Argentina's economy boomed in 2017, making it Latin America's third-largest market. Since then, the country has faced periods of financial crisis; its economy shrank by nearly 10% in 2020 due to the Covid pandemic, for example. If you are thinking of expanding your business and moving into Argentina, we recommend that you enlist local help, in order to seamlessly navigate its diverse and complicated landscape.
The key drivers of complexity in Argentina are constant legislative changes, difficulty sending and receiving foreign currency, and high levels of inflation. However, the government has recently introduced a series of economic reforms to promote new trade agreements and optimise the flow of trade. Argentina ranks 7th in TMF Group's Global Business Complexity Index 2021- ranking 77 jurisdictions for the complexity of their business environments - which is an improvement from 3rd in 2020, suggesting the reforms are already having a positive effect.
Due to the Covid pandemic, the government introduced a series of legislative changes. One such change is the inability to dismiss underperforming employees, meaning that Argentinians have had total job security throughout the pandemic. While positive for workers, this has added significant complexity for businesses operating in the jurisdiction, as employees must leave a company of their own volition, or else the business can face massive penalties.
For those operating in Argentina, it can be challenging to send and receive money to or from abroad, as there are regulations in place that severely limit international transfers. Any money that can be transferred, to pay off import invoices, for example, requires rigorous documentation, adding significant complexity for foreign businesses looking to incorporate and operate there.
Argentina is also facing issues with inflation, with the current rate sitting at over 50%. This is an important risk factor causing uncertainty for foreign businesses that are considering incorporating and operating in the country.
Here are ten factors to consider when doing business in Argentina:
1. Starting a business
The World Bank Doing Business 2020 report ranked Argentina 126th for 'ease of doing business'. To start a business in Argentina, 12 procedures are required, taking 11.5 days on average.
2. Dealing with construction permits
Dealing with construction permits is by far the most complicated and time-consuming aspect of doing business in Argentina. On average, the process clocks in at 318 days, with a total of 17 procedures, almost all of which have associated costs.
3. Getting electricity
Obtaining approval of electrical plans from the relevant municipality, then submitting the service application to the Argentine electricity distributors, and finally waiting for connection cost estimates, can be a dauntingly lengthy task in Argentina. Taking into account inspections and connection work, this process is very long and complex - totalling approximately 92 days.
4. Registering property
Registering property requires the completion of seven procedures taking an average of 51.5 days - approximately ten days less than other Latin American and Caribbean countries. Before the process begins, each of the following certificates must be obtained: a certificate stating that no local taxes are due for that property, a certificate with fiscal valuation ("certificado catastral"), a certificate of ownership ("dominio"), and a certificate of good standing ("inhibiciones"). Accumulating these adds time and expense to the process of registering property in Argentina.
5. Getting credit
Argentina ranks 104th for ease of getting credit, according to the World Bank Doing Business 2020 report, making it one of the most streamlined processes in the country. Still, there are four complex procedures to navigate and the cost of obtaining credit can be quite steep.
6. Protecting minority investors
Investor protection isn't something that Argentina excels at, but its ranking of 61st in the World Bank Doing Business 2020 report is on a par with most other South American countries.
7. Paying taxes
Paying taxes is a complicated process, with around nine payments needed per year, which can take roughly 312 hours of work to prepare. Argentina has very high levels of taxation and a complex system with overlapping taxes, making paying taxes a big burden for businesses.
8. Trading across borders
Overseas trade can be challenging. The Argentinian government has embarked on a progressive process of commercial openings, implementing a series of economic reforms to promote new trade agreements and optimise the flow of international trade and diversification of the import/export market. Among the measures taken was the removal of tariffs on technological products. Despite these efforts, Argentina remains one of the most complex countries to commercialise in Latin America.
9. Enforcing contracts
Enforcing contracts can take up to 995 days, the second longest duration in the LatAm region. Filing and service takes 90 days; trial, judgement and enforcement take an average of 905 days.
10. Resolving insolvency
It can take up to two and a half years from filing for insolvency in court until the resolution of distressed assets, and the cost can total up to 16.5% of the estate in question.
Our experts at TMF Argentina have the local knowledge to help you understand how to invest or operate your business in the country. Whether you want to set up in Argentina or just want to streamline your existing operations here, talk to us.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.