In June 2010, the Central Bank introduced additional regulations on access to the foreign exchange market. While the limit of USD 2 million continues to apply for most transactions, Argentine residents may purchase foreign currency beyond this limit when used for specific purposes outlined in the regulation (e.g. purchases of federal government bonds, purchases of foreign currency to deposit in the local banking system to finance investment projects, etc.). The Central Bank also requires that Argentine residents who purchase more than USD 250,000 within a single year prove that their purchases are consistent with their income tax declarations.

In May 2005, the GOA issued a Presidential Decree and extended the minimum holding period for capital inflows from 180 to 365 days. The Ministry of Economy implemented the decree through resolutions and amendments from 2005 to 2009 which imposed more restrictive controls on the following classes of inbound investments: inflows of foreign funds from private sector debt (excluding foreign trade and initial public offerings of stock and bond issues); inflows for most fiduciary funds; inflows of nonresident funds that are destined for the holding of Argentine pesos or the purchase of private sector financial instruments (excluding foreign direct investment and the primary issuance of stocks and bonds); and investments in public sector securities purchased in the secondary market.

Inflows are subject to three restrictions: (a) they may not be transferred out of the country for 365 days after their entry; (b) proceeds from foreign exchange transactions involving these investments must be paid into an account in the local financial system; and (c) a 30 percent unremunerated reserve requirement, meaning 30 percent of the amount of such transactions must be deposited in a local financial entity for 365 days in an account that must be denominated in dollars and pay no interest.

There are some notable exceptions to the deposit requirement. A deposit is not required for capital inflows to finance energy infrastructure. Nor is a deposit required on inflows for the purchase of real property by foreigners as long as the foreign exchange liquidation occurs on the day of settlement (and transfer of the title). Nor is a deposit required for inflows from foreigners to be used for (a) tax payment and (b) social security contributions within 10 days of the settlement of the foreign currency. With the noted exceptions, violations of the deposit requirement are subject to criminal prosecution.

In October 2007, the Central Bank introduced new control measures and banned all foreign entities from participating in Central Bank initial bond offerings; however, foreign firms may still trade Central Bank debt instruments on the secondary market. The Central Bank imposed a further restriction in October 2008 by requiring that exporters deposit the U.S. dollar proceeds from exports in “local” banks (cuentas de corresponsalía de entidades financieras locales) within 10 days.

The Central Bank intervenes frequently in the foreign exchange market to bolster the competitiveness of the peso. In 2010, increased commodity prices, higher crop yields, the recovery of global growth, the return to growth of Argentina’s main trading partners, and a decrease in capital flight reduced nominal depreciation of the peso. The peso depreciated by 4.7 percent in 2010 due to the Central Bank’s forceful intervention through the purchase of excess dollars to avoid an appreciation of the peso.

Expropriation and Compensation

Section 17 of the Argentine constitution affirms the right of private property and states that any expropriation must be authorized by law and be previously compensated. Fair compensation for expropriation is also guaranteed by international treaty obligation: Article 4 of the United States-Argentina BIT states that investments shall not be expropriated or nationalized except for public purpose upon prompt payment of the fair-market value in compensation. Some U.S. investors claim that the January 2002 pesification of dollar-denominated contracts was effectively an expropriation of their investments and have filed international arbitration claims against the government of Argentina (see Dispute Settlement Section). In October 2008, the Government nationalized Argentina’s private pension funds, which amounted to approximately one-third of total GDP, and transferred the funds to the government social security agency. Compensation to firms in the privatized pension system, including to U.S. investors, has not yet been implemented. In December 2008, the Argentine parliament passed legislation nationalizing the Spanish-owned flag air carrier Aerolineas Argentinas.

In October 2009, Argentina promulgated a law (the media law) governing radio and television broadcast, cable and satellite services. Law 26.522 establishes, non-retroactively, a cap of 30% foreign capital ownership in media outlets, a minimum national content of 60-70%, an obligation to include all signals owned totally or partially by the national government, a minimum screen quota for Argentine movies, a 0.5% of annual revenue fee on foreign programmers for acquiring Argentine films. Advertisement transmitted by broadcast channels or by national channels shall be locally produced and all investment in advertising on a non-national signal shall be covered by exemptions and reductions to income tax. Foreign media operations are given different tax treatment from local companies and the Law also imposes a limited number of broadcasting licenses (based on geography and market segment) in the hands of a single licensee. Although implementing regulations have been published, some provisions of the law have been suspended pending judicial review.

Dispute Settlement

The GOA accepts the principle of international arbitration. The United States-Argentina BIT provides for binding international arbitration of investment disputes that cannot be settled through amicable consultation and negotiation between the parties. The Government of Argentina is a party to the International Center for the Settlement of Investment Disputes (ICSID), the United Nations Commission on International Trade Law (UNCITRAL), and the World Bank's Multilateral Investment Guarantee Agency (MIGA). Companies that seek recourse through Argentine courts, however, may not also pursue recourse through international arbitration.

Prior to and following the 2001/2 economic crisis, a number of U.S. investors in privatized public utilities filed ICSID arbitration claims against the government of Argentina claiming that the government rulings de-linking public utility tariffs to foreign inflation indices and a January 2002 pesification of dollar-denominated contracts were a de facto expropriation of their investments. In addition, some U.S. investors have filed ICSID arbitration claims based on disputes with provincial governments over unforeseen changes in tax laws and liabilities. Customs treatment and delays in re-negotiating public utility rate changes have also provoked investment disagreements.

There were 27 pending cases against Argentina before ICSID tribunals at the end of December 2010. Ten of these pending ICSID cases were filed under the U.S. BIT. Over the past five years, several ICSID claimants who represent a substantial share of total value of claims against Argentina suspended their ICSID proceedings to facilitate further negotiation with the government. A number of the pending cases have reached their final stages. On June 29 and July 30, 2010 the ICSID Committee issued decisions in favor of Argentina on two annulment requests in cases brought to ICSID by U.S. investors. Both investors subsequently filed for resubmission of the claims and the cases are now again pending. As of December 2010, the GOA has not complied with a September 2007 final ICSID judgment awarding approximately $133 million plus interest in favor of a U.S. investor, and a September 2009 final ICSID judgment awarding $165 million plus interest in favor of another U.S. investor. At present, U.S. investors continue to seek payment of outstanding arbitral awards, and two claimants with final awards have filed petitions with the United States Trade Representative (USTR) to withdraw Argentina’s status as a beneficiary of Generalized System of Preferences (GSP) trade benefits, alleging that Argentina has failed to act in good faith to recognize as binding, or enforce, an arbitral award. The petition has been accepted by USTR and included in the USG’s annual GSP review. As of January, 2011, a decision in the matter remains pending.

Domestic investment dispute adjudication is available through local courts or administrative procedures. However, many foreign investors prefer to rely on private or international arbitration when those options are available.

Argentina has a strict bankruptcy law similar to that of the United States. However, initiating bankruptcy proceedings is difficult in Argentina. Creditors can participate in a Chapter 11-like procedure to determine the best means of recovering debts from a bankrupt firm. Company directors are personally and criminally responsible in cases of fraud although severe punishment for white-collar crime is not common.

Performance Requirements and Incentives

No performance requirements are aimed specifically at foreign investors. Government incentives apply to both foreign and domestic firms. The Ministry of Economy administers a complex trade-balancing regime involving quotas and tariffs for auto manufacturers including minimum-content and other requirements. Special regimes also apply to mining, oil and gas, and other natural resource sectors. Media and industry sources have also indicated that the Ministry of Economy informally administers trade and foreign exchange balancing regimes in a wide range of sectors, including food, automotive parts and consumer products.

Right to Private Ownership and Establishment

Foreign and domestic investors have free and equal rights to establish and own businesses, or to acquire and dispose of interests in businesses without discrimination.

Protection of Property Rights

Secured interests in property, including mortgages, are recognized and common in Argentina. Such interests can be easily and effectively registered. They also can be readily bought and sold. The government of Argentina adheres to most treaties and international agreements on intellectual property and belongs to the World Intellectual Property Organization and the World Trade Organization (WTO). The Argentine Congress ratified the Uruguay Round agreements, including the provisions on intellectual property, in Law 24425 on January 5, 1995. Since 1996, however, Argentina has been on the Office of the U.S. Trade Representative's intellectual property rights “Priority Watch List.”

Patents: Patent protection remains a theme of particular importance in Argentina's intellectual property rights regime. Extension of adequate patent protection to pharmaceuticals and genetically modified seeds has been a source of bilateral disagreement. Representatives of U.S. companies with significant interest in patented product sales in Argentina say that the patent issuance process is slow and that the backlog of patent applications remains substantial. The National Intellectual Property Institute (INPI) has, however, taken a number of steps to reduce the backlog, including the implementation in 2005 of fast-track procedures, and opportunities in 2005 and 2007 for companies to prioritize their patent applications before INPI. In April 2002, the United States and Argentina reached an agreement with respect to most of the claims in a WTO dispute brought by the United States with respect to Argentina's implementation of its Trade Related Aspects of Intellectual Property Rights (TRIPS) obligations. Two issues, including the critical issue of data protection, remain unresolved. The United States and Argentina have agreed to leave these issues within the WTO dispute settlement mechanism for action. New patent legislation implementing part of the April 2002 agreement was passed in December 2003. However, some U.S. and European pharmaceutical firms have expressed concern that some provisions in the amended legislation limit their ability to protect patented products via the use of judicial injunctions to prevent patent violations.

Copyrights, Trademarks, Trade Secrets, and Semiconductor Chip Layout Design: Although Argentina’s copyright law dates to 1930, it provides a sound legal framework to protect intellectual property such as books, films, music, and software. Piracy of CDs, DVDs, and software is widespread. While enforcement continues to be sporadic and pirated products are widely available on the market, the government of Argentina has passed laws designed to allow authorities to mount undercover operations; to electronically flag suspect shipments; to facilitate the seizure and detention of suspect merchandise; and to more frequently rotate customs personnel. The Customs administration in 2006 instituted a voluntary trademark registry and owner notification program. Seizures of imported counterfeit goods have since risen dramatically. The government has decreased the time needed for trademark registration and increased the rate at which trademarks are registered. In the view of many industry observers, however, the trademark law, passed in 1980, provides civil damages that are insufficient to be an effective deterrent. The judiciary is reluctant to impose deterrent penalties such as prison sentences in criminal cases, and it is rare that companies press criminal charges. Argentina has no specific law on trade secrets although penalties for unauthorized revelation of trade secrets are applied to a limited degree under commercial law. Argentina has signed the WIPO Treaty on Integrated Circuits, but has no law dealing specifically with the protection of layout designs and semiconductors.

Transparency of Regulatory System

Argentine government authorities, including the Ministries of Economy, Production, and Planning and a number of quasi-independent regulatory entities, have mandates to foster competition and protect consumers. Some international investors have expressed concern about abrupt changes in sector-specific regulatory regimes that in their view increase uncertainty.

The government has encouraged companies to invest in hydrocarbon (oil and natural gas) exploration, development, and refining. Hydrocarbon industry sources and energy analysts have expressed concern that the government's efforts to control domestic retail prices of fuels, combined with hydrocarbon export tariffs and government regulations prioritizing supply of the domestic market at prices below international levels, have created disincentives for companies to invest in oil and gas exploration and related infrastructure. Inadequate investment in those areas could, in turn, have implications for domestic energy production, private sector analysts argue.

In general, national taxation rules do not discriminate against foreigners or foreign firms (e.g., asset taxes are applied to equity possessed by both domestic and foreign entities). Government tax authorities scrutinize tax declarations of foreign corporations operating in Argentina with the intent of curbing the use of offshore shell corporations to shelter profits and assets from taxation.

Efficient Capital Markets and Portfolio Investment

The Argentine Securities and Exchange Commission (Comisión Nacional de Valores) is the federal agency that regulates securities markets offerings. Securities and accounting standards are transparent and consistent with international norms.

U.S. banks, securities firms, and investment funds are well-represented in Argentina and are dynamic players in local capital markets. In 2003, the government began requiring foreign banks to disclose to the public the nature and extent to which their foreign parent banks guarantee their branches or subsidiaries in Argentina.

The private pension fund system -- consolidated in 1995 -- provided a growing base for capital markets until the 2001-2002 economic and financial crises. Following the government’s 2005 debt restructuring, private pension funds once again became significant players in domestic capital markets. However, the government's nationalization of the private pension funds’ assets in November 2008 shut down the funds’ investment activities. As a result of the nationalization, Argentina’s semi-autonomous Social Security Agency (ANSES) now holds large equity stakes in domestic and foreign firms trading on the local stock exchange, and has also taken on the private pension funds’ holdings of federal and provincial government debt. It is still unclear what actions ANSES may take with regard to these assets or what role it will play in developing local capital markets although the government has indicated a preference for using pension fund assets to fund infrastructure investments, develop social assistance programs, and subsidize loans to the industrial sector to promote the vibrancy of small and medium enterprises.

Private sector bank balance sheets, which deteriorated significantly during the 2001-2002 economic crisis, started to recover after 2003 with improving levels of liquidity, net exposure to the public sector significantly reduced, and credit – primarily to the private sector – increasing at a faster pace than nominal GDP growth. Private banks operating in Argentina, which hold approximately 53% of total financial system deposits and (as of September 2010) 62% of loans, have returned to solvency, according to the Argentine Central Bank and international credit rating agencies. The ratio of private bank non-performing loans is currently 2.3%, only .1 percentage point above its historic low of 2.2% (achieved in December 2007), and profits for the overall banking system in recent years are among the highest in more than a decade. According to Central Bank regulatory authorities, Argentina’s public banks, which hold the remaining assets, are also solvent and liquid.

Despite the strong banking sector performance of recent years, system-wide lending remains mostly short-term, as access to long-term financing is limited and borrowers are reluctant to borrow long-term at variable rates. Banking sector representatives point to persistently high inflation and short term deposits as the main obstacle to longer term lending. Financial sector analysts have also argued that the uncertainty in local capital markets complicates government and private sector efforts to develop a long-term fixed interest rate market, without which it will be difficult to deepen Argentina’s financial markets or support large-scale private sector project finance. Government officials have acknowledged the lack of medium- and long-term credit facilities needed to support the expansion of domestic productive capacity, and the government has announced a number of programs aimed at expanding available credit.

Argentine banks have faced a number of challenges, including uncertain macroeconomic conditions, global financial turmoil, and the reduction in the size of the local capital market after the 2008 nationalization of pension funds. The banking system has coped well with the global financial crisis and banks remain liquid and well capitalized.

Competition from State-owned Enterprises

The Argentine Government owns stakes in several companies through ANSES and has the right to nominate board members. The Argentine Government also owns or participates in companies within: civil commercial aviation, water and sanitation, oil and gas, electricity generation, transport, paper production, banking, railway, shipyard, and aircraft ground handling services.

Corporate Social Responsibility

There is an increasing awareness of corporate social responsibility (CSR) among both producers and consumers. Foreign and local enterprises both tend to follow generally accepted CSR principles, such as the OECD Guidelines for Multinational Enterprises. CSR practices are welcomed by beneficiary communities throughout Argentina.

Political Violence

Demonstrations are common in metropolitan Buenos Aires and occur in other major cities and rural areas. Protesters on occasion block streets, highways, and major intersections, causing traffic jams and delaying travel. While demonstrations are usually nonviolent, individuals sometimes seek confrontation with the police and vandalize private property. Groups occasionally protest in front of the U.S. Embassy or U.S.-affiliated businesses.


According to the World Bank’s worldwide governance indicators, corruption remains an area of concern in Argentina. In the latest Transparency International Corruption Perceptions Index (CPI) that ranks countries and territories by their perceived levels of corruption, Argentina ranked 105 out of 178 countries.

There is a strong regulatory framework for combating corruption, but enforcement is uneven, and a weak judiciary makes rooting out corruption difficult. The law provides criminal penalties for official corruption. Public officials are subject to financial disclosure laws, and the Ministry of Justice's Anti-Corruption Office (ACO) is responsible for analyzing and investigating federal executive branch officials based on their financial disclosure forms. The ACO is also responsible for investigating corruption within the federal executive branch or in matters involving federal funds, except for funds transferred to the provinces. While the ACO does not have authority to independently prosecute cases, it can refer cases to other agencies or serve as the plaintiff and request a judge to initiate a case. Reports of the activities of the ACO may be found at http://www.anticorrupcion.gov.ar.

Argentina is a party to the OAS Anti-Corruption Convention and ratified the OECD Anti-Corruption Convention in 2001. Argentina has signed and ratified the UN Convention against Corruption (UNCAC). It is an active participant in UNCAC’s Conference of State Parties and is participating in the pilot review of the implementation of UNCAC. It is also an active participant in the Mechanism for Follow-up on the Implementation of the Inter-American Convention against Corruption (MESICIC).

Bilateral Investment Treaties (BITs)

The governments of Argentina and the United States signed a BIT in 1991. The agreement was amended, ratified by the Congresses of both countries, and entered into force on October 20, 1994. The Argentina-United States BIT can be found on the following site: http://2001-2009.state.gov/documents/organization/43475.pdf Argentina does not have a bilateral tax treaty (Treaty for the Mutual Avoidance of Double Taxation) with the United States.

Argentina has 50 BITs currently in force and valid double taxation treaties with Australia, United Kingdom, Denmark, Germany, Belgium, Austria, France, Italy, Sweden, Switzerland, Spain, Canada, Chile, Bolivia, Brazil, Finland, Norway, and the Netherlands. In addition, a number of treaties concerning the exemption of income from international transport are in force.

OPIC and Other Investment Insurance Programs

The government of Argentina signed a comprehensive agreement with the Overseas Private Investment Corporation (OPIC) in 1989. The agreement allows OPIC to insure U.S. investments against risks resulting from expropriation, inconvertibility, war or other conflicts affecting public order. OPIC programs are currently used in Argentina. Argentina is also a member of the World Bank's Multilateral Investment Guarantee Agency (MIGA).


Argentine workers are among the most highly educated in Latin America. Wages in dollar terms have historically been competitive, but Argentina is losing ground due to inflation increasing over nominal peso depreciation. Argentina has relatively high social security charges and other labor taxes. As of the third trimester of 2010, the unemployment rate was 7.5 percent according to official government statistics. The Ministry of Labor estimated that 36.5 percent of the urban workforce worked in the informal sector as of the second quarter of 2010.

Organized labor plays an active role in labor-management relations and in the Argentine political system. Standoffs between management and union activists do occur, but many managers of foreign companies say that they have good relations with their unions. While negotiations between unions and industry are largely market-driven, they occasionally require mediation by the Ministry of Labor. In September 2010, the government, through a Wage Council resolution, increased the minimum wage to 1,740 pesos (US$ 435) per month effective September 1, 2010 and to 1,840 pesos (US$ 460) per month effective January 1, 2011. This exceeds the Government estimated minimum income needed for a family of four to live above the poverty line.

Argentine law affords unions the right to negotiate collective bargaining agreements and offers recourse to mediation and arbitration. The Ministry of Labor, Employment, and Social Security ratifies collective bargaining agreements, which covered roughly 75 percent of the formally employed work force. According to the ILO, the ratification process impeded free collective bargaining because the ministry considered not only whether a collective labor agreement contained clauses violating public order standards but also whether the agreement complied with productivity, investment, technology, and vocational training criteria. However, there were no known cases of government refusal to approve any collective agreements under these criteria. There are no special laws or exemptions from regular labor laws in the foreign trade zones.

Foreign-Trade Zones/Free Ports

Argentina has two types of tax-exempt trading areas: Foreign Trade Zones (FTZs), which are found throughout the country; and the more comprehensive Special Customs Area (SCA), which covers all of Tierra del Fuego Province and whose benefits apply only to already established firms.

Argentine law defines an FTZ as a territory outside the “general customs area” (GCA, i.e., the rest of Argentina) where neither the inflows nor outflows of exported final merchandise are subject to tariffs, non-tariff barriers, or other taxes on goods. Goods produced within a FTZ generally cannot be shipped to the GCA unless they are capital goods not produced in the rest of the country. The labor, sanitary, ecological, safety, criminal, and financial regulations within FTZs are the same as those that prevail in the GCA. Foreign firms get national treatment in FTZs.

Under the current law, the GOA may create one FTZ per province, with certain exceptions. More than one FTZ per province may be allowed in sparsely populated border regions (although this provision has not been fully utilized). Thus far, the GOA has permitted FTZs in most of the 24 Argentine provinces. The most active FTZ is in La Plata, the capital of Buenos Aires Province.

Merchandise shipped from the GCA to a FTZ may receive export incentive benefits, if applicable, only after the goods are exported from the FTZ to a third country destination. Merchandise shipped from the GCA to a FTZ and later exported to another country is not exempt from export taxes. Any value added in an FTZ or re-export from an FTZ is exempt from export taxes.

Products manufactured in an SCA may enter the GCA free from taxes or tariffs. In addition, the government may enact special regulations that exempt products shipped through an SCA (but not manufactured therein) from all forms of taxation except excise taxes. The SCA program provides benefits for established companies that meet specific production and employment objectives.

The SCA program applies only to Tierra del Fuego Province. The government reduced some SCA benefits in the early 1990s. Some of these benefits were later reestablished at first only for those firms previously established in Tierra del Fuego Province, and later applied to all firms. The SCA program is scheduled to expire at the end of 2023. In late 2006, Economy Ministry Resolution 776 abolished export tax exemption enjoyed by oil companies operating in Tierra del Fuego Province. The Argentine Congress passed a law in November 2009 establishing value-added tax rates up to 21% on cell phones, televisions, digital cameras and other electronic items not produced in the southern Tierra del Fuego foreign trade zone. According to the government, the bill aims to increase government revenue through higher tax collection, and encourage investment in Tierra del Fuego to promote local manufacturing and job growth. Additionally, the law removes certain tax benefits and taxes electronic products between 20.5% and 26%, which is reduced by two-thirds for electronics produced in Tierra del Fuego.

Foreign Direct Investment Statistics

According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2010, the total stock of FDI in Argentina at the end of 2009 was estimated at $81 billion. In 2009 Argentina attracted 1.0 percent of foreign direct investment (FDI) inflows to developing countries (versus 1.5 percent in 2008) and 4.2 percent of FDI inflows to Latin America and the Caribbean (versus 5.3 percent in 2008). Total FDI inflows in 2009 were estimated at $4.9 billion by UNCTAD. The stock of U.S. FDI in Argentina in 2009 was estimated at $14.1 billion by the U.S. Commerce Department http://www.bea.gov/international/di1usdbal.htm. More than 500 U.S. companies have significant investments across a broad range of sectors, employing approximately 155,000 Argentines. Other important foreign sources of investment capital include Spain, Brazil, Chile, Mexico, the UK, the Netherlands, Germany, and Italy.

Argentine firms increasingly invested abroad during the 1990s (particularly in Brazil, Paraguay and Uruguay) although the country has remained a net recipient of foreign direct investment. In 2009, according to UNCTAD, its outward FDI flows amounted to $680 million.

The Argentine Ministry of Economy (http://www.mecon.gov.ar), the Investor's Information Service for Argentina (http://www.infoarg.org), the National Investment Agency (http://www.prosperar.gov.ar) and the Central Bank of Argentina (www.bcra.gov.ar) have additional detailed information on foreign direct investment in Argentina.

Web Resources

Investment Climate Statement – Argentina:

• Ministry of Industry: http://www.industria.gov.ar
• Argentine Under Secretariat for Industry, of the Ministry of Economy and Production’s Secretariat for Industry, Commerce and SMEs: http://www.industria.gov.ar : http://www.sub-industria.gob.ar/
• Argentine Investment Development Agency: http://www.prosperar.gov.ar
• Argentine Under Secretariat for SMEs, Ministry of Economy Industry: http://www.sepyme.gov.ar
• Perceptions Index (CPI): http://www.transparency.org/policy_research/surveys_indices/cpi/2010/results

• Anti-Corruption Office: http://www.anticorrupcion.gov.ar/

• Argentina-United States Bilateral Investment Treaty: //2009-2017.state.gov/e/eb/ifd/43232.htm
• Information and Documentation Center, of the Ministry of Economy: www.infoleg.gov.ar
• U.S. Direct Investment Abroad: Country Detail for Selected Items (U.S. Commerce Department, Bureau of Economic Analysis): http://www.bea.gov/international/datatables/usdctry/usdctry.htm
• Argentine Ministry of Economy: http://www.mecon.gov.ar