Argentina’s recovery from a periodic volatile economic past sees it growing into an attractive location for expansion by foreign companies. Assessed as an emerging market by leading international investment research organisations, Argentina looks to play an increasing role in the global economy.
The Republic of Argentina is the third-largest economy in Latin America and is part of the Mercosur Trade Bloc with Brazil, Paraguay and Uruguay. Globally, Argentina belongs to the World Trade Organisation, the G20 group of Finance Ministers and Central Bank Governors, the International Labor Organisation, and the United Nations. It is also a prospective member of the Organisation of Economic Cooperation and Development. Argentina belongs to many other regional institutions, including the Organisation of American States and the Inter-American Development Bank.
Gross Domestic Product of US$455 billion – 31st in the world – is built on being one of the world’s largest food producers, a strong services sector and growing consumerism, developing industries in pharmaceuticals, biotech, chemicals, renewable energy and manufacturing design. Argentina has the world’s second-largest shale gas reserve and fourth-largest shale oil reserve. Lithium deposits also put Argentina in a position to capitalise on electric vehicle development.
Moving staff worldwide means lengthy processes to obtain visas and residence permits. Once employees are in place, who will handle payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. Your business plan will have to deal with all these issues.
Forward-looking and enterprising international companies poised to explore the Argentine economy can take a foothold by establishing a limited liability company as a subsidiary. This is a Sociedad de Responsabilidad Limitada, SRL, which needs two or more members or partners and is regulated by the General Companies Act. Establishing the entity is mandatory if companies intend to run the payroll for their staff. Compliance with the General Companies Act requires the following:
Argentina is keen to attract foreign investment, but there are always issues surrounding compliance with the relevant legislation. In Argentina, this revolves around the General Companies Act and the Employment Contracts Law, laying down employers’ obligations and employees’ protected rights. Other complications arise through Collective Bargaining Agreements and where legal interpretations vary between the 23 provinces and the Autonomous City of Buenos Aires, the Argentine capital.
There are other issues, too. Where will you find manufacturers, offices and distributors? There is a simple and effective alternative. By partnering with a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Argentina.
Finding an Office in Argentina
Argentina is an enormous wedge-shaped country in South America stretching 2,360 miles from north to south, encompassing the freezing regions of the Antarctic to the fiery sub-tropical areas in the north. It is rich in untapped mineral resources and a founder member of Mercosur, giving companies a 250 million consumer market to tap into with the free movement of goods and services. Most companies know what they are looking for when they expand their businesses into this diverse and beautiful land.
Buenos Aires is the capital city, rich in culture and music, a financial hub and a tourist hotspot. Its workforce is resilient and flexible and overloaded with talent in a country on the road to recovery following the recession, with the promise of a flourishing IT section alongside a strong services sector and developing industries in pharmaceuticals, biotech, chemicals and manufacturing design. Based on figures published in April 2022, 64% of all start-ups were founded in Buenos Aires, considered the top hotspot in South America.
Cordoba is Argentina’s second-largest city and second for business Start-Ups at the end of 2021. Traditionally an agricultural, manufacturing and logistics centre, IT companies have been gravitating towards this city due to government tax breaks. This has attracted Motorola and HP, with over 400 IT companies exporting up to 40% of Argentina’s developed IT software. Cordoba attracts many young talented IT students while providing a more affordable environment.
Rosario, in the province of Santa Fe, is the third largest city in Argentina and upriver from Buenos Aires. It is one of the most crucial agricultural business hubs, with a population of more than one million in a prosperous metropolis boasting a robust academic community and tech hub. Just a 45-minute flight from the capital, it has an excellent transportation and communication foundation, including ports, roads, and international airports.
Free Trade Zones (FTZ) and Special Customs Areas (SCA) are a boon for establishing a business in Argentina. These are designed to encourage growth, exports and imports and are tariff-free. There are ten zones, and foreign companies have the same benefits as local companies. The three most active FTZs are La Plata in Buenos Aires and Tierra del Fuego in the south, shipping goods worldwide. General Pico La Pampa is an important industrial and logistics terminal at the heart of the country.
Apart from tax and customs concessions, FTZs give companies a larger pool of skilled labour, centralized supply chains, and Research and Development opportunities.
Capital – Buenos Aires.
Population – 46 million.
Regions – 23 regions plus the Autonomous City of Buenos Aires.
Official language – Spanish.
Economy and world ranking – US$455 billion, 31st.
Leading sectors – food and processing, energy, textiles, automobile, mining, and chemicals.
Main exports – Soybean and derivatives, petroleum, gas, vehicles, corn and wheat.
Main imports – Machinery, vehicles, petroleum, natural gas, organic chemicals, plastics.
Main trading partners – Brazil, China, Chile, the United States, and Spain.
Government – Presidential, representative, democratic republic.
Currency – Argentinian Peso
The advantages of entering the Argentinian market include the following:
Incentives: Free trade zones apply in some of Argentina’s 23 provinces; tax credits are available on R&D projects; accelerated depreciation is allowed against assets in the biofuel and biotech sectors.
Logistics: Road network targeted with US$60 billion investment to improve infrastructure.
Economy: Rich in natural resources in energy and agriculture, livestock, gas, shale and lithium reserves, fisheries and forestry; developing software and high-tech sectors.
Growth: Economy recovered, with Gross Domestic Product increasing by 10.3% in 2021.
Workforce: Literate, well-educated and cost-effective, although average earnings are often far higher than statutory minimum rates.
The challenges of entering the Argentinian market include the following:
Investment: Foreign companies must regain economic confidence after downsizing or leaving during 2020.
Imbalance: Alongside growing consumerism, 40% of Argentines are below the poverty line, and it has comparatively high inflation and unemployment.
Trade: Limited involvement with international trade.
Economic Freedom: Argentina’s score is 50.1 in the 2022 index, 144th in the world and 27th among 32 nations in the Americas.
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