Background
Argentina benefits from rich natural resources, a highly literate population, an export-oriented agricultural sector, and a diversified industrial base. Although one of the world's wealthiest countries 100 years ago, Argentina suffered during most of the 20th century from recurring economic crises, persistent fiscal and current account deficits, high inflation, mounting external debt, and capital flight. Beginning in 1998, with external debt equivalent to more than 400% of annual exports, the economy slowed and ultimately fell into a full-blown depression; investors' fears grew in the wake of Russia's debt default, Brazil's devaluation, and the political discord caused by then-President Carlos MENEM's unpopular efforts to run for a constitutionally prohibited third term. The government of Fernando DE LA RUA, elected President in late 1999, tried several measures to cut the fiscal deficit and instill confidence and received large IMF credit facilities, but nothing worked to revive the economy. Depositors began withdrawing money from the banks in late 2001, and the government responded with strict limits on withdrawals. When street protests turned deadly, DE LA RUA was forced to resign in December 2001. Interim President Adolfo Rodriguez SAA declared a default - the largest in history - on Argentina's foreign debt, but he stepped down only a few days later when he failed to garner political support from the country's governors. Eduardo DUHALDE became President in January 2002 and announced an end to the peso's decade-long 1-to-1 peg to the US dollar. When the peso depreciated and inflation rose, DUHALDE's government froze utility tariffs, curtailed creditors' rights, and imposed high taxes on exports. The economy rebounded strongly from the crisis, inflation started falling, and DUHALDE called for special elections. Nestor KIRCHNER was elected President, taking office in May 2003, and continued the restrictions imposed by DUHALDE. With the reemergence of double-digit inflation in 2005, the KIRCHNER administration pressured businesses into a series of agreements to hold down prices. The government also restructured its debt in 2005 and paid off its IMF obligations in early 2006, reducing Argentina's external debt burden. Real GDP growth averaged 9% during the period 2003-06, bolstering government revenues and keeping the budget in surplus.
Foreign Investment Assessment
The Argentine government generally promotes foreign investment. Precipitated to a large degree by a longstanding policy to maintain a fixed exchange rate, the 1998 recession undermined the confidence of foreign investors; so did many of the measures that the Argentine government took to address it. Continuing legal uncertainties have further tarnished the country’s attractiveness to foreign investors. The country’s economy is showing clear signs of recovery, however.
Stock Market The Buenos Aires Stock Exchange was established in 1929. By the end of the last decade, there were 129 listed companies on the stock exchange. All foreign investors are granted the same rights as domestic investors.
For more information on the Buenos Aires Stock Exchange, go to URL:
http://www.merval.sba.com.ar/.
Taxation
Corporate tax
The main rate corporate tax rate is 35 percent.
Capital gains
Capital gains of companies tend to be included in taxable income and subject to normal corporate income tax. There are exceptions for gains from bonds and capital gains of individuals in most cases.
Individual tax
Individual tax rates are progressive and include even income tax brackets ranging from seven to 35 percent.
Indirect tax
A value-added tax (VAT) of 21 percent applies to most transactions. There are reduced rates (around 10.5 percent) that applied to some goods, livestock and public transport. On the other hand, a higher rate of 27 percent applies to some telecommunications and utilities services.
Industries
Food processing, motor vehicles, consumer durables, textiles, chemicals and petrochemicals, printing, metallurgy, steel
Import Commodities
Machinery and equipment, motor vehicles, chemicals, metal manufactures, plastics
Import PartnersBrazil 34%, US 16.4%, Germany 5.6%, China 5.2%
Export CommoditiesEdible oils, fuels and energy, cereals, feed, motor vehicles
Export Partners
Brazil 15.8%, Chile 12%, US 10.6%, China 8.4%, Spain 4.7%
Ports and Harbors
Bahia Blanca, Buenos Aires, Comodoro Rivadavia, Concepcion del Uruguay, La Plata, Mar del Plata, Necochea, Rio Gallegos, Rosario, Santa Fe, Ushuaia
Telephone System
By opening the telecommunications market to competition and foreign investment with the "Telecommunications Liberalization Plan of 1998," Argentina encouraged the growth of modern telecommunication technology; fiber-optic cable trunk lines are being installed between all major cities; the major networks are entirely digital and the availability of telephone service is being improved; however, telephone density is presently minimal, and making telephone service universally available will take time; Country Code - 54
Internet Users
4.1 million
Labor Force
14.92 million; agriculture, industry, services
Judicial SystemCombining elements of European and American legal systems, Argentine law generally provides for the efficient resolution of international commercial disputes. Argentina is a party to the International Center for the Settlement of Investment Disputes (ICSID) and the World Bank's Multilateral Investment Guarantee Agency (MIGA). Argentina generally adheres to the principle of international arbitration.
Corruption Perception RankingAs reported by Transparency International, from least to most corrupt (scale of 1 to 163) -- 93
Cultural Considerations
Generally conforms to standards of etiquette common throughout Latin America. Argentine humor may seem a bit strange to visitors, as it may include seemingly derogatory comments. They should be received in the most positive spirit as they suggest that your Argentine counterpart is becoming more comfortable with you.
Country Website (s) www.congenargentinany.com