Interested by setting up your business in Argentina? 6 things you should know before developing your business trade overseas!
1- Quick Facts about Argentina
- Capital: Buenos Aires
Globe South America
- Population: 43,646,35 (The World Factbook, est. 2016)
- Language: Spanish
- Unemployment Rate: 7.5% (The World Factbook, 2016)
- Inflation: 40.5% (The World Factbook, est. 2016)
- Currency: Argentine Peso
Argentina’s Economic Figures
- GDP: USD $972 billion (The World Factbook, 2015)
- GDP growth rate: 1.2% (2015)
- GDP per capita PPP: $22,600 (2015)
- GDP Composition by sector (2015): Agriculture (10.5%), Industry (29.1%), Services (60.4%)
Trading Partners
Export Partners (2014)
- Brazil (20%)
- China (6.5%)
- USA (6.0%)
- Chile (4.1%)
- India (2.7%)
- Canada (2.5%)
- Spain (2.5%)
- Germany (2.5%)
- Netherlands (2.5%)
Import Partners (2014)
- Brazil (22%)
- China (17%)
- USA (14%)
- Germany (5.4%)
- Bolivia (4.0%)
- Trinidad and Tobago (2.7%)
- Mexico (2.5%)
Import Export Commodities
Export Commodities (2014)
- Soybean Meal (17%)
- Corn (5.4%)
- Soybean (5.6%)
- Delivery Trucks (5.6%)
- Soybean Oil (5.3%)
- Cars (4.5%)
Import Commodities (2014)
- Petroleum Gas (8.7%)
- Refined Petroleum (6.1%)
- Cars (5.5%)
- Vehicle Parts (5.0%)
- Telephones (3.2%)
2 – Economic Outlook
Argentinean Pesos
Argentina’s economy has been struggling for many years. It has begun to shift focus to a market-driven economy. High inflation rates and low private consumption have also contributed to the existing recession.
The new president, Mauricio Macri, continues to work on important reforms. He wants to get Argentina out of recession, attract investors and restore consumer confidence. Also, to strengthen the peso value, the government lifted currency controls. It allows its citizens to buy dollars freely. Macri is committed to eliminating corruption at high levels of government. Many economists believe such efforts will help to rebuild this volatile economy.
Trade and Economic Challenges
Argentina is tackling trade and economic challenges. Lack of confidence from its citizens, foreign investors, and foreign governments are some of them. Keep in mind it has only been just over a decade since their last great default.
Furthermore, weak economy, growing debt crisis, and inflation are all dangers to the economic state. Corruption remains a top challenge to both trade and economic growth. Inequality in pay and high levels of poverty continue to remain obstacles in long-term economic stability.
Investment Grade
The investment grade of Argentina is improving with investor confidence. However, a significant risk remains. Standard & Poor’s have rated the country with a B-, Moody’s with a B3 and Fitch’s with a B. All three ratings are reflecting the current economic struggles of this South American nation.
Despite the low investment standings, it is not lacking for Investment opportunities. The US and European administrations are unlikely to invest in Argentina at the moment. Many investors are not backing away from investing in it during these economic-trying times.
The economic history of Argentina demonstrates a pattern of economic collapse. Certain investors see these times as opportunity. The country has a well-skilled and intelligent labor pool along with many investor incentives. It helps to counteract some of the less favorable conditions.
With successful investment returns in the past, Argentina is considered as a well-diversified economy. The government is promoting investment in a wide variety of sectors. Key investment opportunities are within software and IT, agriculture, automotive, biotechnology, and renewable energy. Each sector has many projects seeking investors.
After years of a troubled economy, Argentina is not on the list of best places to do business in Latin America. As the economy begins to recover, this is expected to change.
Argentina’s Technology and Connectivity
Argentina has the highest Internet penetration rate of Latin America with 80.1%. It represents 43,431,886 million users of the total population connected to the Internet. The Argentine government worked for years to provide connectivity to the public. Also, it developed 21st-Century business skills to remain competitive. Today, Argentina is one of the largest and most technology developed populations in the world.
In addition, a $1 billion project started to connect the entire country to fibre optics in 2011. The government supplies many located Internet and technology laboratories to provide free public Internet access with training. The universal telecommunications program assists those who do not have access to the same services as others. Regardless of the economic state, the government remains active in technology and connectivity. It considers them as a global competitive advantage.
E-Commerce and Startups
For many years, Buenos Aires was one of the best places in South America to launch a startup. The capital was attractive because of its technological advances, well-connected and established technology infrastructure. It could also rely on skilled labor force, low cost of living and large population of technology consumers. Unfortunately, due to the current state of the economy, the city has fallen off most of them. Keep on eye on Buenos Aires in the coming years as they are likely to make a return.
The government supports incubator programs. Many private and community based accelerator programs are also successful. Economic and political instability are some of the riskier aspects of launching a startup in the country. Nonetheless, the rewards could result in success throughout the Americas.
E-commerce in Argentina carries on gaining momentum. The startup industry and consumer confidence continues to grow despite the recession. Eight out of ten Argentine shops online and e-commerce grew 58% in 2015. It is well-known that Argentina has infrastructure difficulties. For this reason many shipping and logistics startups are making it easier to deal with these obstacles. They work on reliable and efficient manners to shop online and receive packages.
Furthermore, as with the rest of Latin America, smartphones are beginning to play an even greater role in e-commerce, as well as general Internet usage. The industry in Argentina is expected to continue to grow, despite the weak economy.
3 – Argentina’s Key Industries
The country is lacking for diversity within its key industries. It is self-sufficient in some aspects such as energy and agriculture. Many economists do not advice Argentina to only focus on exporting commodities. If so, they think that the existing economic climate situation could be worse. In addition, the technology sector is continuing to grow. Manufacturing and services remain essential components to the success the GDP.
The following are examples of a few of the primary industries in Argentina:
Agriculture
Soybean field in Argentina
Agriculture has been at the center of the Argentinean economy for decades. Grain, cattle, and sheep were the primary exports. While such commodities are still vital exports, the agricultural industry has diversified. It includes popular exports such as corn, wool, tannin, lemons, peanuts, tea, flax, oats, and sunflower seeds.
Manufacturing
Manufactured products consisted of 35% of all Argentine exports in 2013. Of these exports, the manufacturing sectors remain in appliances, automobile, food processing, and textiles.
Chemicals and steel are also vital exported products. Although this industry has seen great strength during more favorable economic times, it grew slowly in the last years.
Tourism
Iguazu Falls between Brazil and Argentina
North Americans and Australians represent a large percentage of world travellers. With reciprocity fees, they chose other Latin American countries to visit to avoid expenses. At the same time, the illegal blue dollar rate did attract more tourists from other countries.
The new government administration realised the role tourism could play in rebuilding the economy. It has launched several tourism initiatives to attract more tourists away from neighbouring countries. One of such initiatives was to end the reciprocity fee to Americans.
Other efforts include job creation to create better customer service experiences. To encourage local spending as well, the government also promotes domestic tourism.
Largest Employers
The Southern nation host large companies, which employ a large percentage of the population. Although it is a diversified economy, people are concentrated on a few sectors.
It is important to note that a growing number of companies became public. They were acquired by the government and run as state-owned and operated companies. The following are a few of the largest employers:
4 – Time and Cost to Import into Argentina
Shipping containers in Buenos Aires, Argentina
Time and cost to import into the country will vary, depending upon the port of entry. If the exporting country is part of a free trade agreement with Argentina and the imported good is subject to agreement benefits, no import tariffs or customs fees will be applied. It is still possible to pay fees and tariffs, regardless of the country’s agreement standing.
If the exporting country is not a member of any bilateral agreement or trade bloc with Argentina, goods will be subject to import duties, sales tax, statistical fees, and possibly an excise tax. If the goods are shipped into a free trade zone, in theory they should be accepted, repackaged, and exported without having to pay import fees. Do not forget to consider Incoterms before you sign any sales contracts.
As well, the transit time to the country is variable. It takes a day for ocean vessels originating in Uruguay to more than a month for shipments originating in much of the rest of the world.
5 – Tax Free Zones
According to the Argentine government, the country has two primary trade zones. These zones have special customs areas, allowing tax-free importation of parts to manufacture finished goods that meet manufacturing standards. The end result of the finished goods has to be made in Argentina. They are the following:
La Plata
This free trade zone is home to commercial and industrial businesses. Some companies send their finished goods for consumption or for re-exportation to the General Customs Territory, without being subject to traditional import and export taxes. La Plata provides manufacturers with a significant advantage. They have greater opportunities and competitive pricing on an international level.
Tierra del Fuego
The zone of Tierra del Fuego manufactures many household appliances and electronics. This zone also provides tax-free storage and various services. These products are allowed to be distributed throughout Argentina without paying import taxes.
Many secondary free trade zones also exist throughout the country. These zones only provide storage and services. They are as follows:
- Zona Franca Bahía Blanca
- Zona Franca de Chubut
- Zona Franca Comodoro Rivadavia
- Zona Franca de Concepción del Uruguay, Entre Ríos
- Zona Franca de Córdoba
- Zona Franca de Mendoza
- Zona Franca de Misiones
- Zona Franca de La Pampa
- Zona Franca de Salta
- Zona Franca de San Luis
- Zona Franca de Santa Cruz
- Zona Franca Santa Fe
- Zona Franca de Tucuman
6 – General Business Taxes
The general corporate tax rate is 35%. Like many Latin American countries, foreign companies that do not have residence are only subject to tax based on Argentine income. One of its greatest challenges of foreign businesses is the capital movement. Argentina wants to keep all money within the country so they make it very challenging to move funds.
